South Stream: when the periphery becomes the frontline

It has been two days since Vladimir Putin announced the death of the South Stream pipeline and the domestic political fallout in Bulgaria continues

Deputy Director
Head, ECFR Sofia

It has been two days since Vladimir Putin announced the death of the South Stream pipeline and the domestic political fallout in Bulgaria continues. Opinions have varied wildly, coloured also by the fact that Putin explicitly mentioned Bulgaria as having succumbed to pressure from Brussels not to back the project.

Some have welcomed the demise of South Stream because of its lack of transparency, the potential for corruption, and the geopolitical dimension.

Some have welcomed the demise of South Stream because of its lack of transparency, the potential for corruption, and the geopolitical dimension. Its non-compliance with the EU’s Third Energy Package was one legal obstacle; the other was the organisation of the tenders for the actual building of the pipeline in Bulgaria. The European Commission protested at the tender procedures used and fined the Bulgarian government. Many blame these failed tenders for the Corporate Commercial Bank’s liquidity crisis and the dissolution of the Oresharski government in the summer (backed by the Russia-friendly Socialist Party). Even if this was pure coincidence, the fact remains that the corruption surrounding South Stream was unheard of in this part of Europe. The price per kilometre in Bulgaria and Serbia (€3.5 million) was said to be at least twice the price of building the pipeline in Austria, and the difference was threatening to pollute the entire Bulgarian political landscape.

Others, however, talk angrily of the demise of the project as the end of Bulgarian economic development for decades to come. This group, led by the Bulgarian Socialist party and the radical nationalist (yet Russophile) Ataka, argues that Bulgaria will lose €600 million a year in transit fees and that Turkey has won even more economic influence in the region. They are wrong on the former – the agreement is not publicly available, but apparently the debt incurred during the initial investment was to absorb the fees for the first ten years anyway. But they are probably quite right about the latter: Turkey is the big winner in Putin’s latest move.

Turkey is the big winner in Putin’s latest move.

The announcement of South Stream’s sudden death coincided with two other pieces of news: Turkey will buy Russian gas at a discount of 6 percent and the Ministry of the Environment in Ankara has granted Russia’s Rosatom a permit to build the Akkuyu nuclear power plant. This is the first such installation in Turkey to be built, owned, and operated by Rosatom. In his isolation from the West, Putin needs Turkey as a regional ally, which explains his concessions to the energy-hungry Turkish economy. Without Nabucco and, now, minus South Stream, many in the Balkans see energy dependency on one country (Russia) as having simply been exchanged for another (Turkey).

All this has turned out to be a tricky situation for Prime Minister Boyko Borissov. He did not expect to get all the blame or the threat of legal action if Moscow decides to go to court. Borissov realised that a country that had for so long lived on the EU’s periphery had turned into the frontline so he needed support from the EU’s institutions. “We do not want to be a bargaining chip between Russia and Europe,” he said on his way to Brussels, mentioning that Bulgarians fear a weakening in solidarity as a result of a multi-speed Europe. Therefore Jean-Claude Juncker’s statement later that day was an important signal. “South Stream can be built,” he said, adding he will not accept that Bulgaria be blackmailed by Russia. For a country that feels squeezed by geopolitics, this is a sign of support. The next one should be a real push to build interconnectors and revive the Southern Corridor, this time on Europe’s terms.

The European Council on Foreign Relations does not take collective positions. ECFR publications only represent the views of its individual authors.

Author

Deputy Director
Head, ECFR Sofia