Bulgaria drops lawsuit to pull out of Bourgas-Alexandroupolis pipeline company – report

Bulgaria drops lawsuit to pull out of Bourgas-Alexandroupolis pipeline company – report

Sofia, June 6, 2016/Independent Balkan News Agency

By Clive Leviev-Sawyer of The Sofia Globe

Bulgaria has withdrawn a lawsuit filed last year to liquidate the project company for the Bourgas-Alexandroupolis oil pipeline, according to a report in Bulgarian media on June 6.

The claim, lodged in an Amsterdam court, was dropped because “the Greek side suggested that the company continues to exist as the basis for future joint infrastructure projects,” news website Mediapool.bg quoted Finance Minister Vladislav Goranov as saying.

“We accepted this argument because the costs of maintaining this framework are negligibly small and so that it can exist as the foundation for future projects between Bulgaria and Greece in the area of energy diversification. That is why we withdrew our lawsuit in the Amsterdam court,” Goranov said.

The publication, however, notes that it was unclear how the project company, in which three Russian state-owned companies held a combined 51 per cent, would serve as the foundation for Greek-Bulgarian projects.

Of the three “energy grand slam” projects signed by former Bulgarian president Georgi Purvanov with Vladimir Putin, then president of Russia, in January 2008 (along with South Stream gas pipeline and Belene nuclear station), the oil pipeline was meant to pump Russian oil from the Caspian Sea, bypassing the straights of Bosphorus and Dardanelles.

The inter-governmental agreement between Bulgaria, Greece and Russia was signed after more than a decade of intermittent talks on the subject, but the onset of the global financial crisis in 2008, as well as the austerity policies of the Boiko Borissov government, which took office in mid-2009, had dealt major blows to the project’s viability.

The costs of Bourgas-Alexandroupolis, in particular, were never clear, although most estimates said that the 280km pipeline – envisioned to pump an initial 35 million tons of oil a year, rising to 50 million tons at full capacity – would cost between one billion euro and 1.5 billion euro to build.

It also engendered the most vigorous opposition in local communities, where the residents feared the prospect of an oil spill that would obliterate the region’s main industry, tourism. Several local referendums in Bulgaria showed public opinion was opposed to the pipeline, but such polls have no legal clout to scupper the project.

In December 2011, Bulgaria announced its intention to exit the project, with Bulgaria’s finance minister at the time, Simeon Dyankov, saying that the proposed pipeline could no longer be built under the terms of the agreement. In February 2013, the Cabinet filed an motion in Parliament to exit the intergovernmental agreement with Russia and Greece for the construction of the Bourgas-Alexandroupolis oil pipeline, which was passed a month later.

Following the snap elections in May 2013, which handed the reins of government to the ill-fated “Oresharski” administration, the issue was overshadowed by the drama surrounding the South Stream gas pipeline. With Borissov’s party GERB back in government after the October 2015 elections, his Cabinet had resumed efforts to wind down the Bourgas-Alexandroupolis project company.

However, in April the Cabinet approved an equity hike of 88 000 leva (about 45 euro) in the Bulgarian subsidiary of the project company, arguing that the money might be needed in case of a future tax inspection, Mediapool said. From the point the Bulgarian subsidiary was set up and until the end of 2015, the company had accumulated losses of 8.2 million leva, according to the report.