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Bulgaria's support for the North and Turkish Streams - a solo act in Central and Eastern Europe



There is nothing kept secret that will not come to light. reads the Bible.

While in Moscow, Borisov and Putin have agreed that Bulgaria should oppose the granting of extended powers to the European Commission to represent the Union in the legal and regulatory battle over the new infrastructure projects of Gazprom - Nord Stream -2 and the extension of the Turkish stream on EU territory.
The Bulgarian media overflows with superfluous analogies made to accommodate political expediency of politicians betting on the Turkish and North Streams.
Germany claims to have been trying to justify engagement with North Stream - 2 on business grounds. The analogy goes that Sofia could join in Germany's brokerage gas affair with Russia - a sheer fallacy, typical for politicians that defy market gravity, believing in the omnipotence of politician's power i.e. that Bulgaria could copy the conduct of the German government, using it as a screen for its own overtures with Putin, opening a new gate for Russian gas to access the EU market from Turkey.
In his quest to see the Balkan hub dream a reality, PM Borisov - as there is no doubt that he in charge - has sought to coordinate his actions with Chancellor Merkel, essentially granting privileged status and exclusive business terms against the backdrop of EU sanctions on Russia. Such a duplicity is inevitably exposed and politicians that underwrite such policies face tough times, as Mrs. Merkel has seen recently. If Bulgaria join Germany's Russian-centric energy agenda, blocking the European Commission's attempts to pursue a level playing field in the EU gas market, it risks turning the odds against itself with risks it can hardly mitigate.  
At this moment in time, it is obvious that Prime Minister Borisov's Balkan Hub decisions are taken in a close obscure circle of confidants, which implies a higher probability for bad judgement and sub-optimal trajectory.
The idea that Bulgaria will be able to guarantee access for Russian gas in the indicated quantities after the Turkish Stream-2 of nearly 16 billion cubic meters is certain to end up in failure. Without any doubt this implies derogation for the Trans-Balkan Pipeline, like the one sought for the OPAL pipeline in Germany. At present this seems highly unlikely to expect that the Commission will be more lenient on the Turkish Stream - 2 or consider the matter as a priority. Whatever Mrs. Merkel's body language tells PM Borisov, she cannot deliver on behalf of the EC as her political future is at stake.
Mr. Borisov has failed to note, that the Nord Stream-2 has become a target of US criticism of the EU alongside with low defense spending. 
What makes the Bulgaria PM think that Washington will be more indulgent to his Turkish stream - 2 plans to extend it on Bulgarian territory?
It is not at all about twisting arms, but about core perceptions of solidarity between allies. One cannot profit from US defense guarantees while closing EU market to US goods and services - in this case US natural gas. Concurrently Bulgaria extends privileged treatment to Gazprom - over long-term supply contracts, heavily subsidized transit tariffs, exclusive access to end clients.
Another sci-fi dimension of the Balkan-1 scenario, favored by the Bulgarian Prime Minister, is the promise to secure more than 50% capacity in the TBP's and the follow-on transit infrastructure to Gazprom by attracting sizeable flows of non-Russian gas - Azeri, Iranian, East Med. 
The two options under the EU regulatory framework are clear - either free 50% of the existing line to third parties - hence Bulgartransgaz can promise only up to 8 BCM to Gazprom or double the transit capacity of the TBP to make sure that current quantities in Turkish Stream-2 would comprise half of the pipeline's capacity. 
These free deliberations do not account for the simple fact that, at present, the TBP and the TANAP are not interconnected.
Even if the hurdle with the connectivity is resolved with the help of "Erdogan the Friend", which is not a sure bet, the Balkan Hub Gazprom-only plan will still lack alternative supplies and competition. The only quantities of 'alternative' Azeri gas have been contracted so far by Bulgargaz, are due to enter Bulgaria via the interconnector with Greece, i.e. not directly from Turkey. 
There is no option of EU law compliant entry for Russian gas into Bulgaria anywhere near the quantities speculated in recent public statements by PM Borisov and the top managers of Bulgartransgaz.
One thing is certain, in the interim, Bulgaria has lost trust in its closest family circle in the CEE - the Visegrad - 4. Their solidarity and support have proven essential in diluting and standing up to President Macron's proposal to impose restrict the operation of lorry truck companies in Bulgaria.
When juxtaposing the North Stream-2 and the Bulgarian extension of Turkish stream-2 the misfit sticks out. 
Whereas Angela Merkel has been playing the geopolitics business game and the US sanctions against German companies have been brewing, Bulgaria has been maneuvering in the shade, spared the turbulence of the geopolitical clash between the US and Germany. Although Russian gas has a dominant market share in the German gas market it does not have a monopoly status as it will enter as non-Gazprom gas. This fact will not change in the event of North Stream - 2. Few believe that Chancellor Merkel or her successors will cease to speak up and criticize Mr Putin and the Russian foreign policy aggressive moves. 
At the same time, Russia's preponderance in the Bulgaria's energy sector and its tight grip on the country's domestic and foreign policy are unprecedented for a EU member state. PM Borisov has rarely missed an occasion to cast doubt on the sanctions, consistently refusing to admit that Russia is a threat to NATO and Bulgaria's national security. He has vehemently objected to increased defense spending and has engages in appeasement of the Kremlin, as the latest opposition to EC request for extended powers to deal with Gazprom.
The 'net benefits' of Sofia's denial to vote with the CEE family speak for a potential rift with longer term consequence as the North Stream-2 touches upon vital interest of allies in the EU and NATO.  Bulgaria seems to prefer bilateral exchanges with Gazprom on the continuation of the Turkish stream on our territory at the expense of shared values and common interest within the CEE group.
A snap cost-benefit analysis could help identify the areas of concern.
The pretext for Sofia's departure from EU policy benchmarks is that Bulgaria could lose  essential revenues from transit tariffs, should Gazprom decide to shut down transit via Ukraine. The idea, that Bulgargas could copy the German North Stream tactic, buying and selling Russian gas at the Turkish border has recently been floated. Given the track record of the company and the total lack of regional client base, gas trader's experience in a liberalized market - such a scenario seems totally off track. The national gas company acts as a rep office for Gazprom - invoicing Russian gas to Bulgarian clients. 
The Balkan Gas Hub might benefit few Bulgarian companies, contracted for the upgrade of the gas transmission system. However, a small portion of the proceeds are likely to remain within the country. The probability of high local added value is slim - a small number of Bulgarian companies could hope to take a more prominent role - that of a project manager or key contractor, largely due to high project cost of the Balkan Gas Hub - in the range of one billion dollars. In all likelihood, the credit line will originate in Russia, which invites additional risk of sanctions and a new round of geopolitical turf war on Bulgaria's territory with net balance ranging between less probable gains and highly probable losses, possibly even sanctions against the country.
Note that the benefits, if bestowed, might come many years from now, while the risks and the cost will bear an immediate effect. Consequently, we bet our good money and reputation on an event with dubiously low probability rate in the uncertain future.
Let's look at the potential losses' list.
First, with almost immediate effect is the loss of confidence and support from the Visegrad-4 and the Baltic States. The only two countries that strongly back the Nord Stream - 2 are Germany and Austria. None of them fall into the category of die-hard supporters of Bulgaria on her outstanding contentious issues on the EU agenda.
Second, most of the associated speculations hung on an implausible premise - that the Balkan gas hub is at all feasible only with Russian gas only via the Trans-Balkan pipeline. The fact that the EC's Directorate-General for Energy pats us on the back on a regular base, might create a false and misleading impression. As has been pointed out recently, the main reason EC officials seem to pay lip service in support of the the Balkan Gas Hub is the understanding that promoting it would force the TSO Bulgartransgaz and the national gas trader Bulgargas to abide by the EU competition rules and thus loosen the grip of Gazexport.
Third, the US sanctions on EU companies involved in North Stream - 2 seem almost imminent, few would question the resolve of the US to extent this treatment to Bulgarian companies taking part in the smaller "stream kin" - Turkish stream through Bulgaria. This is rarely a rocket science and the Erdogan factor might have a counter effect - the United States and Turkey are at a new record low in their relations. Suffice to look at the Senate's latest move to block the delivery of the F-35 and the threat of sanctions on Turkey for the purchase of the C-400. 
To make an even stronger case on behalf of the US and disperse doubts where Washington stands on the Turkish Stream, Wess Mitchell, Assistant Secretary of State for Europe and Eurasia, at a recent presentation at the Heritage Foundation conferred: "We support intra-European pipelines like the Interconnector Greece-Bulgaria, and the Bulgaria-Romania-Hungary-Austria pipeline.  We stand with the European Union and a plurality of its member states in opposing Nord Stream 2.  And we oppose the multi-line Turkish Stream pipeline that would give Russia the means to continue its virtual monopoly on gas imports to South Eastern Europe".
Identifying the Turkish Stream extension with the Bulgaria's national interest is bogus, concealing the fact that such an action would primarily benefit Kremlin's interest - securing Gazprom market share and revenues, as well as its monopoly status - pre-empting competition from alternative gas suppliers, including US shale LNG. In Mitchell's words - all the US wants is a level playing field for everyone who wants to compete for the Bulgarian consumers' lev?
Summing it all up - Bulgaria need to stop wasting precious time pursuing absurd policies, while missing the obvious, achievable and realistic steps towards liberalization, diversification and greater competition on the gas market in Bulgaria. Aligning national interests with Gazprom invites future suboptimal choices, financial losses and strategic blunders. It also implies future losses and low occupancy rates of the transit infrastructure with sunken investments going into excess capacities for Russia promoted East - West transit instead of market driven and EU-NATO compatible South-North direct and reverse gas flows.


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