Sofia view: Oil pipeline cancellation questions

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Call it a trial balloon, call it a U-turn, but something is brewing in the complicated and crucial world of oil pipelines. Vedomosti, a Russian business daily, just announced that Russia may walk out from the Burgas-Alexandroupoli oil pipeline. Sources from Trans-Balkan Pipeline B.V., the joint venture set up in 2007 , suggest that Transneft, Rosneft and Gazprom Neft are now in favour of the alternative route that runs between the Turkish ports of Samsun and Ceyhan, to bypass the clogged straits between the Black and Mediterranean seas. The formal decision is due on Thursday, 17 February.

To be sure, such a decision would surprise few. The current Bulgarian government is not keen on the project, which it inherited from their predecessors, now in opposition. The transit fees (€30-50 million a year) would have been enough to offset potential risks to the environment and Bulgaria’s Black Sea tourism. Sunny Beach, a familiar destination for Northern European package holidaymakers, is not far from the would-be terminal of the pipeline. Sofia was thus far temporising. Back in June Prime Minister Borisov declared Bulgaria was out of the project but then said it was waiting from environmental impact assessment.

The change of plans would be more of a blow to Athens given the political capital invested into the project. Admittedly, that was under the Karamanlis administration so even there damage would not be as tremendous for the ruling PASOK.

We are yet to see how Turkey reacts – that is, how high it will set the transit charges. Vedomosti speculates about a three-fold increase compared to the Russian-Bulgarian-Greek project.

Now the really interesting questions: Burgas-Alexandroupolis was, at the time, packaged together with South Stream and Bulgaria’s deal with Rosatom to build a nuclear power plant near Belene. On the latter, the government’s line is that presently there is no cash in its coffers to finance the behemoth cost of at least €5 billion. On 7 February, La Tribune  revealed that Rosatom may sue Bulgaria for €200 million should the contract be cancelled. The threats were made by the company director, Sergey Kiriyenko, whom some may remember from his short stint as Russia’s prime minister in 1998.

So if Burgas-Alexandroupoli is about to die a natural death, what are the chances for Belene to follow suit? Russia seems think otherwise and is hence ready for more brinkmanship. Sofia has already thrown in up to €1 billion for the behemoth project, which is deeply unpopular with both environmentalists and Russia-sceptics in the country. Expect more really serious arms-twisting in the weeks and months ahead.

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