As time ticks away, Bulgaria faces an ever greater risk of being taken to arbitration by Russia's Rosatom as it will obviously miss the deadline for signing a final agreement for the construction of Belene nuclear plant.

Moscow has threateningly warned that if the contract is not signed by July 1, Bulgaria will be sued and obliged to pay EUR 1 B in damages.

Is the prospect of paying hefty compensation to the Russian contractor that scary?

Surprisingly, the answer is no.

Why?

1. Russia, for whom this project is very important from a political rather than an economic point of view, is very likely to agree to another delay. For Moscow, it is important to build its first nuclear power plant in the European Union, which it then can show to all its clients in Europe.

2. The Russian side may even be better off to wait for HSBC analysis as it will gain lots of benefits if the consultant's decision is in favor of the project.

3. The very constitution of the arbitral tribunal takes a few months. In some cases this process can be quite long, especially when the arbitration procedure is not explicitly stipulated in the contracts. It took two years for Gad Zeevi, whose firm privatized Bulgaria's bankrupt flag carrier Balkan Airlines and sued the Ministry of Finance and the Privatization Agency, to do that.

4. It takes a long time before the International Court of Arbitration comes up with a ruling. Under the law, this should take no more than a year, but actually cases drag on for about two-three years.

A case in point is Turkey's CCG, part of the Ceylan conglomerate, which filed in 2007 a claim for EUR 75 M at the International Court of Arbitration. The Turkish company was contracted to implement the Gorna Arda project under an electricity-for-infrastructure swap deal Bulgaria and Turkey signed in 1998, during the term of the government of Ivan Kostov. The launch of the hydropower construction was delayed after the Turkish company ran into financial troubles.

The claim in the arbitration court was against the other member in the joint venture for the construction of the hydro power project on the Arda river, known as Gorna Arda - Bulgaria's National Electric Company NEK. Four years later no verdict has been delivered yet. The trial was suspended over the Turkish company negotiations for  the sale of its 30,1% stake.

The 12th annex to the main contract between Bulgaria and Russia on the construction of two 1,000 megawatt nuclear reactors at Belene, in the north, expires at the end of June.

Asked by journalists whether Bulgaria faces the risk of being taken to arbitration by the Russian contractor Rosatom as it is likely to miss the July 1 deadline for signing a final agreement for its construction, Economy and Energy Minister Traicho Traikov said:

"The arbitration is not a risk, it is an option."

The Bulgarian side apparently wants to steer clear of rushing for last-ditch effort in the negotiations with the Russian state nuclear corporation Rosatom for the fate of the Belene nuclear power project.

It is still unclear how things will turn out as Russia's claims of for nearly one billion euros may prove to be unfounded. Potentially, however, this could become the most expensive arbitration proceedings in which Bulgaria has ever been involved.

For a country that has suffered from the Chernobyl disaster and decommissioned several nuclear reactors over safety concerns and for a government, which has vowed to sever ties with Russia, Bulgaria's pursuit of atomic energy is surprising at best.

In an age when the major powers are giving up on nuclear energy, Bulgaria's pursuit of atomic energy places it once again in Europe's backyard and brands it as Russia's Trojan horse in the united bloc.

Russia's threat should not scare stiff the Bulgarian government and determine its economic logic. Should the project be found not economically feasible, forking out the damages may prove to be the lesser evil.

We need your support so Novinite.com can keep delivering news and information about Bulgaria! Thank you!