BALKAN BLOG: Bulgaria tries to keep Russia sweet

BALKAN BLOG: Bulgaria tries to keep Russia sweet
The National Electricity Company's €620mn debt to Russia’s Atomstroyexport was a source of tension.
By Clare Nuttall in Bucharest October 6, 2016

When a Russian parliamentary candidate claimed in September that Russia could “buy” Bulgaria, it struck a raw nerve in Sofia. Pyotr Tolstoy, who has since been elected to the duma, told a journalist, “We will just buy out the whole of [Bulgaria]. We have already purchased half of its coastline.” Bulgarian Foreign Minister Daniel Bitov immediately slammed Tolstoy’s comment as “arrogant, categorically wrong”.  

The reason the comment sparked so much anger is that it raised the highly sensitive issue of Russian influence on the Bulgarian economy - and the consequent potential for political leverage. Recent political developments only confirm that Russia is still very influential in Bulgaria and is likely to remain so.

The Bulgarian government’s decision to lend money to state-owned National Electricity Company (NEK) to repay its €620mn debt to Russia’s Atomstroyexport defuses a source of tension in Bulgaria’s relations with Russia, in line with the highly pragmatic stance of Boyko Borissov’s government.

The expected victory of parliament speaker Tsetska Tsacheva, the candidate for the ruling Citizens for European Development of Bulgaria (GERB), in the upcoming presidential elections will reinforce this approach, in contrast to incumbent Rosen Plevneliev’s outspoken criticism of Moscow.

GERB is more orientated towards the West compared to its main rival the Bulgarian Socialist Party (BSP), the successor to the Communist party, but it is primarily pragmatic and therefore more inclined to seek a balance between Brussels and Moscow than Plevneliev. In addition, ongoing developments in the energy sector could increase Russia’s influence over the Bulgarian government in the coming years.

The current president Plevneliev has repeatedly called for tougher action against Russia over the conflict in Ukraine, and he appears to have stepped up his rhetoric against Russia in the final months of his presidency. In an address to the European parliament in June he claimed that Moscow was trying to “destabilise” and “destroy” the EU.

He repeated this view in an interview with Darik radio in September. “Russia is not an enemy but it is an opponent … the idea is that we are witnessing efforts on the part of Russia to destabilise the EU. These efforts can be seen from Bulgaria,” the president commented, according to local news portal Novinite.

There have been signs recently that GERB is distancing itself from Plevneliev’s stronger criticisms of Russia.

“I think [the election] will lead to a change in relations… Plevneliev is unusually vocal against Kremlin interference and Russian influence in general,” forecasts Pierre Bussieres, junior research fellow at the Nato Association of Canada. “Usually Bulgarian politicians are a bit more measured and don’t voice their concerns.”

However, Dimitar Bechev, director of the European Policy Institute think tank in Sofia, says he does not expect a big change as a result of the change of president. “The main decision maker is the prime minister. If anything, we are likely to see a president who has much less independence than the current one, so there will be even more emphasis on what [Prime Minister Boyko] Borissov will decide vis a vis Russia.”

Soft pedal

GERB has been consistently rated Bulgaria’s most popular party according to recent polls, and this is expected to result in Tsacheva’s election. Indeed, Borissov was so confident in his candidate that he said in early October that his government would stand down immediately if Tsacheva does not lead in the first round of voting. Tsacheva’s main rival is the Bulgarian Socialist Party (BSP) candidate, former air force commander General Rumen Radev.

The issue of Russia “may become a bit more salient because the Socialist candidate is trying to use Russia as a kind of campaigning tool,” Bechev points out. “However, I don’t think he has a strong chance to be elected and I don’t think this resonates with the electorate.”

The lack of emphasis on Bulgaria’s relationship with Russia in the run-up to the election is somewhat surprising given that Bulgaria has been forced to lend hundreds of millions of euros to NEK to cover its debt to Rosatom subsidiary Atomstroyexport. Bulgaria was ordered by a court of international arbitration to repay the Russian company for work carried out on the cancelled Belene nuclear power plant project.

According to Bechev, Borissov is “taking a soft pedal” on Russia, most recently with the decision to lend money to NEK, and thereby avoid further conflict with Moscow on the Belene issue. “GERB is probably afraid of certain aspects of Russian [power] … but at the end of the day the relationship with the EU is more important,” he told bne IntelliNews.

This was highlighted recently, when Borissov nominated European Commission Vice-President Kristalina Georgieva as its new candidate for UN secretary general. The official reason given by the prime minister was the poor performance of Bulgaria’s original candidate, UNESCO director general Irina Bokova, in successive straw polls. However, there were also rumours that German Chancellor Angela Merkel had pushed for Georgieva to be nominated, while Russia reportedly favoured Bokova, the candidate put forward by the former Socialist-led government.

Having said that, good relations with Russia is almost equally as important as those with the EU, given the country's strong historical links and Russia’s importance as Bulgaria’s energy supplier. It provides almost all of Bulgaria’s gas and, despite the cancellation of the South Stream gas pipeline project, in which Bulgaria would have been a key transit state, there are still hopes in Sofia that it could be resurrected, although Bulgaria is also pursuing other options including an inter-connector with Greece.

Not only that, but Russia has a high degree of control over the Bulgarian economy. A report from the German Federal Intelligence Service (BND) cited by Spiegel in 2014, claims that one third of Bulgaria’s economic output is either directly or indirectly controlled by Russia.

Bussieres points out that most of the Bulgarian elite - even those who belong to the ethnic Turk parties - made their fortunes at least partly in Russia. One of the reasons why Plevneliev is able to criticise Moscow is that his wealth did not originate in Russia. Before entering politics, Plevneliev was the co-owner of a subcontractor to Germany’s Lindner, later setting up Bulgarian construction companies within the German group.

The Russian business ties of other politicians raised concerns within Brussels over Russia’s potential influence over one of the newest EU member states. “The EU is very afraid of the idea of a Trojan horse controlled or assumed to be controlled on some level by the Kremlin,” Bussieres tells bne IntelliNews. He claims there has been a “backlash” every time Sofia has taken a position against Russia, and this is a source of continuing concern for local politicians.

“It is very difficult for Bulgaria to turn away from Russia if only because of the very big Russian influence on energy and the banking sector,” says Bussieres. “I would most definitely think Russia has the potential to stir things up because of its sheer importance economically for the country.” 

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