Bulgaria’s New Coalition and the Future of South Stream

The new government, led by GERB’s Boyko Borisov, will have its hands full on many fronts. But one of the key issues that outsiders will be watching is the South Stream project, the gas pipeline that is intended to circumvent Ukraine and deliver Russian gas to Italy and Central Europe. From the point of view of Bulgaria, South Stream has one major flaw.

On the anniversary of the day Communist leader Todor Zhivkov was deposed and one-party rule ended a quarter century ago, Bulgaria experienced the rise of its first four-party coalition government into power. The new government emerged as a result of the October 5 elections, after a month of negotiations that for the first time were centered around platforms and policies rather than around the personal preferences of the leadership of the political parties. 

The coalition consists of centre-right parties GERB and the Reformist Block, together with two parties that are smaller in parliamentary representation, the nationalist National Front and the centre-left party, ABV, which splintered off from the Bulgarian Socialist Party. The new coalition reflects the voters’ rejection of the much-disliked three-party government of Plamen Oresharski, which lasted from May 2013 to September 2014. The parties that formed this previous coalition – the Bulgarian Socialist Party, the ethnic Turkish DPS, and the radical nationalists of Ataka – will remain in opposition in the forty-third Bulgarian parliament.

The new government, led by GERB’s Boyko Borisov, will have its hands full on many fronts. But one of the key issues that outsiders will be watching is the South Stream project, the gas pipeline that is intended to circumvent Ukraine and deliver Russian gas to Italy and Central Europe. 

Many governments in the region are under pressure both from Gazprom and from the European Commission: the Russian gas giant is pressuring governments to build the pipeline, while the European Commission is trying to convince them to block the project. But for the last few months, they have had a convenient excuse not to do anything: Bulgaria having decided to freeze the construction of the pipeline, following a European Commission threat of initiating infringement procedures. Bulgarian tenders for building the pipeline did not fulfill European Union criteria, and the project itself was not in line with the EU’s Third Energy Package stipulating third-party access. 

From the point of view of Bulgaria, South Stream has one major flaw. Projected to cost up to €7 million per kilometer, observers claim that South Stream will cost more than twice what a similar pipeline would cost in Germany, for instance. The difference between the market price and the actual price could help foment a sophisticated type of corruption: through subcontractors, it could benefit different political actors to a degree previously unknown in this part of Europe. Weak institutions in places like Bulgaria or Serbia are easy victims for this kind of graft. To ensure this does not happen, the new coalition agreement has specified clear conditions under which the pipeline could be built.

Gazprom

The agreement foresees the liberalisation of the electricity and energy market, allowing consumers to choose their supplier; an improvement in Bulgaria’s energy security through the completion of interconnectors with its neighbours; the development of local energy resources; and the construction of South Stream “only in full compliance with EU legislation, in dialogue with the European Commission and if clear economic benefits for the country are proven”.

Borisov’s track record during his first mandate as prime minister from 2009 to 2013 speaks about his willingness to genuinely cooperate with the European Commission and keep a close eye on the bill that Bulgaria would have to foot on controversial energy projects. In 2010, he put a halt to the strategically risky and economically dangerous nuclear power plant Belene, which was supposed to see yet another Russian reactor installed in Bulgaria. The future form and shape of South Stream will be a new test for the country’s – and the prime minister’s –ability to choose wisely.

Bulgaria’s almost total gas dependence on Russia has given many in Sofia, Brussels, and elsewhere reason for grievance. South Stream’s advocates argue that diversifying the route of Russian gas, if not the source, will provide some relief. But its ability to increase corruption and strategic dimension within the current standoff between Russia and the EU will not allow South Stream to be “normalised” like its northern analogue. The new government in Sofia will have to negotiate these difficulties cautiously and with a view of becoming not only a part, but also an active founder of the planned European Energy Union.

This piece was first published on the web site of the European Council on Foreign Relations