South Stream Coalition in Bulgaria possible?

Some of my Russian friends solicited my opinion on the effect of the election results on the future of the South Stream project. This comes to no surprise as Kremlin’s look on Bulgaria is more of a black and white vision – those not “pros” are definitely “cons”. No talk of trifling details – such as geopolitics, feasibility and return on investment.

Here is my take.

Boyko Borissov is known for his version of pragmatic relations with Russia which includes the first contract on the South Stream, the choice of contractors and his personal commitment to see the project through. So he is a fully capable of a South Stream type of a coalition (with of some socialists (BSP or more likely ABV) and the tacit support of the Movement for Rights and Freedoms) sidelining the non-believers – notably the Reforimist block.

However – such a coalition is no guarantee that the project will see it through to the end. The only option he has is to repeat the standard line – i.e. that the South Stream should comply with the EU legislation and regulation in order to be built. This accounts for fact that Bulgaria is a EU member and has limited room for individual action.

The fate of the South Stream will not be decided in Sofia – henceforth the notion that his return to power will mean that the South Stream will proceed as usual decries the fact that decision making has shifted from individual South Stream transit country capitals to Brussels.

This does not imply that the different South Stream onshore segments could not proceed at the working level with financial proceeds (needed to keep vital channels of influence open at the peak of the Ukrainian crisis) and the offshore pipe laying on the Black sea bed going as planned. But the risks will be entirely born by Gazprom and Kremlin would hardly force through the most costly fragments without a strategic clearance from Brussels.

Let’s keep the facts in mind – although Gazprom complains about administrative barriers from the EC it has chosen not to start a formal Third Energy Package derogation procedure. The Russian gas giant reasons it does not need to apply, preferring to stick to the old adage that bilateral intergovernmental agreements override internal EU legislation. Mr. Alexander Novak has repeated this policy line stating that the project is irreversible and the EC or the individual (Bulgarian) governments can’t stop it.

From EC’s perspective none of the outstanding issues have been addressed – starting with The EU Commission’s infringement procedure against Bulgaria on the tender for main contractor of the South Stream, which has discriminated against other EU companies.

No progress has been registered on the other three red marks – the ownership unbundling, the non-transparent transit tariff structure and the third party access.

Boyko Borissov might try a South Stream coalition but the ball is out of Sofia’s court.