Much ado about South Stream

Written by on April 17, 2014 in Perspectives - Comments Off on Much ado about South Stream

As the Ukrainian crisis shows no signs of speedy resolution, one of the main corollaries of the situation has been the flurry of activity surrounding the South Stream gas pipeline – the Kremlin’s hyped-up project meant to bypass Ukraine and offer an alternative route to gas deliveries to Europe.

The proposed pipeline is of special interest to Bulgaria because it would make its landing – after crossing more than 900km under the Black Sea – just north of Varna and proceed over the entire country before continuing on to northern Italy, via Serbia and Hungary.

The ruling axis in Sofia has relentlessly extolled the virtues of the project, saying that the investment would boost the economy and create new jobs, as well as reduce transit risks.

If those arguments sound as if they are parroting Moscow’s playbook, that is because they are; the critics’ counter-argument that the new pipeline will maintain Sofia’s dependence on Russian gas (as opposed to seeking alternative energy sources) has remained unanswered by the Bulgarian government.

Bulgaria’s close ties to Russia (particularly under socialist administrations like the current one) are no secret, but the latest developments once again give credence to the notion that Sofia is Moscow’s “Trojan horse” in Brussels, the turn of phrase coined by Russia’s ambassador to the EU, Vladimir Chizhov, on the eve of Bulgaria’s accession to the bloc in January 2007.

From the debates whether Bulgaria should veto any EU sanctions on Russia in retaliation for the annexation of Crimea, to the recently-tabled amendments in Parliament, which, if passed, would exempt South Stream from EU gas unbundling regulations (which prevent gas traders like Gazprom from owning pipelines), Sofia has taken decidedly the most Moscow-friendly stance inside a European Union that seems unable to, once again, deliver a monolithic position on a foreign policy issue on its doorstep.

Bulgaria is, of course, not the only dissenting voice in the European choir – when the European Parliament votes on April 17 on a draft resolution condemning Russia’s stance on Ukraine, the European socialists are expected to vote against the motion.

Among the numerous points made in the resolution is also that “the South Stream pipeline should not be built, and that other sources of supply should be made available.”

Commenting on the draft, Bulgarian MEP Ivailo Kalfin trotted out the familiar argument that “Bulgaria has already been burned by the closed taps through Ukraine”, as quoted by Bulgarian media. Indeed, interruptions of gas deliveries during the winters of 2006 and 2009 hit Bulgaria hard, but Kalfin (who was Bulgaria’s foreign minister at the time) appears to forget that in both cases, it was Moscow that turned off the taps, not Kyiv.

One of the consequences of the current stand-off in Ukraine is the renewed push from the Kremlin to get EU backing for South Stream – delivered through its loyal “experts” quoted by government-owned media, who argue that the Ukrainian crisis will inevitably bring the EU onboard the idea of building the pipeline, exempt from EU unbundling regulations.

So far, there is little evidence of such a shift, with European energy commissioner Guenther Oettinger saying last month that political talks with Russia on the future of South Stream in EU countries would be put on hold.

The talks were meant to find a solution after the European Commission said in December 2013 that EU member states should renegotiate their bilateral agreements with Russia on South Stream and bring them in line with EU law. The events in Ukraine, including the ousting of president Viktor Yanukovich and Russia’s annexation of Crimea, appear to have ended the process before it started in earnest.

(Oettinger’s spokesperson later clarified that expert-level talks would continue unabated and a meeting of the EU-Russia working group was held in Brussels last week).

Another development worth keeping an eye on are the reports in Bulgarian media that Russian firm Stroytransgaz – owned by Gennady Timchenko, reportedly a close associate of Russian president Vladimir Putin, who is subject to US sanctions imposed in the wake of the annexation of Crimea – was in talks to buy assets in Bulgaria.

According to news website Mediapool.bg, which cited unnamed government sources, Stroytransgaz wanted to buy a stake in the government-owned Bulgarian Energy Holding (BEH), the umbrella corporation for the Bulgarian state-owned companies in the energy sector (including the Bulgarian stake in the company that will build South Stream in Bulgaria), and was also in talks to buy Energoremont Holding, a privately-owned firm offering services in the energy sector.

Bulgaria’s Economy Ministry has declined to comment on the sale of a stake in BEH, while Energoremont confirmed that it was in talks with a Russian firm, but gave no further details.

According to earlier reports, Stroytransgaz was also part of the consortium awarded the contract to build South Stream in Bulgaria, although this is yet to be confirmed officially by Bulgarian authorities.

On a final note, reports in Bulgaria on April 17 said that the pipes used in the ceremonial first welding in Bulgaria in October 2013 had vanished from the site. (The news was first reported by Bulgarian website bivol.bg, which has no  relation or connection to the author of this piece.)

This sparked reports in Russian media that Bulgaria was perhaps reconsidering its participation, only for South Stream Bulgaria to dash any such hopes – the company said that the pipes had been moved into storage and would be used in actual construction at a later date.

Missing Stream Atanas Tchobanov

(Top photo: the ceremonial ‘first welding’ on South Stream in Bulgaria in October 2013, via gazprom.ru. Bottom: at the same site, in April 2014, photo: Atanas Tchobanov via Facebook.)

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About the Author

Alex Bivol is the news editor of The Sofia Globe.