Wednesday, July 13, 2011

Bulgaria offers Lifeline to Burgas-Alexandroupolis Pipeline

The Bulgarian government of Prime Minister Boyko Borisov has thrown an unexpected lifeline to the Trans Balkan Oil Pipeline. Ever since he was elected Prime Minister in 2009, he has been on record as saying that the pipeline would never be built. Now, however, the government has provided the Trans-Balkan Pipeline Company with the minimum amount of money needed to keep the firm operating, according to the Journal of Turkish Weekly. The funds follow an April 2011 decision by the Bulgarian parliament's Law Committee that the contract creating the company does not contain any clauses giving Bulgaria the right to pull out. The situation remains confused, however, in that the Bulgarian Ministry of the Environment rejected the company's environmental impact statement for a third time.

The oil pipeline is designed to allow oil from the Black Sea basin to reach the Mediterranean without transiting the Bosphorus Straits. The pipeline was originally planned in 2007, when Bulgaria, Greece and Russia reached an agreement. The pipeline company was formed shortly thereafter, with 51% of the shares divided among three Russian companies. Today, the Bulgarian Ministry of Finance owns 24.5% of the shares, and the remaining 24.5% are divided among two Greek companies with a token 1% ownership by the Greek state.

Unfortunately for the pipeline, the ruling Socialist party in Bulgaria was replaced in 2009 by the GERB party whose leader has been opposed to the pipeline. The government immediately began setting up regulatory roadblocks, and stopped paying its share of the company's expenses (5 million Euros in 2010, and a total of 8 million Euros since the fourth quarter of 2008.) In November 2010, the Ministry of the Environment rejected the environmental impact statement for the first time. In addition, three municipalities (including Burgas itself) have voted in referendums against the construction of the pipeline because of environmental concerns.

The Greek Deputy Prime Minister, Theodoros Pangalos, rejected the environmental concerns, according to the European Energy Review. Pangalos saw an American-backed conspiracy to cancel the project to hurt Russian interests in the area. "Every time political forces which are under strong Western influence win in Bulgaria, Burgas-Alexandroupolis reaches a dead end," he told a meeting of the Greek-Russian Society. "Multinational oil companies connected with the American government use all means to prevent the realization of the Burgas-Alexandroupolis oil pipeline."

In February 2011, the former director of the Bulgarian branch of the company, Plamen Rusev, predicted the pipeline would be terminated because Bulgaria had not met its financial obligations, according to the Sofia News Agency. "I can confirm that the project is going to an end and this is a good outcome at present because Bulgaria's failure to pay its obligations has created tension between shareholders. As a result, Greece stopped paying its obligations, too. You cannot have only one side paying," he said. (Other analysts such as Vladimir Sokor believe Greece stopped making its payments because of the Greek debt crisis, and not because of Bulgaria's intransience.)

The media soon began to speculate that Russia would cancel its involvement. In response, a spokesman for one of the Russian owners, Transneft, said the shareholders had not agreed to scrap construction. Igor Dyomin, a Transneft spokesman, said that the project would focus on minimising expenses, according to Ekathimerini. The Bulgarian Finance Minister, Simeon Djankov, also denied a Russian withdrawal, according to the Sofia News Agency. "There is a meeting of the project company Trans Balkan Pipeline and the withdrawal of the Russian party is not on the agenda," he said. While not wanting to kill the project, however, the Russians insisted that Bulgaria pay its fair share. In February, Russia's energy minister Sergei Shmatko told Ria Novosti that it may sue Bulgaria if it drops the pipeline. "The status of the project is such that we have practically frozen all activity," he said. "We are waiting for the final official decisions from the Bulgarian government and we will proceed according to the relevant inter-governmental and corporate agreements in place."

Things became dire on February 17, when shareholders voted to lay off staff and give up its rented office space. They also demanded that Bulgaria should repay its debt by March 20, according to Prime-Tass.

But the Bulgarian government neither paid its dues, nor did it reject the company's environmental statement entirely. On March 31, the Ministry of the Enviroment extended the deadline by two months for corrections to its second statement, according to the Sofia Echo. The company submitted a third statement, changing its plans on how to offload the oil in Bulgaria. The environmental ministry again returned the statement, however, seeking additional details. The government again gave the company an additional two months, according to UPI.

In May, 2011, the Greek Deputy Minister for the Environment tried to raise the ante. Yiannis Maniatis told New Europe that the construction of the pipeline was an issue for the entire European Union. He said Greece had agreed with the European Commission to examine the basic environmental issues that Bulgaria was citing as the reason for delay.

Given the Borisov administration's opposition to the pipeline, and its continuing efforts to block its construction by rejecting its environmental statements, it is surprising that the Bulgarians have made a partial payment on its membership dues to the company. While it would be easy enough to starve the company financially, making a partial payment would allow the government to represent itself as a defender of the environment instead of someone opposed to a pipeline for political reasons.