Black Sea Stream: the Planned Russian Pipeline to the South Returns to the Agenda

The revival of the Turkish Stream project means that Bulgaria is now almost guaranteed to lose transits to Turkey, and maybe even Greece.

The recent shift in Turkish politics towards pursuing dialogue with Moscow, which was welcomed in Russia, didn’t just help resuscitate the Turkish Stream gas pipeline that is expected to link Russian and Turkey though the Black Sea, but also breathed new life into the South Stream project to build a gas pipeline to the European Union.

On the eve of the visit to Russia by the Turkish delegation headed by President Erdogan, which resulted in the official resumption of talks on the Turkish Stream as expected, Bulgaria’s Prime Minister Boiko Borisov called Vladimir Putin with a proposal to revive suspended energy projects, including the South Stream.

Just nine months ago, speaking at a press conference in Sofia organized by the US Chamber of Commerce, Borisov did little to hide who prevented Bulgaria from giving the green light to South Stream’s first branch in the autumn of 2014, when everything was ready to begin construction. “I will be honest with you, since we are partners and friends, and not only when we are sitting at the same table, but also when issues arise. If you know something important, just tell it to me. We are united. We are friends. We stop Russian airplanes, we have suspended three major projects with Russia [the Belene Nuclear Power Plant, the Burgas–Alexandroupoli oil pipeline and South Stream gas pipeline – Alexei Grivach]. If we are not your partner, who could you possibly call a partner?” he said.

In that instance, Bulgaria deprived itself of huge investments, since the cost of South Stream’s Bulgarian part was estimated at 3−4 billion euros. It also lost an opportunity to increase transit payments several times, resolve all gas supply issues and strengthen its strategic position by becoming a major gas transit hub for all countries in Southeast Europe.

However, nature abhors a vacuum, as the saying goes, so as Bulgaria vacated this niche as a transit hub for EU-bound Russian gas, Turkey instantly stepped in to fill the void. The alternative route was called Turkish Stream. By fully replacing South Stream, Turkish Stream would make it impossible for Bulgaria to become a gas transit hub. As much as 15−17 bcm of gas currently pass through Bulgarian territory to Turkey and Greece, which fetches Sofia an annual revenue of some 100 million euros.

Europe clearly did not find the idea of receiving Russian gas from Turkey very appealing. Flirting with Turkey’s transit ambitions as part of the Southern Gas Corridor initiative to get more gas from the Caspian region or the Middle East so as to compete with Russian deliveries is one thing. So far, contracts to acquire only 10 bcm from Azerbaijan with deliveries expected to begin no sooner than in early 2020s have been signed. But importing 40 to 50 bcm (the actual volume that was initially projected for South Stream or Turkish Stream) of Russian gas from Turkey every year under existing contracts and building infrastructure for that throughout the Balkan region is a whole different story.

Last year, European companies came together in an urgent effort to expand Nord Stream. In fact, there are plans to use the Baltic route to deliver some 30 bcm of Russian gas intended for Southeast Europe or, to be more precise, for Austria’s Baumgarten gas distribution hub. It all happened long before the crisis in Russian-Turkish relations following the downing of a Russian jet. At the same time, the projected capacity of the Black Sea pipeline was scaled down from four branches and 63 bcm to only two branches and 31.5 bcm per year.

Of these two, one branch would suffice to cover the contractual obligations towards Turkey and Southern Balkans (Bulgaria, Greece and Macedonia). In order for the second branch to be viable, there should be demand for additional volume, primarily from Italy, the region’s largest market.

Bulgaria has tried to benefit from the freeze in Russian-Turkish cooperation and divert one of the two branches back to Bulgaria, so as to maintain the status of a transit hub for Turkey and Greece. The first signs of Sofia’s interest in reviving South Stream appeared in the winter of 2016. However, back then Boiko Borisov failed to get approval from Brussels and Washington. The situation changed radically when Erdogan sent Putin a letter and the reconciliation between Moscow and Ankara got underway, as well as in the aftermath of the failed government coup in Turkey, which the Turkish president blamed on the West, even if indirectly. It seems that Bulgaria was granted certain freedom to negotiate with Russia with a view to counter-balancing Russian-Turkish rapprochement. 

In addition, the revival of the Turkish Stream project means that Bulgaria is now almost guaranteed to lose transits to Turkey, and maybe even Greece. This issue depends entirely on bilateral relations between Moscow and Ankara. European partners and regulatory approvals are needed for this second transit branch that could tentatively go to south Italy. In this case, Turkish Stream’s second branch is unlikely to be a priority. Bulgaria seems better positioned as a destination for direct EU-bound deliveries and investments, etc. In other words, this is Bulgaria’s chance to jump on the bandwagon and secure the status of a transit country.

The problem is that Sofia can be hardly trusted as a reliable partner. From Moscow’s perspective, it did not and does not decide anything. “Yes, now we see that Bulgaria would like to resume this project, but we incurred some losses due to Bulgaria’s refusal. So now we will not settle for just intentions and need absolutely rock solid legal guarantees. They have not been forthcoming,” President of Russia Vladimir Putin said after meeting with Erdogan, which is telling.

The signal being sent to Russia’s Bulgarian partners is easy to understand: if you want a branch of the Black Sea gas pipeline, get all the approvals from the European Union first. Turkey is almost certain to have the first branch. This means that Bulgaria will have to obtain approvals for importing new volumes of Russian gas into the EU, and for that Brussels would have to renounce its own energy policy vision, which it has been preaching over the last several years, if not a decade.
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