Hristo Kazandzhiev: Russia Might Curb Gas Supplies to Bulgaria over South Stream
Hristo Kazandzhiev is an energy expert and consultant. He graduated from the University of Mining and Geology in Sofia and has a degree a number of specializations related to oil and gas exploration and extraction. Between 2002 and 2009 he headed a Directorate at the Ministry of Economy.
Novinite.com and Novinite.bg have asked him for a comment on Russian President Vladimir Putin's announcement that the South Stream gas pipeline project is coming to a halt.
Russian President Vladimir Putin has said the South Stream project cannot be carried out under the present conditions. Is the project really coming to a halt or the statement is part of a strategy aimed at Europe?
I think this step from President Putin was motivated by the impossibility to carry out the project and by Europe's determination to stand up for the principles on which the union was built, to defend the principles of rule of law and upholding the legal requirements. Russia's tough position not to take European law into consideration led to the end of a project which was not well-founded from the economic perspective, but was politically necessary as Russia's lever to undermine the foundations of Europe.
Putin mentioned Bulgaria as the main culprit. Is this an implication that the project could be continued if Sofia changes its position? Is this a way to put pressure on Bulgaria?
I wouldn't say this is about pressure. This is an overstatement about Bulgaria's role made because the country, to a certain extent, took European and Bulgarian legal requirements into consideration. In fact Bulgaria will be unfortunately one of the countries to bear consequences from stopping the project. As some Russian experts put it, a cold winter is looming and I will not be surprised if gas flow to Bulgaria is curbed in retaliation.
Speaking of consequences, Putin said on Monday that Bulgaria would lose EUR 400 M in funding every year now that South Stream has been abandoned. But less than two months ago former caretaker Economy Minister Vasil Shtonov estimated the project at BGN 1 B in revenues collected from transit taxes in the next 10-15 years. Where does the truth lie?
The truth is that the project could in no way bring about benefits to Bulgaria the way it was structured and organized and with these huge capital expenditures. To compare, revenues from the current gas transit within 18 billion [cubic meters] is BGN 100 M. If all the gas transit via Bulgaria was carried out through South Stream and Bulgaria received all the transit fees, revenues would be at about BGN 350 M. But this [would happen] only on the condition that Bulgaria was independently carrying out the project and also [if] the project was being implemented at more reasonable costs. This is why potential benefits which Putin had ascribed to Bulgaria were overestimated. In fact Bulgaria is rather the winner that the loser of South Stream's demise due to the fact that it will not be compelled to set aside anything from the already insufficient public funds to finance a project which is not beneficial to it.
Will it be easy for Russia to redirect resources from South Stream to a second gas pipeline to Turkey, having in mind its joint commitments with other companies?
I don't think Russia is losing over the halt of South Stream - on the contrary, I think it is a winner, since the project was carrying losses for it, but [Moscow] had decided to realize it in the name of certain economic interests. Besides I do not believe that Russia is seriously intending to carry out the southern corridor to Europe via Turkey, because it would be substantially more expensive that the initial estimates. Secondly, Russia is having a tough time from the financial point of view, and furthermore has already embarked on a number of other projects related to the Asian markets.
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Hristo Kazandzhiev: "I do not believe that Russia is seriously intending to carry out the southern corridor to Europe via Turkey, because it would be substantially more expensive"
More or less expensive, it doesn't really matter. It will still carry on. If price would matter that much Russia would continue use pipelines via Ukraine.