Bulgaria to offer South Stream restart plan

Bulgaria to offer South Stream restart plan

Sofia, December 11, 2014/ Independent Balkan News Agency

By Clive Leviev-Sawyer of the Sofia Globe

Bulgaria intends to offer the European Commission a plan that would lead to the resuscitation of the South Stream pipeline, albeit in a curtailed form, it emerged on December 10.

Bulgarian Prime Minister Boiko Borissov told Cabinet ministers during the weekly government sitting that Sofia should offer a compromise solution in which Russia would still build the underwater stretch of the pipeline to Varna, where the EU would fund the construction of a gas hub. Bulgaria would meanwhile expand its gas grid capacity to ensure that gas from the new hub would reach neighbouring countries, according to the Cabinet discussion transcript, published by the government’s media service.

In this scenario, Russia would still get an alternative transit route into Europe – Moscow has sought to reduce transit through Ukraine for years and South Stream was envisioned as one of the main tools to do so – but no control over the gas once it reaches the hub.

EU’s main objection to the South Stream project has been the fact that the proposed pipeline did not meet EU rules on gas unbundling, which are meant to prevent gas traders from operating gas infrastructure, while also allowing third-party traders access to new pipelines. Bulgaria’s proposal envisions no land section of South Stream, thus no EU rules would be breached.

The proposal is not unlike the plans announced by Russian president Vladimir Putin to replace South Stream with a new pipeline to Turkey, from where the gas would be shipped to a hub on the Turkish-Greek border and sold to European consumers. Putin announced the new pipeline during a visit to Ankara last week, when he also said that Moscow was scrapping South Stream.

In Borissov’s scenario, Bulgaria would take Turkey’s place, and, furthermore, construction could start much faster because all the prospecting and engineering work on the underwater stretch of South Stream has already been completed.

Borissov mandated Tomislav Donchev, deputy PM in charge of EU funds and overseeing economic affairs, to make a formal proposal to the European Commission. Describing his initiative, Borissov said that the EC would control the distribution of gas from the Bulgarian hub because it would be the one funding its construction.

Bulgaria has maintained that the future of South Stream will have to be decided in talks between the EC and Russia. Sofia has also steadfastly supported the pipeline project, even though the exact size of transit revenue it can expect remains unclear (because no transit contract was ever signed, according to Borissov) – but wants it done in accordance with EU rules.

Putin blamed EU’s obstruction, and Bulgaria’s failure to issue a construction permit in particular, for the decision to cancel South Stream. In their defence, Bulgarian officials have said that the government could not issue such a permit for as long as the EC has an ongoing infringement proceeding against Bulgaria for the way the construction contract for the land stretch was handed, possibly in breach of EU procurement rules, under the now-departed Plamen Oresharski administration.

It remains to be seen whether Moscow will agree to Bulgaria’s proposal – some analysts have said that in addition to bypassing Ukraine, the South Stream pipeline was also intended to increase Russian influence over the transit countries in South-eastern Europe. Russian companies have also signed new gas contracts with China over the past year, which will require building two new major pipelines, but the falling oil price and devaluation of the Russian currency may make it too expensive for Moscow to pursue so many infrastructure projects at once.