As Vladimir Putin’s Russia loses ground in Ukraine and is ever more isolated internationally, Bulgaria’s president Rumen Radev is curiously out of step. The caretaker cabinet he appointed (and still dominates) is busy executing a strategic turn back towards Moscow in the sphere of energy. This needs to be recognised by Bulgarians (and others) for what it is – and resisted.
It’s not news that Bulgaria has an energy dependence problem. And not news either that most of that problem consists in dependence specifically on Russian energy.
It’s always wise to hedge your bets. And they wouldn’t seem to be very hedged in a situation where you’re importing all the nuclear fuel and 95% of the natural gas you use from one supplier country; and where that same country supplies most of your crude oil – which you then proceed to refine in a facility, the only big one operating locally, that’s owned by said country. Especially if that country is known for throwing its weight around and shunned in polite society for faux pas like sending troops into its neighbours’ territories and annexing bits of them.
But, hey, solutions are in hand! Russia’s latest little indiscretion – the invasion of Ukraine in February 2022 – seems to have woken the West up, acting as a catalyst for a process of radical adaptation. The shock, that is, has finally given some priority to the question of reducing the dependence of Europe on Russian energy and eliminating the scary leverage it gives the Kremlin. Russian gas behemoth Gazprom has done its bit too, by restricting supplies via the Nord Stream gas pipeline and, in Bulgaria’s case, by stopping pipeline supplies back in April, when Sofia refused to go along with the eccentric requirement for payment in Russian rubles.
So that’s alright. It will be a rough ride in the near future, but we will emerge stronger and wisely diversified at the end of the process. Right? Well, apparently not. Not if president Rumen Radev, caller of shots on Bulgaria’s currently deadlocked political scene, has his way.
We’ve got to start somewhere, and April 2021 seems as good a point as any. That was when a general election ended the long rule of Boyko Borissov. Mr Borissov and his party, Citizens for the European Development of Bulgaria (generally referred to by its Bulgarian-language acronym GERB), had been in power since 2009, with only a brief interlude in 2013-2014 (when the country’s Socialists had emerged to provide one of their periodic bouts of comic relief).
Not much had been done to reduce energy dependence on Mr Borissov’s watch. A contract providing for gas supplies from Azerbaijan had been signed in 2013. And significant work had been carried out (though suspiciously rather slowly and short of actual completion) on the Interconnector Greece-Bulgaria (IGB). That was a long-mulled and long-overdue project aiming to facilitate the entry of gas from Bulgaria’s southern neighbour, both pipeline gas from the TANAP-TAP route (for Azeri gas) and liquefied natural gas (LNG) from the regasification terminal at Revithoussa and, therefore. the world LNG market. So that meant some good news, if as yet no actual gas. On the other hand, Mr Borissov had played a crucial role in facilitating the Turk Stream pipeline, an ambitious project to bring Russian gas to Bulgaria, and to Europe beyond, via Turkey (rather than via Ukraine).
So the situation in April 2021 was pretty much what we hinted at earlier:
- 100% dependence on Russia for nuclear fuel, which is used by Bulgaria’s single – Russian-built and Russian-equipped – nuclear power plant (NPP), at Kozlodui on the Danube. Mr Borissov had done nothing to alter this situation (though admittedly no-one had been pushing for alteration at this stage). And indeed his main contribution on the nuclear front had been an unsuccessful attempt to get a second Russian-equipped NPP built, at Belene;
- Heavy dependence in respect of crude oil and capacity for refining it: the oil Bulgaria used was largely imported from Russia as crude and processed locally at the Russian-owned Lukoil Neftochim refinery in Burgas on the Black Sea coast;
- 95% dependence on Russia for gas supplies. The other 5% of gas was Azeri, incidentally: Bulgaria had never produced much gas of its own and had effectively produced none at all since 2016 – though its potential is considerable and Mr Borissov had done little or nothing to develop it.
All in all, then, not much of a baseline. So what’s happened since?
Well, a lot of domestic politics has happened (together with a huge international crisis).
Following the departure of Mr Borissov from government, there were two caretaker cabinets, appointed by the rather Moscow-minded Mr Radev in the wake of indecisive general elections in April and September 2021 – and both headed by his notably Russophile protégé Stefan Yanev. There was quite a lot of talk of diversifying energy sources, as well as significant protests in favour of it. But in terms of the actual progress achieved in practice under these two cabinets, the situation can be summarised in one word.
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A third election, in November 2021, yielded a diverse and precarious regular cabinet headed by the reformist and pro-Western “We Continue the Change” party (Produlzhavame Promyanata or PP). The leaders of PP, prime minister Kiril Petkov and deputy premier Assen Vassilev, set about changing the country’s geopolitical anchors, but it was a massive undertaking.
This was partly because PP was in coalition with some pretty tricky partners, but most of all because Bulgaria’s entire energy elite, in all three areas of dependence, is Russian-trained and bound to Russia – Russia the One and Only – by multiple ties of sentiment, personal connections, self-interest and, in a lot of cases, downright corruption.
Like so much else about contemporary Bulgaria, this can be traced back to the days of the Soviet Union (USSR) and the Soviet Bloc. Then the division of labour within the bloc decreed by Moscow meant that the USSR was the supplier of oil and gas to Eastern Europe, where—except in the wayward case of Nicolae Ceausescu’s Romania – the corresponding sectors were left underdeveloped and those sectors’ elites were geared to Soviet economic and energy dominance and to cooperatiion with the Soviet supplier. The USSR is no more, of course. But if you read “Russian” for “Soviet”, the situation in Bulgaria three decades on had changed remarkably little.
So Petkov & Co had their work cut out. Nevertheless, in just eight months of rule – and despite having an energy minister affiliated, not to PP, but to a decidedly less enlightened grouping – the Petkov cabinet did achieve a certain amount. The war in Ukraine, along with that suspension of natural gas supplies by Gazprom in April 2021, forced some diversification of gas sourcing. Under Mr Borissov’s regime, uptake of gas from Azerbaijan had run to just a third of the one billion cubic metres per year (1 bcm/yr) that was available: it was much cheaper than Russian gas, but obligations to Gazprom took precedence. Under Mr Petkov, Bulgaria took delivery of the full amount of Azeri gas on offer. Which was enough for the Kremlin to start getting nervous that the loss of market share might be irreversible.
The ties that bind
At the risk of repeating ourselves, Russian influence in Bulgaria, and Russia’s foreign policy options vis-à-vis Bulgaria in general, are a direct function of energy dependencies and of the volumes and prices of the energy commodities traded. If Russia does not dominate Bulgaria’s oil, gas, and nuclear energy sectors, then the material basis of the Kremlin’s levers of pressure will vanish. Hence the geostrategic value of preserving those energy levers.
There are two sides to this equation. On one side there’s the Kremlin. And on the other, there are the Bulgarian politicians and businesses affiliated to it, whose status and material well-being depend on the uninterrupted flow of Russian energy commodities.
Now, for the Kremlin, the loss of influence in Bulgaria, and therefore of share in the Bulgarian market, would, in itself and on the face of it, not be such a serious matter.
After all, just look at the figures.
Bulgaria consumes around 3 bcm/yr of natural gas. In refined oil products, the country consumes the equivalent of forty-five million barrels per year (45mn bbl/yr) of crude oil, and since Lukoil Neftochim is doing a lot of the refining of these products, that’s a more lucrative proposition than just supplying the crude. Finally, Kozlodui uses around $70 million worth of nuclear fuel annually. Over the last 12 months, Bulgarian companies and consumers have paid some $7.5 billion for oil and refined products, natural gas and nuclear fuel, and that tidy sum has ended up in Russia, or more precisely in Mr. Putin’s war chest – possibly the largest contribution by any EU member, relative to GDP.
Now, these are respectable amounts. But they are pretty small in the context of overall European demand and of the much bigger assets, in terms of both market shares and political influence, that Russia seems to be in the process of losing in the geopolitical convulsions caused by its Ukraine adventure. Put bluntly: having destroyed Russia’s relations with Germany, France and Italy, it’s not obvious why Mr Putin should be losing additional sleep over Bulgaria.
However, for Bulgaria’s Russophile – or, more accurately, Kremlinophile – elites, separation from Russia would be an existential matter. That’s true in individual terms, those of status, personal wealth, and so on. But it’s also true in political terms. By losing contact with the Mother Ship, those elites would lose their main counterweight against overwhelming Western influence. The bond with Russia is vital to sustaining the corrupt and autocratic existential model the Kremlin’s acolytes thrive on. Without that bond, their mode de vie could hardly survive in the geopolitical framework of EU and NATO. So the reset in Moscow’s list of priorities – and some rather drastic reassessments of Russia’s economic, military and geopolitical potential – that have been driven by the Ukrainian war are making Bulgaria’s Russophiles increasingly nervous and dejected.
For them, everything is at stake. Everything. That’s why the risk of Bulgaria undergoing a regression to a situation of near-monopoly Russian energy supplies is growing exponentially. And the source of such a regression would not be some external crisis or market fluctuations. If it happened, it would spring from a combination of three things:
- First, a determined and coordinated effort by Bulgaria’s three key political power-brokers – Mr Radev, Mr Borissov, and Delyan Peevski, the ultra-sleazy politician-oligarch who dominates the mainly ethnic-Turkish Movement for Rights and Freedoms (DPS);
- Second, the fact – singularly lucky for the country’s Russophiles – that, despite its small market size, little Bulgaria seems, as we shall see, to be central to the Kremlin’s new scheme to limit the damage done by the Ukrainian war to Russia’s position as purveyor of gas to Europe;
- And, third, an appalling and myopic acquiescence on the part of the West. Which should not happen and may not happen, but on past form can hardly be ruled out.
As noted above, Bulgaria is dependent on Russian energy in three main areas – nuclear fuel, oil, and natural gas. Balancing and mitigating the risks involved in these plays a crucial role in determining both the country’s coordinates in global geopolitics and its domestic policy trends. So let’s consider these three dimensions in turn – and see what our Bulgarian political operators and geostrategists have been up to in the last month or two.
Dimension 1: Nuclear fuel
As we have mentioned, Bulgaria’s nuclear power capacity is Russian-equipped and runs entirely on fuel supplied by Russia. Attempts by Kiril Petkov’s government to diversify nuclear fuel supplies were met with a boycott by most of the managers and professionals in Bulgaria’s nuclear sector. While the Czech Republic and Ukraine have already signed contracts with the US firm Westinghouse and France’s Framatome, the Russian lobby in Bulgaria has managed to block a proposed Westinghouse contract on the pretext that US nuclear fuel is not suited to Russian VVER reactors of the type installed at Bulgaria’s Kozlodui NPP, notably the sixth reactor.
This was confirmed recently in the Draft Decision on the subject that emerged last week from Mr Radev’s third and latest caretaker government – the one installed after the Petkov cabinet was toppled in June. This draft explicitly slams the door on the American nuclear fuel supplier. And it does so with the apparently killer argument that Westinghouse was not licensed by – wait for it – the Kurchatov Institute, Russia’s premier nuclear research centre!
But that isn’t the end of the saga.
Sanctions resulting from Russia’s invasion of Ukraine have effectively disqualified Rosatom – the Russian nuclear generation and engineering giant in charge of the strategic nuclear arsenal – as a partner for Bulgaria in nuclear projects. The Kremlin’s aggression has de facto rendered valueless the two reactors that Bulgaria had purchased for Belene, the country’s (formerly) planned second NPP. For the same reason Mr Radev’s government wants a Russian institute to certify the fuel of its US competitors, no Bulgarian government will be able any time soon to complete NPPs involving Russian reactors without Rosatom. Now imagine precisely how Rosatom would build a nuclear facility in Bulgaria in the middle of a war. It just couldn’t happen, especially in the context of the nuclear threats currently surrounding Ukraine’s Zaporizhzhya NPP. For, in current circumstances, any NPP becomes a potential nuclear bomb, just waiting to be detonated by an attack with conventional weapons.
So the message from last week’s caretaker cabinet session is this: forget American nuclear fuel; we’re staying with Russia. With Russian fuel delivered via Framatome, to be sure. But nobody is saying anything about the political risk to these “French” deliveries, about what happens if Russia stops its fuel deliveries to the French company. US nuclear fuel, by contrast, mitigates this risk, because the US has steadily reduced its dependence on uranium supplies from, and enrichment capacity in, Russia.
In other words, there’s a very strong argument for US nuclear fuel in mitigating nuclear fuel supply risk, at least in part. And the arguments against it just don’t work. To say that it’s hazardous is clearly absurd, since the Czech Republic and Ukraine are already using it. And claiming that it is more expensive than Russian fuel is not a sound argument either – if you include the cost of insurance against political risk.
So much for nuclear fuel. In the second half of this two-part article, we will see whether there’s a similar pattern in the other two areas of Bulgaria’s energy dependence – oil and gas.