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Strife over South Stream

Alexander Andreev / sri
June 12, 2014

Bulgaria has yielded to pressure from Europe and indefinitely halted work on the Russian gasline project South Stream. But experts believe the decision may do more harm than good for the government in Sofia.

A gas worker in Ukraine
Image: Reuters

Bulgaria is in the midst of a political quagmire. The opposition in parliament has repeatedly pushed for votes of no confidence and next week a date will be set for early parliamentary elections.

Experts believe the current problems of the socialist-dominated government stem from the South Stream gasline project. Public sentiment in Bulgaria is that politicians have caved to western pressure and sacrificed a project that could be very lucrative for the country.

The European Commission has said the gasline project may break EU competition rules and filed a criminal case against Bulgaria last week. Sofia reacted by halting work on the pipeline for now.

The Russian gas giant Gazprom controls 50 percent of the entire planned South Stream network, including all of the pipeline in Bulgaria. This violates Europe's so-called Third Energy Package, which emphasizes the need to decouple the production of natural gas from transport and consumer supply so as not to distort competition.

Additionally, the construction contract in Bulgaria was awarded to a consortium involved with the Russian company Stroytransgaz. The former Gazprom subsidiary is on a list of companies affected by US sanctions against Russia in light of the conflict in Ukraine.

Following a meeting with three American senators, Bulgarian Prime Minister Plamen Oresharski announced his country would freeze work on the South Stream project until the EU's concerns were allayed.

At the same time, two Bulgarian parties - the socialist BSP and the party of the Turkish-speaking minority, DPS - said they favored early elections. Their calls came no more than a year after the inauguration of Oresharski's cabinet.

Lucrative business for Bulgaria

Firstly, participation in South Stream would offer Bulgaria discounts on Russian natural gas. Secondly, the country's energy supply would be guaranteed because the pipeline would bypass Ukraine.

Bulgaria relies on Russia for 90 percent of its gas. The ongoing dispute over gas prices between Ukraine and Russia has stoked fears in Sofia that the bottlenecks of the past may happen again.

Furthermore, Bulgarians expect billions of dollars in investments and thousands of new jobs from the project. The pipeline project therefore enjoys broad public support in the EU's poorest country. There is also a lot of dissatisfaction with the policies of Brussels surrounding South Stream.

A prominent Bulgarian political analyst, who asked not to be named, told DW that "the EU has no money to support Ukraine in the gas dispute with Russia."

"So in order to blackmail Moscow and compel it to continue transporting gas via Ukraine, Brussels wants to put a halt to the South Stream project. Bulgarians are the ultimate victims. And the project might still be completed, potentially via Turkey, which does not bow to the pressure from the EU," the analyst said.

The deputy chairman of the Russian State Duma's foreign affairs committee, Leonid Kalashnikov, also called the termination of the work on South Stream gas pipeline project "energy blackmail against Russia."

Kalashnikov said that the West "has a trump card in its hands with the blockade, which is stronger than all other previous sanctions against Russia."

Skeletons in the closet?

Ognjan Mintschev, head of Transparency International’s Bulgarian chapter, believes the Bulgarian government has caved in too soon to the EU’s demands on the gas pipeline project.

"Plamen Oresharski has failed as prime minister. He should not have only given up on South Stream but also negotiated with Russia over compatibility with EU standards," the political scientist told DW.

Mintschev believes the Bulgarian government still has many skeletons hidden in the closet and is therefore unwilling to publicly disclose all the documents related to its negotiations with Russia.

According to Mintschev and other Bulgarian critics of the project, these documents were deliberately formulated so that they allowed plenty of scope for corruption in the awarding of public contracts.

An almost conspiratorial interpretation of the current political crisis is circulating in Sofia, says Mintschev.

The political scientist says the two coalition partners divided their pieces of the pie so that the socialists, who are aligned with Moscow, could benefit financially from South Stream. The smaller coalition partner, DPS, would then take its share of EU funds, which are mainly supervised by DPS ministers.

Former Prime Minister Boyko Borisov is currently touring the US and one of the topics on his agenda is the South Stream project and Bulgaria's energy supply.

The conservative politician with a solid chance of returning to power after the early elections is already advertising for US investments in Bulgarian natural gas projects - ones that are not even planned yet.

By doing so, he is turning a cold shoulder to South Stream - even though he was the one to sign the contract with Moscow.