Using talking points, fueling myths, lack of concreteness, financial commitments on the part of Bulgaria only and deep diving in the blackmailing war between Russia and Ukraine.
That is the summary result of Russian prime minister Dmitry Medvedev’s visit to Bulgaria and his meeting with prime minister Boyko Borisov. It should be admitted that Medvedev was markedly reserved in his comments after the meeting; unlike Borisov who – with his usual pathos – relied on false arguments, emotions, figurative speech, gestures and few facts.
Russia has no plans whatever to participate in the construction of the so-call Balkan gas hub. That emerged from the statement of Gazprom’s CEO Alexey Miller before the Russian media covering the visit of Medvedev’s delegation to Bulgaria. Gazprom however claims €800 million in damages for the failed South Stream project, which the European Commission stopped in 2014. For that reason now Russia wants guarantees from the EC that Turk Stream will not have the same fate.
The truth is that Russia cannot channel big resources into an investment of an uncertain result. While Medvedev’s delegation was in Sofia, something unseen happened in Moscow. The chairman of the State Duma, Vyacheslav Volodin, interrupted the statement of the minister of economic development of the Russian Federation, Maxim Oreshkin. Within the government’s hour in the State Duma on Wednesday Oreshkin had to talk about the social and economic development of the country and the national project for supporting small and medium-sized businesses. Volodin interrupted the minister and asked him to talk about concrete steps rather than generalities. The chairman of the Duma said he wanted to hear how much funds had been allocated to the regions for the implementation of the national projects and state programs and also when the execution of the president’s instructions and his messages to the Federal Assembly would begin.
Why is that event significant? Because it shows the situation in which Medvedev has to govern at the moment. In a situation of economic crisis, under sanctions and increasing pressure for resolving Russia’s social problems.
In the light of the suffocating problems within Russia, Medvedev’s visit to Sofia was a kind of oxygen pumping by the Bulgarian authorities.
After the meeting with his Russian counterpart Bulgarian prime minister Borisov started his news conference speech by stating that Russia had suffered substantial losses from the termination of South Stream and had not claimed damages from Bulgaria.
After that Borisov quickly discussed one of his and his ministers’ favorite myths: what would happen when Russia stops transporting gas through Ukraine.
“Currently 14 to 16 billion cu. m of gas is transited from Ukraine and Bulgaria to Turkey. The moment Turk Stream starts operating, that amount of gas will stop flowing through Bulgaria and the Bulgarian pipes will become empty. Those who are skeptic about Bulgaria becoming a gas distribution center should first answer the question of what we shall do with the 6-billion investment made in a gas distribution network and compressor stations. Or we shall be only conveying 3 billion cu. m of gas from Varna to Sofia,” Borisov said.
And added: “Not that the Russian side [insists on the extension of Turk Stream – editor’s note], do not get me wrong.”
Blackmailing war between Russia and Ukraine
By putting forward the argument of “when Russia stops the transit through Ukraine” however Borisov intentionally or not included Bulgaria exactly in the group of those playing for “the Russian side”. Because Russia’s terminating gas transit through Ukraine is neither certain, nor agreed. As a matter of fact, that is just a myth. And all arguments supporting that myth are just a part of the blackmailing war between Russia and Ukraine over the price of gas deliveries and transit. The term of the current agreement between the two countries expires on December 31, 2019.
However, both countries seem more than willing to sign a new agreement. Ukraine has prepared an action plan in case the talks with Russia on the transit of gas to Europe after January 1, 2020 fail, Ukraine’s deputy minister of foreign affairs Olena Zerkal told Ukrinform.
In her words Kiev is getting ready to stick to Plan A after the current agreement expires, which provides for a new agreement by the European rules.
“Our Plan A is to ratify the new annexes to the Agreement on Association with the EU [regarding Ukraine’s integration into energy space of the European Union], to make them legally binding and to perform them in any scenario and in any case,” said Zerkal, cited by RBK.
After his visit to Sofia Russia’s prime minister Dmitry Medvedev flew to Luxembourg. Answering a question about the future of Russian gas transit in an interview for Luxemburger Wort he said Moscow was ready to continue the transit of gas through Ukraine under certain conditions, i.e. a settlement between stakeholder companies, favorable economic and commercial terms, and a stable political environment. That concerns the contract between Naftogaz and Gazprom.
Almost the same stand was expressed earlier by Russian president Vladimir Putin. In July last year he pointed out that Russia would be ready to keep the gas transit via Ukraine if the Stockholm arbitration issue was settled.
Since 2014 Gazprom and Naftogaz have been engaged in an arbitration fight in Stockholm over the contracts for transit and delivery of gas to Ukraine. In February last year the court obliged the Russian company to pay Kiev $4.63 billion for failure to deliver the entire amount of gas agreed in the transit agreement. After deduction of the Ukrainian debt (about $2.1 billion), Gazprom had to pay $2.56 billion. Several months later Moscow achieved suspension of the arbitration decision and Naftogaz did not challenge Gazprom’s actions. In late February 2019 the Ukrainian company started a procedure to collect its debt from Gazprom in Luxembourg. Kiev filed claims against Moscow in several jurisdictions simultaneously.
Thus playing the card of alternative routes for gas transit to Europe now more and more seems to be part of the game for gaining commercial advantage in the arguments between Russia and Ukraine.
What the Bulgarian interest is
It comes as a logical question what the Bulgarian interest is. “If there are national traitors, those are the people who want our investment in this area to remain buried under the earth and become scrap one day. I am certain that if we increase the capacity of the pipes and build a gas pipeline, there will be more and more gas, so I think the government has made its stand on that quite clear,” Borisov said, explaining the Bulgarian strategy.
With these words he also tried to explain the investment of nearly 3 billion leva in the construction of a gas pipeline from the Turkish to the Serbian border. On Wednesday Bulgarian company Bulgartransgaz announced the candidates for construction of the pipeline.
One is DZZD Gas Development and Expansion in Bulgaria, a tie-up of Consortium Varna1 (set up by Italy’s Bonatti S.p.A. and Germany’s Max Streicher S.p.A.) and the Bulgarian branch of Luxembourg-based Completions Development SARL.
The other two offers were filed by Hungary’s OT Industries and Saudi Arabia’s Arkad. The Hungarian candidate is a tie-up of its divisions OT Industries Fovallalkozo Zrt. and OT Industries-KVV Kivitelezo Zrt. Arkad’s consortium includes Arkad ABB S.p.A. and Arkad Engineering and Construction Company.
The main question that Borisov’s government has to answer is what will happen if Russia and Ukraine agree on the extension of the agreement for transit through Ukrainian territory. Has a feasibility study of the Balkan gas hub been made under such a scenario? Who will buy the gas transited through Bulgaria in such a case? And how will Bulgaria’s investment in the pipeline be repaid if there are no transit fees?
According to calculations of Bulgarian energy minister Temenuzhka Petkova Bulgartransgaz would gain 397 million leva a year from transit fees. Thus the investment Bulgaria will make in the pipeline construction would be repaid by 2039. All those calculations, however, are staked on one card. The card is that Russia will redirect the Ukrainian transit to Turk Stream. What if it does not?