Trans-Europe Express – Dubious sale has potential to sink two governments

The Trans-Europe Express is EURACTIV's weekly roundup of news from across Europe.

The Bulgarian and Czech governments are trembling because of the unfolding scandals surrounding a deal to sell the assets of ČEZ Bulgaria to an obscure private company with no experience. ČEZ is a Czech state energy giant in which pro-Russian President Miloš Zeman has a lot of sway.

On 22 February, ČEZ officially announced the sale of its Bulgarian assets to the absolutely unknown Bulgarian company “Inercom Bulgaria”. The price for the purchase of the shares is €340 million, with which the buyer will acquire the business of supplying electricity to 40% of Bulgaria’s population, including the capital Sofia.

The owner of “Inercom Bulgaria” is Ginka Varbakova from the town of Pazardzhik, who has no experience in managing such projects. The company was founded last year with capital of €25,000.

Borissov was already forced to resign once before, in February 2013, over a scandal linked to electricity prices. In that case, ČEZ was targeted for what was perceived as an attempt to exploit Bulgarian consumers.

It is clear that Varbakova and Inercom Bulgaria cannot complete the deal because of the rising public resistance.

Meanwhile, the scandal produced ripples in the Czech Republic as well, because of the news that the deal was held hostage to a conflict between President Zeman and acting Prime Minister Andrej Babiš.

Zeman is often seen as the person who politically controls ČEZ, in which 70% of the shares are owned by the Czech state. Zeman is often reproached for having serious contacts with the Kremlin, and the deal may yet become hostage to geopolitical interests too.

A confirmation of this scenario came when newspaper Lidové noviny revealed the scheme Varbakova had devised to finance the transaction.

The most problematic aspect of the scheme is the envisaged financing by offshore companies owned by a Russian-Georgian businessman with Bulgarian citizenship, Paata Gamgoneishvili, whose name appears in the Panama Dossier investigation.

Right now, it is clear that ČEZ’s deal with Varbakova in Bulgaria is virtually dead and all other options are impossible without the political support of the authorities in Sofia and Prague, Bulgarian journalist Krassen Nikolov wrote, providing many other details.

The scandal shows that state institutions in Bulgaria are not really working to stop the mafia, not even the deals which have the potential to threaten the national security.

It also illustrates, time and again, that all the power in Bulgaria is concentrated in the hands of a prime minister who has no time to deal with all issues, especially since he has aspirations to be a statesman on the global stage, especially while Bulgaria holds the EU rotating presidency.

It is also clear that in every Bulgarian scandal there are strings leading to other capitals. Moscow is certainly one of them.

Inside Track

German re-start. With the end of political uncertainty in Berlin, Chancellor Angela Merkel can focus again on political decisions at EU-level – and the list is long.

Defensive stance. In the continuing row over Warsaw’s controversial judicial reforms, Poland’s PM handed over a White Paper during his visit to Brussels defending the changes and warning that EU pressure could deepen a “populist” backlash at home.

Political turmoil. After the murder of journalist Jan Kuciak, a political crisis is evolving in Slovakia. While mass protests take the streets, PM Robert Fico accuses the president of colluding with George Soros in an attempt to destabilize the country.

Eastern fears. The Baltic States, three exposed allies on NATO’s eastern flank, urged Western leaders this week not to respond naively to Russian threats.

Economic progress made. France’s macroeconomic situation is improving, as the country left the list of states with “excessive macroeconomic imbalances” and joined Portugal and Bulgaria in the category of countries with “imbalances”.

Just in case. Belgium will make iodine tablets, which counter effects of nuclear radiation, freely available in pharmacies as the country’s ageing nuclear reactors stoke safety concerns.

Feminist strike. Spain marked International Women’s Day with unprecedented protests in defence of women’s rights. Hundreds of trains were cancelled, and massive rallies held in Madrid and Barcelona to highlight sexism and the gender pay gap.

Post-election hangover. In Italy, members of the crushed Democratic Party are considering a possible deal with the triumphant 5-Star Movement to avoid deadlock and Western Europe’s first far-right leader since 1945.

Showing good will. Croatian, Serbian and Bosnian leaders met for the first time in six years in an attempt to settle bilateral disputes in the region, after the EU unveiled its new enlargement strategy for the Western Balkans.

Views are the author’s