Gas Deal Trumps Nuclear Power in Bulgaria-Russia Talks

On Saturday, November 13th, Russian Prime Minister Vladimir Putin visited Bulgaria. The main aim of the talks between him and his Bulgarian colleague, Boiko Borisov, was to come to agreement on the questions surrounding energy in the EU member-state. These include the South Stream gas pipeline project and the nuclear power plant being constructed at Belene, Northern Bulgarian.

Through these projects, "Bulgaria can become the gas-center of the Balkans", stated the Mr. Borisov. The South Stream gas pipeline is now going to be built and all speculation surrounding it has disappeared. The agreement reached between the two Prime Ministers effectively created a joint-venture corporation between the Bulgarian Energy Holding and Gazprom, to be split equally between the two countries. Nevertheless, Gazprom will finance the infrastructure in Bulgaria, in the form of a 'loan', the details of which are not known. This will leave the current pipelines running through the country intact.

“South Stream project is of utmost importance for Bulgaria as well as for the European energy market in view of route diversification for natural gas supplies and increase of European energy security. The project itself with no doubt will have a positive effect on end users not only in Bulgaria but in Europe as well,” said Maya Hristova, Executive Director of Bulgarian Energy Holding. Yet, one of the main Bulgarian demands - that the price of natural gas be reduced by 5-7% - was not accepted by the Russian delegation. The explanation given by Gazprom was that only a small portion of the price of gas to Bulgaria is actually influenced by the Russian supplier. The rest is composed of duties, excises and transit taxes. Such a reduction could therefore not happen.

The second point on the agenda of Mr. Putin's visit was the new NPP Belene. Mr. Borisov's main concern was for the Russians to name the final cost of the nuclear plant. To this, Mr. Putin answered: "We are ready to do it now. But I cannot because I have to agree with the Bulgarian side first".

Later the same day, the Bulgarian Minister for Economy, Energy and Tourism, Traicho Traikov, explained that his Russian colleagues had proposed the same amount which they had before - 6.3 billion Euro. Yet, according to him, anything above 5 billion Euro is unacceptable. (As a point of comparison, the new NPP being planned in Lithuania is estimated to cost 2 billion Euro.) In this way, the talks on nuclear power in Bulgaria have sustained the status quo - the ongoing construction of NPP Belene remains a mystery.

The impact of both projects on the environment is currently under consideration by the Bulgarian Ministry for the Environment and Water. Under state law, energy-related projects have to undergo an "environmental inspection" before construction begins. Yet, the impact of both South Stream and NPP Belene (as well as the pipelines Nabucco and Burgas-Alexandropolus) on the environment are evident to many - they will facilitate the shift away from solid fuels, which would lead to less CO2 being released into the atmosphere. Nevertheless, there are many more points to consider, such as the biosphere, impact on terrain and waste management.

Throughout Mr. Putin's visit to Bulgaria, certain questions were asked, and left unanswered yet again. How much is the Bulgarian side expected to invest in the infrastructure connected to South Stream? How much is Bulgaria expected to profit from transit taxes on gas? How is the Bulgarian government going to finance NPP Belene? What is the plan of action if the European Commission bans exports of nuclear waste (N.B. Bulgaria currently exports its nuclear waste to Russia)? All these, and many more, questions cast their shadow over the Bulgarian-Russian energy relationship. Yet, the most pressing one is: When can we expect an outcome?!