Bulgaria and Russia: a cold marriage

Irina Novakova
27 January 2009

The 2009 round of the annual January spat between Ukraine and Russia left Bulgaria with barren gas pipelines and pushed it to the verge of humanitarian crisis and economic collapse. Domestic and industrial consumers watched in dismay as Moscow and Kiev haggled over gas prices and exchanged accusations, while the European Union frantically tried to broker a solution. It seemed impossible to secure alternative supplies. Public opinion blamed the government for lacking emergency plans. To add to the misery, it was freezing outside.

Irina Novakova is the European Union correspondent of the Bulgarian daily newspaper Dnevnik

Also by Irina Novakova in openDemocracy:

"Georgi Markov: the truth that killed" (10 September 2008)

The immediate crisis may be passing after the Russia-Ukraine deal of 19 January takes effect, but its consequences will continue to be felt as Bulgaria is forced to re-examine its controversial relationship with Russia, the country's main energy supplier and long-term partner. It may also become a pivotal event in Bulgaria's already fractious relationship with the European Union, which it joined in January 2007.

The questions the crisis leaves in its wake are multiplying. Will Sofia now make an effort to integrate in the envisaged European energy network? Or, disillusioned by the dearth of quick alternatives, will it move even closer to Russia, diversifying transit routes but not gas sources? Will it commit to invest in green technologies and curb inefficient energy use? Or will it look eastwards for the questionable security of new bilateral deals?

Bulgaria relies on Russia for 96% of its gas - a dependence its government has done nothing to curb. This government, dominated by the descendants of the former communist party, maintains an unabashedly friendly relationship with the Kremlin. The EU observes this Slavic solidarity with mixed feelings: a certain relief that one of its number counterbalances the spiky attitude of (say) Poland and Estonia to the former Soviet hegemon, alongside unease that Bulgarian politicians' closeness to Moscow makes more difficult the EU's search for a coherent line on Russia (with regard to human rights as well as energy policy).

The gas crisis in Bulgaria has a long history. Energy dependence on Russia was a reality even in the 1980s, when the country (then still a Soviet satellite) agreed to finance and build pipelines for the supply of Russian gas and its transit to Greece, Turkey and then-Yugoslavia. In exchange, the USSR offered free gas as "a sign of the ever-deepening cooperation and warm links between the Bulgarian and Soviet nations". The arrangement lasted until the end of 1998, when it was replaced by the first of several opaque contracts with Gazprom subsidiaries.

Also on Bulgarian politics and culture in openDemocracy:

Ilija Trojanow, "Bulgaria's red mafia on Europe's trail" (19 January 2006)

Ilija Trojanow, "Bulgaria: the mafia's dance to Europe" (16 August 2006)

Ivan Krastev, "Europe's other legitimacy crisis" (23 July 2008)

Dessy Gavrilova, "Entropa: art of politics, heart of a nation" (16 January 2009)

A closed chapter

Meanwhile, the 1990s were a murky period when shady offshore companies, criminals and former communist bigwigs fought to control lucrative businesses like gas, coal and oil, but also cigarette-smuggling and tourism. They emerged as middlemen between Gazprom and consumers, thus securing Bulgaria's position as an energy satellite. In various configurations, this motley "energy mafia" privatised control over energy-distribution and forged rewarding contracts with the gas-thirsty industries.

Many had the direct support of senior Gazprom figures, apparatchiks of the Soviet secret services, or Russian oligarchs. Some lost their lives in the game to control the pipes. One of those appears to be Andrei Lukanov, former prime minister and powerful Socialist Party member, who was killed in October 1996. Lukanov was reputedly the brain behind several companies who tried to build a "Bulgarian Gazprom" by buying and reselling Russian gas. The scale of his involvement and the precise reasons for his murder are still unknown.

The terms of Bulgaria's present long-term contracts for Russian gas are equally unclear. They were signed by the current government with three Gazprom subsidiaries in 2006, and are blamed for repeated rises in gas- prices in 2007-08. The contracts are secret, but leaked documents show they contain no guarantee for supply and therefore would be of little use if Bulgaria seeks compensations for the recent disruption.

The costly gas spat has revealed the magnitude of Bulgaria's dependence on Russia - but also its frightening lack of alternative sources (the opening of the Nabucco natural-gas pipeline on 27 January 2009 notwithstanding). Bulgaria is the European Union's least energy-efficient country; but unlike Serbia, Slovakia and Romania, it has no access to other gas sources or transit-pipelines, and no interconnection with the networks of its neighbours (such as Turkey). Its only gas storage is relatively small, and was not at full capacity when the crisis started.

Industrial companies and energy-providers did not store oil reserves, although they are obliged to. It turns out that the cost of such insurances would not have been excruciating - between €700 and €900 million ($900-$1,160), which is affordable for Bulgaria and accessible through EU funds. The question why investments were never made remains unanswered. Some blame it on government negligence; others say inaction has been premeditated, since full dependence on Russia still serves political and business interests.

Whatever the answer, Bulgaria's energy picture turns the country into a liability for the EU. The European commission has already promised to bail it out of its complete dependence on Russian gas. Interconnectors to Greece and Romania, a liquid natural gas (LNG) terminal, new storage facilities and measures to improve energy efficiency are being planned, as may be a loan for the construction of Bulgaria's second nuclear-power plant, Belene.

A locked future

These are no short-term solutions, though, and the country's government has expressed little interest in moving out of Russia's sphere of energy influence. In the worst days of the January 2009 crisis, the energy minister Peter Dimitrov emphasised the "vital importance" of South Stream, an alternative route for Russian gas. The vaunted Belene nuclear plant is another communist-era project; it is also being built by a Russian firm, with Russian technology, and will most likely use Russian nuclear fuel.

The Sofia government, instead of seeking as a matter of urgency way of escaping the addiction to Russian gas, has repeated its pledge to restart a defunct nuclear reactor at the Kozloduy plant; one of the two there whose closure the EU demanded in 2007 on (controversial) safety grounds. The European commission has long rejected attempts to change this decision, but some Bulgarian politicians see the gas crisis as an opportunity to raise the question again.

Their justification seems feeble - nuclear-produced electricity cannot replace gas in the short term, and Bulgaria continued to export electricity even at the worst of the gas crisis. The European commission seems irritated that Bulgaria's authorities push to reopen the old reactors; Brussels sees the campaign as an attempt to shift the focus from the gas crisis and shady deals with Gazprom, to blaming the EU for keeping the reactors closed. This does not improve Sofia's chances to acquire EU funding to diversify its energy sources.

That the government is trying to divert attention from its relationship with Russia is hardly surprising, considering Bulgaria's reputation as one of Moscow's staunchest allies in the European Union. On the eve of its accession to the union in 2007, the Russian ambassador to the EU expressed hope that Bulgaria would be his country's "Trojan horse" among the twenty-seven member-states - a statement that provoked some anger, but no shock; in September 2008, Russia's foreign minister said that Bulgaria has the same attitude toward his country as it had to its EU and Nato partners.

The gas crisis has led to a half-hearted shift of rhetoric; the authorities in Sofia have admitted that Russia is no longer a reliable gas-supplier and pledged to look elsewhere; on 26 January 2009, they announced a deal with Azerbaijan to import a billion cubic metres of Azeri gas from 2010. But this itself indicates that there is no quick remedy, and that Bulgaria will remain in wedlock with Gazprom for years to come. Whether it will seek a divorce, or at least separation, remains to be seen; the chances of either are not high. The forces responsible for such a radical move would be the same that led Bulgaria to its addiction to Russian gas in the first place. So far, they have shown little interest in finding a cure.  

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