IS BULGARIA A RUSSIAN TROJAN HORSE IN THE EU

IS BULGARIA A RUSSIAN TROJAN HORSE IN THE EU

Tue, 05/01/2007 - 18:03

Facts and figures indicate that Sofia stands a lot closer to Moscow than to Brussels

atom power in a communust era mural.jpg
The power of the "peaceful atom" was often depicted on public murals in Communist Bulgaria

Twenty years ago, news of the Burgas-Alexandroupolis gas pipeline agreement would have prompted the following headline in the Bulgarian newspapers: "On the occasion of 3 of March, Bulgaria's national holiday, our fatherland gave Russia a humble gift as a mark of profound respect and gratitude." Of course, now there are differences. Twenty years ago the national holiday was 9 September, the day, in 1944, of the Red Army-backed coup which brought 45 years of Communism to Bulgaria. And gas was not an issue at the time - cheap crude still flowed into Bulgaria from its Big Brother in the East. But are the differences that great?

Under Communism, any concession of Bulgarian national sovereignty to Russia was presented as a sign of "gratitude". Bulgaria was regarded as the Soviet Union's most loyal satellite. It was probably the only state in history that offered to suspend its own existence in order to incorporate itself into another state. Not so long ago, in 1963, Todor Zhivkov and his cronies applied for membership of the USSR, in an attempt to make Bulgaria its 16th republic. The idea was shelved and was not put into effect for various reasons, but the documents still exist.

Much has changed since then. No longer a satellite of the USSR, Bulgaria is now a member of both NATO and the EU. Yet, apparently, the attitude of today's rulers toward the erstwhile bosses in Moscow is not that much different from the days of Todor Zhivkov. The only significant modification is in the degree of openness. At present, this is lower than during the Cold War, when everything was either black or white. Today, agreements are more tortuous and not so direct, but they are essentially not much different from the servility of the past. The Bulgaria-Is-Russia's-Trojan-Horse-in-the-EU gem belongs to Vladimir Chizhov, the Russian ambassador to the EU. It clearly indicates that the Kremlin's attitude to Sofia's new role as a European capital is unequivocal.

What is the Burgas-Alexandroupolis gift about? The project had been talked about for over a decade and was finally approved when the Bulgarian Socialist Party (BSP) re-emerged as the leading political force. Here are the facts, taken from the text of the agreement officially published on the Ministry of Regional Development and Public Works' website.

  • In case Bulgaria wants to sell its shares, it can't take an independent decision;
  • The pipeline land area becomes property of the new company where Russia is the majority shareholder;
  • Tenders and contracting will be carried out and approved by the new company where Russia is the majority shareholder;
  • Bulgaria will bear all environmental risks.

Here is what the Burgas-Alexandroupolis oil pipeline agreement does not stipulate:

  • A "golden share" for Bulgaria as part of its shares;
  • A guarantee that Bulgaria will receive $35 million per year from transit fees;
  • A guarantee that Russia will provide the necessary amount of oil; A guarantee for the contracting of Bulgarian companies and workers.

The Burgas-Alexandroupoulis pipeline project was given the official go-ahead in March 2007

The Burgas-Alexandroupoulis pipeline project was given the official go-ahead in March 2007

The Bulgarian government has pointed to the annual transit fees, ranging from "tens" to "hundreds of millions" of dollars, as the pipeline's major benefit to Bulgaria. The difference in figures comes from the different sources quoted. Putin promised Bulgaria "tens of millions", while Bulgarian Prime Minister Stanishev was not as modest and surpassed him with "hundreds of millions". As it turned out, the amount is expected to be $35 million annually, at the best. In all likelihood, it will not exceed $30 million a year. So far, nobody has explained why the Bulgarian share in the pipeline dropped from 33 to 24.5 percent. Presumably, this happened after a meeting between Bulgarian President Parvanov and Russia's Putin which took place shortly before the 2006 presidential election in Bulgaria. The agreement leaves Bulgaria with no rights over control; all it receives is the transit fees. One Bulgarian company which benefits from the project, however, is Technoexportstroy, reputedly a sponsor of Parvanov's election campaign. The Greek party defended its national interests and received the so-called "golden share" of one percent state participation. Bulgaria never wanted one.

Gains and Losses

It has turned out that the notorious $35 million annual oil transit fee is not written into the provisions of the agreement.

There are other calculations to consider too: the money may go to compensate landowners whose land will be expropriated. But if land is paid for at market prices the amount will not be enough even to cover this. It is ridiculously low for the 155 km, or 96 miles, of pipeline passing through Bulgarian territory. It seems this did not occur to the Bulgarian negotiators. The document contains text which states "the enumerated sites and plots where the construction is located are the property of the International Project Company (MPK)." Fifty-one percent of this company is Russian, meaning that it will have the ultimate say in the decision making process. Some experts claim that the land will not be legally expropriated. Thus landowners risk being dispossessed and not compensated according to market prices.

What benefits Bulgarian companies will have remains to be seen. There is not a single clause in the agreement guaranteeing quotas or any other type of preferentiality. The allotment of contracts remains a lucky dip: if they choose you, you'll get the job. The decisions, however, are taken by the MPK, where Russia is the majority shareholder, as the agreement says that it will organise and approve all tenders and contracts.

It is also arguable whether the 1,000 new jobs which will be created when construction on the pipeline begins, as Prime Minister Stanishev promised, will be taken by Bulgarian workers or whether we will have to "import specialists".

The prime minister claimed that this agreement would make Bulgaria a major "energy centre" in the Balkans. He said that Russia had committed to providing the necessary oil deliveries in order for the pipeline to function effectively. But there is no such commitment recorded in the agreement. It states only that the transported amount of oil will be between 35 and 50 million tons per year.

The text of the agreement also reveals that the Russians have complete control over the project. They will also determine the financial results. Under the agreement, if Bulgaria wants to sell its shares in the pipeline, it needs the consent of the Russians, who will decide on an appropriate buyer. They can also choose to buy them themselves, at a price which they are free to fix.

Prime minister Sergey Stanishev shows Russian Ambassador Anatoliy Potapov around Pravets, Todor Zhivkov's hometown

Prime minister Sergey Stanishev (right) shows Russian Ambassador Anatoliy Potapov around Pravets, Todor Zhivkov's hometown

Unlike their Greek counterparts, the Bulgarian envoys who took part in the negotiations also failed to include the construction of an oil storage facility in the agreement. Greece will have a 600,000 metric ton facility.

The agreement stipulates that Bulgaria and Greece undertake to provide the most favourable tax regime and exempt all equipment for the pipeline from import taxes. Besides this, the Bulgarian party will give state guarantees for bank loans Bulgaria also bears all environmental risks in its territory. There have been no comments about the effect construction will have on tourism on the southern Black Sea coast. Tourism is the main source of revenue for the Bulgarian budget. There is a high probability of oil spillages in the Bay of Burgas, bearing in mind the statistics related to similar ventures. Experts believe that a major spillage would have disastrous and long-lasting consequences for the flora and fauna of the southern Black Sea coast. The Bay of Burgas is relatively small and the Black Sea is landlocked. This means that the project poses high risks, not only to the lucrative tourist industry but to the environment as well.

Can Bulgaria import oil from other companies? Not in the near future, but despite this, Russia's intentions clearly reveal that it aims not to lose this market. Regardless of the Russian president's aggressive talk, his companies cannot have a huge impact in the market distribution of global oil supply. The average growth of Russia's market share is under one percent, while that of the Caspian countries is expected to be six times higher, according to calculations by the US Department of Energy in 2006. They show that Bulgaria will always have alternative suppliers.

Besides, Russia has had the chance to build other pipelines, Burgas-Vlöre or Constanta-Trieste, but did not do so because it would never have been the majority shareholder. Russia gains a lot from the lack of a common European policy regarding energy. Not only does Moscow fuel the disagreements between old and new EU members, but it has also found support in its onetime satellites. The old personal connections that Russia activated in Bulgaria and Hungary allowed it to build oil pipelines and distribution centres which will impede the EU initiative for the development of alternative energy sources.

Russia's plans for the Balkans are hardly a secret. The Kremlin is striving to minimise the risks for its transit oil routes and preserve its domination on the major tanker route across the Bosphorus and the Dardanelles. The new pipeline will also give Russia access to the large Adriatic ports, as far as Italy, and thus allow it to control the main routes in this area. In this way it will achieve its aim: to make any alternative oil routes redundant and to gain greater control of the European energy supply.

This is a good example of how an agreement may become a successful move in the geopolitical chess match. One which would not have been possible without the servile attitude of the Bulgarian government.

In the old days the Bulgarians used to joke that when Russia sneezes, Bulgaria gets a cold

In the old days the Bulgarians used to joke that when Russia sneezes, Bulgaria gets a cold

Bulgaria's attitude to Russia has never been particularly pragmatic. Unofficially, Bulgaria was indeed a Soviet republic. The Communist dictatorship was enforced by the Soviet forces on 9 September 1944. Georgi Dimitrov became a member of the Bulgarian parliament though he had Soviet citizenship, and Soviet state security officers had unlimited access to information in Bulgaria. Ironically, even Bulgaria's incumbent prime minister was until recently a Russian citizen and has the Russian name Sergey Dmitrievich. During the past half a century Bulgaria has emulated whatever changes took place in the former USSR. Stalinist repressions, the era of stagnation, Glasnost and Perestroyka, the empty shops, the ugly Communist buildings and the drabness of life were all automatically copied by the leaders of the Communist Party and the state. Even the post-Communist transition to democracy was done following the Soviet model. There was the same chaos over property, the same criminal economy, the same evolution of former Communist Party dignitaries into economic tycoons and the same draining of funds using financial pyramids and banks. The mutri and oligarchy eventually established themselves as the model of governance despite the formal existence of democratic elections, as in Russia.

In Bulgaria, all this was of course on a much smaller scale, but an incredible opposition was summoned up at the first more serious attempt to break away from this model, in the form of the government of the Union of Democratic Forces in 1997-2001. Shortly before Simeon Saxe-Coburg's triumphant return from exile in 2001, there were 180 Russian diplomatic officers working in Bulgaria, as many as those in the United States, the UK and Germany put together.

According to General Atanas Atanasov, former head of the National Security Service, the main channel of Russian intelligence in the country was that of the diplomatic mission. After Saxe-Coburg, the former Bulgarian king, became the country's prime minister, word was spread about "warming Bulgarian-Russian relations," coming from high up. It resulted in some tangible steps. Russia's debt to Bulgaria was reduced from $135 to $40 million. The Ministry of Defence signed an allegedly scandalous agreement with a Russian company to repair and modernise Bulgarian MiG jet fighters to NATO standards, though it had received better offers from Western companies. This was in 2003. The aircraft remain as they were then to this day. High import taxes on a range of Bulgarian goods have not changed despite nostalgic talk about the "golden past" when Bulgaria exported the canned tomatoes that every Russian fondly remembers.

Bulgaria hoped that with the help of the Soviet Union it would one day live in a bright future where nuclear energy would be put to ''peaceful uses''

The agreement for the Belene Nuclear Power Plant was the other big present which the Bulgarian government gave to Moscow. Over 60 percent, or 2.4 billion euros, of the initial calculated cost (which will inevitably be exceeded several times) will be paid for the supply of equipment from Russia. When it is put into operation, 100 percent of the nuclear fuel and 75 percent of the spare parts and equipment will come from Russia.

After Belene's two reactors are commissioned, the import of Russian nuclear fuel will double and will exceed 100 million euros at present prices. The new 30-year contract with Gazprom will increase prices by about 35 percent compared to their present level, which will result in Bulgaria paying over 160 million euros per year for gas at the present level of consumption. The loss that Bulgaria will suffer from the preterm annulment of the old contract will amount to 480 million euros for the three years.

These figures are self-explanatory. They say more than words and are a direct refutation of Tyutchev's famous over-quoted verse "You cannot understand Russia with your mind". I would argue that Russia is all too easy to understand. What is hard to explain is Bulgaria's actions, which, even now as an EU member, continues in a style more in keeping with a well-known saying from Soviet times: "The hen is not a bird and Bulgaria is not behind the border", meaning that it is not abroad. Translated into today's language, it means that in this geographical area Russia has no borders with the EU either. Here the bitter words of Bulgarian Exarkh Antim I, a Russophile and national freedom fighter, come to mind. Soon after liberation from Turkish rule in 1878 he addressed a high-ranking Russian officer with the far sighted "We, the Bulgarians, are very grateful to you for liberating us from the Turks. But who is now going to liberate us from you?"

It seems this issue is still on Bulgaria's agenda, and the flippant attitude of the Western world to a Russia reverting to autocracy does not hold an optimistic answer.

The Economics of Bulgarian-Russian Relations

These figures, taken from the National Statistical Institute and the Ministry of Economy and Energy, were presented by economic expert Dimitar Bachvarov at a public lecture about the economic aspects of Bulgarian-Russian relations.

In 2006 Bulgaria exported 12,000 tons of fruit preserves to Germany, 5,200 tons to Italy and only 3,000 tons to Russia; Bulgaria exported 10,000 tons of canned vegetables to Greece, 8,000 tons to Germany, 4.3 tons to the US and only 1.8 tons to Russia; Bulgaria exported 1.6 billion euros worth of clothes and shoes to the EU, including over 400 million euros worth to Germany. The export of this group of goods to Russia is below statistically recorded levels; Bulgaria's total exports to the EU amounted to 5.918 billion euros, of which 2.367 billion euros was from consumer goods. Total exports to Russia were only 164.5 million euros, which is 36 times less than export to the EU and only 1.4 percent of Bulgaria's export. The export of consumer goods to Russia is under 70 million euros, or 34 times less than the export of such goods to the EU; Russia caused all sorts of administrative obstacles, including the so called non-tariff restrictions on Bulgarians goods. For example, the export of pork and wines in early 2007, when a tax of 16 roubles per litre was levied on Bulgarian wines for two months, "by mistake". Bulgaria's negative trade balance with Russia for 2006 amounted to 3.0086 billion euros, which was 78 percent of the total current account deficit and nearly half of the country's total trade deficit. This was nearly 12 percent of the country's GDP and 16.4 percent of its total imports. In 2006, Bulgaria imported 2.313 billion euros of crude oil, $460 million of natural gas, 79 million euros of coal and 57 million euros of nuclear fuel, which makes a total of 2.909 billion euros for energy imports.

Warm Ties Without Neckties

In the first three years of his initial term of office, until 2004, President Georgi Parvanov met Russian President Putin six times. Political observers noticed that the frequency of these meetings exceeded even the "fraternal relations" between dictators Zhivkov and Brezhnev, who exchanged nearly the same number of visits, but over a period of 20 years. Here is how Parvanov responded to the question about this strange frequency in an interview for ITAR-TASS on 6 July 2004:

"President Putin and I discussed a wide range of issues, from trade, investment and financial relations through energy, infrastructure and tourism to the social area and the contacts between people. Each of our meetings so far has involved the signing of important bilateral documents in practically every sphere of cooperation and contacts between business people, members of local authorities and men of science and culture. These documents and contacts find expression in concrete projects, though perhaps not as quickly as we would like.

"My sixth meeting with President Putin will not be an exception in this respect. It is enough to mention that a permanent Bulgarian-Russian business forum will be established following our joint initiative. Its ideas and suggestions will additionally support the diversification and more efficient use of the existing resources in the industrial, trade, infrastructure, energy and social spheres.

"And I will remind those who have noted the intensity of my political contacts with the Russian president that in both my electoral platform and my public speeches I have always advocated a greater balance and diversity of our foreign relations, an activation of the connections with those countries and regions which for some reason have been underestimated in recent years and development of the relations with all our traditional and potential partners.

"Bulgarian-Russian relations are among those I want to put a stress on in this context." Apparently, Simeon Saxe-Coburg also amazed a narrow circle of experts with his confession" that he had been in Moscow long before the fall of the Iron Curtain and that he had known Evgeniy Primakov, former KGB head, Russian foreign minister and prime minister, since then.

Simeon said this to Bulgarian journalists on an official visit to Russia as Bulgaria's prime minister. This caused no interest in Bulgaria despite the fact that it had been unthinkable for even minor-league emigres to jump the curtain and throw themselves into the lion's mouth. On top of that, nearly all Bulgarian diplomats from the Cold War era, many of whom still have their jobs today, studied in the USSR and all officers from the former State Security passed compulsory training in the Soviet capital. Experts claim that Russia has a copy of the complete archive of the Bulgarian security services, which, reputedly, had to send information to Moscow using a special fast and secure connection.

Issue 8

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