EU-US Bulgaria Squeeze Freezes South Stream

EU-US Bulgaria Squeeze Freezes South Streamby Kostis Geropoulos*

Following pressure from Brussels and Washington, Bulgaria has decided to halt construction work on the Gazprom-led South Stream gas pipeline, in which the Russian gas monopoly holds a 50% stake

Following pressure from Brussels and Washington, Bulgaria has decided to halt construction work on the Gazprom-led South Stream gas pipeline, in which the Russian gas monopoly holds a 50% stake.

A visit by US senators John McCain, Christopher Murphy and Ron Johnson on June 8 in Sofia was "definitely a factor” in Bulgaria’s decision, independent consultant Peter Poptchev, a long-time Bulgarian ambassador-at-large for energy security and South Stream negotiator, told New Europe on June 12 in Thessaloniki.

Bulgaria’s Prime Minister Plamen Oresharski said on June 8 that he has ordered all work on the project planned to bypass Ukraine as a transit country and consolidating Russia’s energy grip in Europe to continue only after consultations with Brussels.

"The US side, through its ambassador in Sofia and others, has been sending signals of their displeasure that Bulgaria continues to be defiant to the notifications of the Commission,” Poptchev said in an interview on the sidelines of a regional energy conference by the Institute of Energy for South-East Europe (IENE) in Greece’s northern port city of Thessaloniki. He said that the US senators’ visit to Sofia "is a positive expression of the strategic relationship between the two countries”.

Last week, the European Commission opened an infringement procedure against Bulgaria and asked construction work to be stopped, arguing that Bulgaria hadn’t respected EU internal market rules covering the award of public contracts.

Washington has pushed Sofia to diversify its energy resources. About 85% of Bulgaria’s gas comes from Russia. McCain attended Bulgaria’s signing of the Nabucco intergovernmental agreement in Ankara in 2009 – a project that later lost the race against the Trans Adriatic Pipeline (TAP) to carry Azerbaijani gas to Europe.

"The three senators emphasised the situation as they said there is too much Russian participation in South Stream, probably implying that if the project is internationalised this would be much more acceptable to the international community,” Poptchev said.

US ratchets up the pressure

He also said that the US "thought it advisable to approach Bulgaria at high political level to push its point” that it would not be acceptable if Bulgaria proceeded with Stroytransgaz, a Russian company hit by US sanctions, to construct South Stream on its territory. Bulgaria selected Strontransgaz late in May. The Russian company is controlled by Gennady Timchenko, a personal friend and ally of Russian President Vladimir Putin who is subject to US sanctions. Timchenko is not subject to EU sanctions.

Poptchev said that there has not been any real South Stream construction per se - just preparatory work where the pipelines would come out of the sea on Bulgarian land.

Russia has been pushing South Stream as a way to provide an alternative supply route for Bulgaria, Serbia, Croatia, Hungary, Slovenia, Austria and Italy. It is expected to ship up to 63 billion cubic metres of gas from 2018.

Ronald Wolk, head of marketing and sales at the Central European gas Hub AG (CEGH) in Austria, noted that South Stream does not increase security of supply sources but security of supply routes. "If there should be problems in Ukraine then you can go via South Stream. But additional pipelines also probably will bring additional gas - not only replacing gas from Ukraine into South Stream,” Wolk told New Europe on the sidelines of the same conference in Thessaloniki.

He noted that after the planned EU-backed Nabucco project died, Austria is now getting its role back as an energy hub through South Stream. "It’s getting the role back. I don’t think that much additional gas will come. It’s just another route of supply,” he said, adding that Russia is a big player in Austria.

Bulgaria was among those who suffered most of the gas price dispute between Russia and Ukraine in 2009. "There’s no doubt that a project of the magnitude of South Stream is very important for a country like Bulgaria for strategic, economic, commercial and – at least as far as the current government is concerned - social reasons,” Poptchev told New Europe. "However, there have been critical views and opinions to South Stream both as a concept and in particular as an implementation mode,” he added.

Serbia sends mixed signals

Following Bulgaria’s announcement that it would freeze the construction of South Stream on its territory, Serbian Deputy Prime Minister Zoran Mijailovic said on June 9 that Serbia had to suspend the construction of the gas pipeline due to Bulgaria’s decision. But Serbian Prime Minister Aleksandar Vucic said later the same day that Serbia’s government has not taken a decision on South Stream.

Poptchev said that each and every of the EU member states that have signed intergovernmental agreements with Russia on South Stream have repeatedly said that they are interested in having South Stream. "But, on the other hand, it’s obvious again that none of these countries have at all been near infringement procedures threat by the Commission – meaning that Bulgaria has gone perhaps too far. The case of Bulgaria might have been used by other to be perhaps more cautious. As for Serbia it is, of course, not an EU member not yet so it’s not obliged to follow in legal terms. But, on the other hand, having acquired pre-accession negotiation status it is in its interest to follow what Brussels thinks on South Stream,” he said.

"This is predominantly political - to Serbia South Stream and Russia have more strategic meaning than any other country in Europe,” Poptchev said. "It’s very political also in Bulgaria. Some of the leading parties in Bulgaria have tied up their fortunes and their social and economic policies to the implementation of South Stream,” he said.

"Outside of the views of some extreme parties, the mainstream parties are all in favour of South Stream with the notable difference that the Bulgarian Socialist Party, at least until last week, did not see the need for South Stream to comply necessarily with EU requirements while most other parties have said right from the beginning that they want the project provided that it complies with Commission requirements,” Poptchev said on June 12, adding that the BSP appears to soften their stance.

He said that the Ukrainian crisis has brought other positions and considerations to the forefront.

"The European Commission did not interrupt consultations with the Russian side just to show its displeasure about what is going on in Ukraine. It interrupted because it has to reassess the meaning of South Stream for European Energy security but also the implications of Gazprom’s plans,” he said.

"The fate of South Stream, the decision-making, is now been elevated to the very top echelons of the European institutions and perhaps the United States as well,” he said, adding that the new decisions will probably be made after the new European Parliament and Commission are in place.

Poptchev noted that if South Stream were to adopt third-party access, it could help the implementation of the pipeline. "But this is the least of problems for Russia. South Stream has other features which could potentially upset the application of the EU Third Energy Package and now is the time for the Commission to negotiate strategically. After Crimea the Commission has political leverage it could use to the benefit of all 28 member states,” Ambassador Poptchev said.

Turning back to Bulgaria, he noted that on June 13 there is a Bulgarian Parliamentary debate on South Stream on which the prime minister and energy minister were asked to report as a basis for the debate. And on the same, a small delegation from DG Energy is expected to discuss South Stream with the Bulgarian government in Sofia.

Meanwhile, IENE Executive Director Costis Stambolis told New Europe on the sidelines of the same conference that South Stream is not in trouble after the Commission put pressure on Bulgaria to halt the project.

"I think the Russian government, President Putin, Gazprom and the entire Russian establishment are firmly behind South Stream. It is part of the current energy policy of Russia and the project is so important that they are going to use - and we can see that - whatever strategies they have in their means,” Stambolis said.

Russia remains silent

"Maybe right now despite of what Bulgaria has done or Serbia is saying is going to do, the Russians are purposefully showing restraint. They are not reacting in any strong way because the actual project and the benefits which will derive from the project and the price are so big. So the Russians are playing it very cool right now, seeing what the reactions are going to be from the European Union, from Brussels, from other countries and they are reassessing their strategy,” he said, adding that in essence the Russians are playing very strongly.

"Don’t forget that South Stream is the mirror project of Nord Stream. Nord Steam, South Stream and LNG export capability of Russia right now is the center of the energy policy,” Stambolis added.


*Energy & Russian Affairs Editor of "New Europe" newspaper

(source: New Europe 13 June, 2014 )

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