Bulgaria’s government to collapse over South Stream

Sergei Stanishev

Sergei Stanishev

Bulgaria’s government will be the first in the European Union to fall after the EU elections, against the background of the unfolding controversy over the Gazprom-supported South Stream gas pipeline.

Sergei Stanishev, leader of the Bulgarian Socialist Party (BSP), the leading partner in the minority coalition government, said today (10 June) the government should resign “immediately” and early elections should be held in July.

“The fair position is that elections should be held immediately. […] After the European elections everyone understood that the cabinet will not make it until the end,” said Stanishev, who is also president of the Party of European Socialists (PES).

The coalition cabinet of BSP and the Movement for Rights and Freedoms (DPS), a mainly ethnic Turkish party, was in difficulties since DPS leader Lyutvi Mestan said early elections should be held on 30 November or 7 December, mentioning the issue of South Stream as a reason for his party’s disagreements with BSP.

>> Read: South Stream project threatens to bring down Bulgarian government

Friday 13

Stanishev has brought forward the date suggested by DPS. The main opposition force, Citizens for European Development of Bulgaria (GERB), led by former Prime Minister Boyko Borissov has requested a motion of censure against the cabinet. It will be most probably be voted on on Friday (13 June). Stanishev said that the government should resign immediately after the motion of censure was rejected.

Until now, the minority government has successfully rejected four motions of censure by GERB. That’s thanks to the support of the nationalist Ataka party, which is not a member of the coalition between DPS and BSP, but has offered its support each time it was needed.

This dramatic development takes place after work on the South Stream pipeline was halted. Prime Minister Plamen Oresharski said on 8 June his cabinet was stopping construction until Brussels lifted its objections to the project. At the G7 summit, Commission President José Manuel Barroso made it plain that the EU’s executive had launched an infringement procedure against Bulgaria for non-compliance with European rules on energy competition public procurements. Other infringements procedures related to other countries would follow if other irregularities were not removed, he said.

Oresharski announced the decision to freeze South Steam after he received in Sofia US Senators John McCain, Ron Johnson and Christopher Murphy. On 6 June, the US Ambassador to Bulgaria Marcie Ries said that Bulgarian companies participating in the construction of South Stream could be hit by sanctions. The reason is that Bulgaria has awarded the construction of the Bulgarian stretch of South Stream to a consortium with the participation of Russia’s Stroytransgaz, a company linked to Genady Timchenko, an oligarch under US sanctions [read more].

Asked by EURACTIV today in front of the Commission headquarters if he saw the news coming from Sofia about the freeze of works on South Stream as positive, Energy Commissioner Günther Oettinger said “it seems so.”

Commentators in Bulgaria have repeatedly said that the main “raison d’être” of the pro-Russian government in Sofia has been to open the door for South Stream. The proposed pipeline would arrive in Bulgaria, EU territory,  through the Black Sea. It is planned to continue through Serbia with branches to Bosnia and Herzegovina and to Croatia. From Serbia the pipeline crosses Hungary with a branch to Austria and Slovenia before reaching Italy. Its planned capacity is 63 billion cubic metres per year (bcm/y).

Oresharski’s cabinet has largely mismanaged its communication over South Stream, confirming the impression that it was there to help various economic players pocket hefty sums. The pricetag of the Bulgarian section of South Stream is €3.5 billion, a sum which according to critics is inflated “Putin-style,” as were construction projects during the Sochi Winter Olympics.

It is difficult to say what kind of coalition would take over after the early elections. Bulgarians voted in the European elections, in what was seen by political commentators as a test for early elections. The winner of the elections was the centre-right GERB, with 30.4% of the vote, followed by BSP at 18.5% and DPS at 14.1%.

Two more parties were able to send MEPs to Strasbourg and Brussels – a new political party “Bulgaria without censorship” led by former journalist Nikolai Barekov, which obtained 10.6% and the centre-right Reformist Bloc, who got 6.4%.

A new party, which couldn’t pass the threshold for obtaining an MEP seat, but met the 4% threshold needed for entering the national parliament, is the Alternative for Bulgarian Renaissance (ABV), which positions itself on the centre-left. 

In December 2013, the European Commission said that all bilateral agreements (IGAs) for the construction of South Stream gas, signed between Russia and Bulgaria, Serbia, Hungary, Greece, Slovenia, Croatia and Austria, are all in breach of EU law and need to be renegotiated from scratch [read more].

EURACTIV has seen a letter sent by the Commission to the Bulgarian authorities, dated 14 August 2013, which analysed the Bulgaria-Russia agreement in great detail. The six-page document, addressed to the Bulgarian deputy energy minister, Evgenia Haritonova, has never been made public, despite pressure by some MPs in the Bulgarian Parliament to disclose it.

Apart from breaches to EU energy market rules forbidding energy producers from simultaneously owning transmission networks (so-called ownership unbundling), which are common to all seven agreements, the letter identifies the following grievances:

  • Bulgaria committed to provide the most favourable tax regime to Gazprom, which according to the EU Commission is a breach of the EU's state aid rules;
  • At one point, the inter-governmental agreement (IGA) stipulates that Bulgarian and Greek companies would be subcontracted, and at another, that preference would be given to companies from the states of the parties (Bulgaria and Russia), which is against EU competition rules;
  • The IGA stipulates that tariffs for using the pipeline would be established "by the Company," which is in contradiction with the powers of the national regulator to approve transmission tariffs in accordance with EU law.

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