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Magnitsky-listed Bulgarian mogul Peevski defies the US and becomes strongman of Bulgarian politics

Repercussions can be very much to the detriment of Bulgaria, the EU and the US

If you think that being on the Magnitsky list of sanctioned individuals will curb the appetite for power of Bulgaria’s top political oligarch, you are sorely mistaken. Few people outside Bulgaria know his name, or even suspect that he is such an important figure whose moves on the political scene could have serious repercussions far beyond his country. In fact, he runs the deep state in Bulgaria, determining who should be in power and what direction Bulgarian politics should take. On the face of it, this should not be possible, as the US and the UK have made their position on the most prominent figure in the Bulgarian backstage – Mr Delyan Peevski – clear, describing him as a proven corrupt politician who has abused his power and influence. He does not have many political friends in Europe – practically no EU government to stand up for him – but this does not prevent him from ‘calling the shots’ in Bulgaria. Do not think that he won the elections by a landslide or that he is the leader of the first or second political party. He is not, but he enjoys the support of both Russia and, through the Movement of Rights and Freedoms – DPS party he leads, Turkey. For more than a decade, he has systematically and unflinchingly moved to prominence, consolidating his grip on the Bulgarian deep state – the security services, the law enforcement agencies, the executive, the judiciary, the media and the underground.

Peevski Uber Alles

Mr Peevski began modestly, slowly and methodically by taking control of the ethnic Turkish party, the DPS. Despite the grievances of the ethnic base of the party, he succeeded in ousting or isolating the seemingly almighty former leader, Ahmed Dogan. In recent years, the new chairman of DPS turned his eye on the largest party in the country – GERB, forcing its long-time leader Boyko Borissov into self-humiliating action, including the sudden cancellation of the rotation of the Gabriel-Denkov government and white-washing PR for Peevski’s confidant, former Finance Minister Vladislav Goranov, who is also accused of grand corruption and is on the Magnitsky list. Thus, the new caretaker and any future government of DPS and GERB appears to be pre-branded as corrupt, and epitome of the post-communist nomenklatura’s deep state meant to ensure uninterrupted access to power regardless of the election results.

This is not the first time that Mr Peevski has tried to gain a foothold in the executive and secret services, or to control the largest party, GERB. In 2013, the then leader of the socialist party, Sergey Stanishev, whose party, along with the DPS and Ataka, all proxies of Moscow, admitted in public that if Mr Peevski was not appointed head of SANS – the State Agency for National Security – the coalition between the BSP and the DSP, with the support of Ataka, would collapse. Peevski’s and Moscow’s plan was simple: subjugate SANS and defang its counter-intelligence functions, thus ensuring a free hand for Russia’s GRU, SVR and FSB operations in the country. Recent revelations in parliamentary committee hearings that SANS had willingly ignored and then allowed to leave the country a Russian citizen, Mr Gleb Mishin, who was behind a scandal involving the SANS-sanctioned issuance of hundreds, maybe thousands of Bulgarian passports to Russians, confirm the degree of infiltration and Kremlin control of Bulgaria’s security apparatus and Moscow’s state capture.

Then, as now, Mr Peevski made no secret of his ambition to become prime minister. But to do so, he needed control of the largest political party, GERB, and the security services, as well as sufficient financial resources to overcome the Magnitsky legacy and the deep public mistrust.

In 2014, the mass protests triggered by his appointment as head of SANS thwarted the intrigue and he switched to the backup option of consolidating the power base, by taking over billions leva in the assets and destroying the Cooperative Commercial Bank(KTB), and by further inflating his financial resource base through which he sustains the deep state network of magistrates, media, law enforcement, politicians, executive power and the underground. The dismantling of KTB was a punitive action and a lynching of its CEO and majority owner Tzvetan Vassilev for disobedience, designed to signal to the wavering “who is king in town” and to consolidate the rank and file in the informal, often vaguely structured, backstage groupings of the deep state.

Subduing the biggest political party GERB

Even since then, GERB leader Borissov has had to swallow his pride and learn subservience, forcing him to resign from the government in 2013 after a targeted campaign in Peevski’s controlled media, orchestrated by the DPS, BSP and Ataka with the help of the Kremlin. Moscow used its full arsenal of disinformation, kompromat and, above all, passionate ‘popular’ resentment, culminating in a series of self-immolations that raised public temperatures to fever pitch, which forced Borissov to throw in the towel.

Shortly after the demise of the South Stream projects, for reasons totally beyond Bulgaria and its government, Mr Borissov agreed to implement the Turk Stream gas pipeline project so as not to further antagonise the Kremlin and to promote Russia’s energy projects in the EC and the US. It is no coincidence that most of the millions of dollars that allegedly “disappeared” during the implementation of the South Stream and Turk Stream projects ended up in entities under Mr Peevski’s control. The secret visits of the Kremlin’s envoys, SVR Lt. Gen. Leonid Reshetnikov, called “Putin’s man on the Balkans”, sanctioned by the US since 2016 and Putin’s special representative for cooperation with organisations of Russians abroad Alexander Babakov, sanctioned by the US in 2017, marked the deepening stages of the then prime minister’s complete subjugation by Putin. Today we are simply witnessing the 2024 episode in this old saga.

The vision of Western diplomacy has often been blinded by the sheer arrogance and cynicism of the Peevski-Borissov double play with the US, garnished with pro-Atlantic rhetoric and even more artfully garnished with transactional diplomacy or casual outbursts of carefully staged expulsions of Russian diplomats sacrificed on the altar of the Kremlin’s larger geopolitical and energy interests.

The legacy of Turk Stream

The West’s leniency and lack of interest in what has been and is happening in Bulgaria and its role in regional geopolitics can be explained either by a lack of understanding or interest in the genetic link between the deep states in Russia and Bulgaria. The aftermath of the visits of Alexander Babakov and Leonid Reshetnikov is the visible tip of the iceberg of the intertwined web of dependencies between Russian and Bulgarian elites, with Mr Borissov moves on the political downstage, while Mr Peevski enjoys to be more active in the backstage of the pro-Kremlin operation.

There has not always been harmony between the two, suffice it to mention the turf war behind the selection of the main contractor for the Bulgarian section of Turk Stream. Mr Borissov and his choice of Saudi-based Arkad initially took the lead, but in the end the Kremlin, through Bulgartransgaz CEO and Gazprom confidant Mr Malinov, backed by Mr Peevski, took control of the project company, ensuring the entry of Russian and Belarusian suppliers and contractors and the flow of ‘motivation’ money into the “right” pockets.

Trading business for indulgence

At the same time, transactional diplomacy and business deals with the US were in full swing – the Borissov-Peevski government ordered and prepaid for the first eight F-16s in 2019, and BTG ordered the equipment for the Turk Stream compressor stations from US-based Solar Turbines, in what appeared to be a deliberate political exchange aimed at US condescension over Turk Stream. And it worked, judging by the low-key approach of the Trump administration to the Turk Stream project and the belated and somewhat muted sanctions of the US Congress, in contrast to those imposed on Nord Stream. A cynic turned pragmatist might point to the Kremlin’s net gains – the revenues for US companies were one-offs measured in tens of millions of dollars, while the benefits for Russia are multi-year and measured in tens of billions. Above all, Vladimir Putin has been able to project his geopolitical gas weapon and keep in power his friendly leaders in Bulgaria, Serbia and Hungary, who now form the soft underbelly in the defence of NATO and the EU. To their credit, the Moscow curators of these hybrid operations have learned to navigate the mechanisms of policy-making in Western countries to promote their own interests. Western embassies in Sofia are usually content to report multimillion-dollar deals back to their home governments and foreign ministries, without much concern for the “big geopolitical picture” and the long-term implications for the state of democracy in Bulgaria. The big picture is left for headquarters back home.

The Vertical Gas Corridor – the lure

History is now repeating itself, with all the Kremlin’s political troops in the region being called to arms to find an alternative route for the volumes of Russian gas being diverted from Ukraine via the Vertical Gas Corridor, which would move gas from south to north, making the Ukrainian route for Russian gas unnecessary.  However, in the context of the war in Ukraine and escalating tensions between NATO/EU and Russia, a Turk Stream copycat operation is, if not impossible, at least severely hampered. Therefore, the geopolitical sweetener offered by Mr Peevski and Mr Borisov to Western governments has to be much stronger.

The latest double-bottomed lure for the Americans in the Vertical Gas Corridor project is the allocation of € 400 million leva in loans and loan guarantees from the state budget to Bulgartransgaz, whose CEO all along the execution of the Turk Steam project, is the current energy minister. The officially stated objective by Bulgartransgaz sounds familiar – to increase the capacity of the transmission network in Bulgaria by removing bottlenecks, e.g. by increasing the capacity of the Siderakastron-Kulata interconnector with Greece, and thus to facilitate the import of LNG from the Greek terminals.

The capacity increase projects include the construction of several loops, including the ones resolving the Rupcha-Vetrino bottleneck, which was created by the launch of Turk Stream, and the use of part of its capacity to transport Russian gas to Serbia. At the end of the day, what matters is not the pretext for capacity expansion, but who will ultimately use and benefit from it. And it’s definitely not LNG importers, but Russian gas supplied via pipeline to Turkey and then moved on via Bulgaria.

Russian Pipe Gas vs LNG

Putin’s original plan was to regain control of the EU gas market and create an alternative to the TTF gas market benchmark in Turkey and the region by offering abundant Russian pipeline gas on spot terms. In recent months, according to ICIS’s senior journalist Aura Sabadus, day-ahead gas prices on the Bulgarian gas exchange have been at a discount of around €6.00/MWh to TTF equivalents, as have Hungarian spot prices to Austrian and German prices, although the discount has been smaller, up to €1.5/MWh.

It is true that the spot volumes traded in Bulgaria are not yet market makers, but the Russian-gas-via-Turkey operation is only in test mode.

Not only is spot trading on the rise, based on higher volumes of gas imports from Russia, allowing Botas to build up sustainable gas surpluses, but it is also concluding longer-term contracts for larger volumes with leading gas companies in Romania and Hungary. Negotiations are also underway with Moldova.

The impact on the Greek gas market is a perfect example of the destructive effect of heavily discounted Russian gas, effectively stifling any competition from LNG or other pipeline gas in the region. Instead of gas flowing from the Southern Gas Corridor and the TANAP-TAP pipelines to markets in Southern and Eastern Europe, recent gas trade patterns based on increased imports of Russian gas into Turkey have changed dramatically, with more gas coming from Turkey to Bulgaria and then on to Greece and on to Romania and Serbia.

The Turk Stream schoolbook of circumventing the US and the EU objections

Today, the Turk Stream schoolbook on how to circumvent all EU and US barriers is being revisited, using the loopholes in Regulation 459 of 2017, which covers the EU network code, as well as in the rulebook of the Bulgarian regulator EWRC on granting access to gas transmission networks, in order to push through the current capacity ‘expansion’ project launched by BTG. Top US and EU diplomats are told that all BTG is doing is simply increasing transmission capacity and removing bottlenecks to carry more non-Russian gas, including US and Qatari LNG from Greece. At face value, it sound convincing and largely true.

However, fresh market tests, coming up in the next few months, that normally precede the expansion of the Siderokasto-Kulata and IGB interconnectors and the other part of the capacity expansion project are likely to show increased demand for Russian gas pipeline flows via Turkey to, rather than LNG from Greece.

 Another “small” detail that is usually left out is that EU rules are often useless in a monopolised market, where market tests or open season procedures are unlikely ever to lead to diversification. A case in point is the overwhelming supply of cheap Russian gas at the only remaining wide open gateway for Russian gas to the EU gas market – Bulgaria. And no, “cheap” in this case does not mean that Russian gas is actually cheaper to produce and bring to market than gas from other suppliers: as a state-controlled monopoly, Gazprom can always price its product in a way that undermines competition and diversification, even at the cost of making a loss. And yes, Gazprom did report a net loss of $6.9 billion for 2023, the first in 22 years. No one expects a shareholder mutiny, let alone a change of ownership – corporate considerations come second to the Kremlin’s geopolitical interests.

The market – dominated by one state-owned supplier, Gazprom – cannot replace the need for NATO and EU political decision-making, as Russia constantly tries to stifle competition, even at a net loss to Gazprom. In terms of maintaining market dominance, which translates into geopolitical leverage, the Kremlin and Gazprom will always win easily. The CEOs of the region’s gas traders will also be inclined to trade their loyalty and responsibility for higher profits and bonuses.

Unless geopolitics intervenes at EU and NATO level, Russian gas-related financial flows will translate into more bombs over Ukraine, offsetting the effect of Western military aid. By entering the EU through Bulgaria, these volumes of Russian gas via Turk Stream and the Trans-Balkan Pipeline will be a significant and sustained geopolitical burden in their own right, encouraging and financially supporting pro-Kremlin political networks and politicians along the Bulgaria-Serbia-Hungary-Slovakia-Austria route. Indeed, the difference between the sanctions imposed on Russian oil and those imposed on Russian gas is striking, and this duplicity creates niches of vulnerability that Moscow is already exploiting.

The Geopolitics in BTG’s transmission capacity expansion project

The process of selecting the contractor for the BTG capacity expansion project is a classic case of circumvention techniques, and the asymmetry in cost-benefit and geopolitical net gains – we have a clear favorite for the contract worth hundreds of millions, the BTG’s usual pick – GBS which has teamed up again with a US company, Honeywell. Never mind that GBS has dramatically failed to expand the Chiren underground gas storage facility, which has always been crucial for LNG imports in the region, with no prospect of successful completion in the near future. On top of that, GBS has embarked on a multimillion-dollar lobbying effort in the US, often promoting the interests of the Peevski-Borissov tandem, and indirectly financed by contracts for projects awarded to GBS by Bulgartransgaz.

The US charming package of the Peevski-Borissov tandem also includes the AP-1000 nuclear power plant project with the US-based Westinghouse, with €700 million already committed as seed money to cover project development costs, with the promise of more than €20 billion until completion.  In the meantime, Bulgarians begin to take note of the political expediency, behind Peevski and Borissov rush move, as a tool to appease the US in securing a nod on the Russian gas flows via Bulgaria. In addition, the project will always be exploited by Russian propaganda when compared in terms of cost to the abandoned Rosatom project and, most importantly, with the worsening trading terms for newly built NPP power in the era of renewables. Suffice to look at the Electricity System Operator’s troubles in balancing the system that serves these days a load of less than 2700 MW in local electricity demand, and limited export markets (Greece has temporarily closed its market for electricity imports). Should this supply-demand misbalance continue to exist, bringing the AP-1000 online may cannibalize the current reactors at the Kozloduy NPP and force their early closure. In the end, the next generation of Bulgarian taxpayers and consumers will have to foot the bill, and the offshoots of the Peevski-Borissov tandem might very much redirect the public’s angst against “the bad West”.

Cui bono – Turkey vs the EU

Since Putin is a total liability when it comes to convincing and promoting such projects in the West, President Erdogan and the Bulgarian ruling trio – President Radev-Borissov-Peevski – have taken it upon themselves to promote the plans for new routes for Russian natural gas at all political levels in EU capitals and in Washington, DC. Hungarian Prime Minister Orban’s diplomatic net worth with the Biden administration and the current European Commission is negligible, leaving the main role to Turkey’s Erdogan.

The dual nature of Ankara’s policy is that it is ostensibly a loyal NATO member and supporter of Ukraine, while at the same time being reluctant to join Western sanctions against Russia, while profiting handsomely from brokering trade in oil, gas and technology originating in or destined for Russia. Turkey’s policy of overwhelming cooperation and muted rivalry with Russia continues to dominate the regional geopolitical backdrop against which EU and NATO options in Southeast Europe for pursuing collective EU and NATO defence interests vis-à-vis Russia’s war in Ukraine are limited. Erdogan’s game is long-term and strategic, to the detriment of Ukraine and the EU, at least with regard to the Russian gas whitewashing operation via the Turkish Gas Hub, and the West can completely sleep through it.

According to ICIS, in the period from 23 November to 24 January alone, Turkey “accumulated a surplus of two billion cubic meters of gas, part of which came from spot imports from Russia”. Based on data from traders and ENTSOG, that ICIS quotes, I trust that a charm offensive campaign is underway in the West to make Putin’s idea a reality.

Mr Putin has postponed his visit to Turkey several times, apparently making it conditional on Erdogan’s success in resolving all outstanding issues, including obtaining US approval or acquiescence to the idea of Turkey becoming a gas hub fed mainly by Russian gas. The US National Security Council’s coordinator for strategic communications, John Kirby, denied Ankara’s announcement of an Erdogan-Biden meeting on 9 May, stating that ‘nothing is scheduled for President Erdogan’s visit’, casting doubt on the previously planned event. Despite claims of a pending strategic gas deal between Botas and Exxon-Mobil for 3.5 bcm/year of LNG supplies, this was apparently not enough to allay Washington’s concerns about Turkey’s much larger gas deals with Russia and its open support for Hamas. Obviously, the transactional diplomacy or energy security justification that Erdogan offers for the idea of re-exporting more Turkish-labelled Russian gas to the EU is not gaining traction in the West. The push by Orban and the Bulgarian ruling trio of Peevski-Radev-Borisov alone will make little difference, at least until and if Donald Trump wins the autumn elections.

Back to Bulgaria

But back to Bulgaria: all these undertakings by Moscow require the full subordination and cooperation of the Bulgarian government, including the energy ministry and the Parliament. Moscow’s concentration of huge financial, political, diplomatic and intelligence resources based on current and projected future pipe gas export revenues, now confined only to Bulgaria, explains the sharp increase in political turbulence in the country in the run-up to the snap elections scheduled for June 9, 2024.

To put it bluntly, the Kremlin stood less of a chance under a Denkov-Gabriel government, despite its non-impressive record in curbing Russian influence in the gas sector, largely due to GERB’s and DPS’s political shield for the incumbent ‘agents of influence’. So Moscow, through Mr Peevski and his junior partner Mr Borissov in this affair, launched its rescue option with a caretaker government, with deliberately vague public accountability and the option of pushing through necessary steps “quietly” behind the scenes. There is no doubt that the conductor’s baton is in the hands of the odious Mr Peevski, who seems to see his only option for dealing with the impact of the Magnitsky Act sanctions in promoting Moscow’s energy interests and thus securing his long-term power base in funding the deep state in Bulgaria. If the Peevski- Borissov duo fails to achieve a convincing electoral result through a controlled or bought vote, and to push through Kremlin’s plan to secure additional volumes of Russian gas exports to the EU, Moscow will likely resort to escalating de-stabilization of Bulgaria and to pre-empting regular governments with the participation of pro-Western political parties.  

Against the backdrop of overwhelming Russian gas footprint in Bulgarian elections, the US and EU’s laissez-faire approach of believing Peevski and Borissov could keep the country in the mainstream of NATO and EU policy is naive at best.

Peevski’s ascent to the country’s political heights is problematic both conceptually and practically, given his key role in converging interests of Ankara and Moscow. He tops the list of Bulgaria’s most distrusted politicians, despite an abysmal approval rating of less than 7 per cent, proving that the deep state, controlled by him, is not popular with the Bulgarian public. Therefore, Mr. Peevski is simply hijacking Bulgaria’s democracy, undermining its democratic institutions and processes. This speaks volumes about the deep political and institutional crisis in Bulgaria and the lack of adequate awareness of this pernicious fact at home and especially abroad.

The lack of an objective assessment of Mr Peevski’s role and actions by our key EU partners, a role he is now playing with the help of Mr Borissov, is tantamount to selling them a deeply corrupt Bulgarian hybrid version of Euro-Atlanticism that pays lip service to common EU and NATO policies and values while supporting major Russian energy projects and guaranteeing substantial cash flows to Moscow’s war machine. In both the short and long term, the surge in Russian pipeline gas sales via Bulgaria does not bode well for the EU’s and NATO’s ability to project power in the Balkan and the Black Sea region. Appeasement will not work, hardball politics will.

Ilian Vassilev

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