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Relentless pursuit: Russian executives visit Sofia in quick succession to give traction to transnational undertakings, pounding away at Sofia's resolve.

If Russia's joint energy projects with Bulgaria are not proceeding as fast as Moscow would like them to, it is not for lack of effort on the Kremlin's behalf. And while there has been no major breakthrough comparable to the signing of the "grand slam" of agreements during Vladimir Putin's visit to Sofia in January 2008, compounded by the change of government in Bulgaria raising the prospect of more setbacks than progress in the future, there has been inexorable, if slow, forward movement.

Visits by Russian top-level executives to Sofia in mid-February, have not elicited much in the way of actual progress, but were indicative of the tenacity of the Russian companies involved in pursuing the projects.

First came the trip of Sergey Kirienko, the chief executive of state nuclear company Rosatom, the parent company of Atomstroyexport, contracted to build two 1000MW lightwater reactors at Belene on the Danube River for four billion euro.

On February 12, Kirienko met Bulgaria's Economy and Energy Minister Traicho Traikov to discuss the terms of a loan that would keep the project going while the Bulgarian Cabinet reviews its own approach and seeks new strategic investors.

The global credit crunch and ongoing opposition from environmental groups have thwarted the efforts of French banking group BNP Paribas to raise funding for the project, with reports in France claiming earlier in February that the bank resigned its mandate.

Putin's offer for a 3.8 billion euro loan, which would have covered all but five per cent of Atomstroyexport's contract costs, was initially rebuffed, but negotiations on the issue were launched under the tripartite coalition after it became clear that BNP Paribas was unsuccessful in its funding drive.

Having earlier dropped its demands for state guarantees, Rosatom is now reportedly ready to put up two billion euro in funding, which would cover construction costs for two years, during which period Bulgaria is expected to finalise its new strategy and have enough time to pick new investors.

The new strategy will see Bulgaria relinquish its control by keeping less than a majority stake--that figure could be between 20 per cent and 30 per cent. For months after Germany's RWE pulled out of the deal to buy 49 per cent in Belene, media reports in Bulgaria and Russia said that Rosatom was interested in buying some of the shares that Bulgaria will put for sale. State-owned Bulgarian Energy Holding was expected to call for offers, by end-February, to pick an adviser that would draft the new government strategy and prepare the strategic investor tender.

Following Kirienko's visit, Bulgarian daily Dnevnik said that Rosatom wanted a stake of between 30 per cent and 35 per cent in return for the loan, quoting unnamed sources familiar with the talks.

Traikov did not offer details on the talks, saying only that the nuclear plant could be built because of the large amounts already invested in it.

Bulgarian Prime Minister Boiko Borissov, speaking on February 17, was more forthright, saying that "we continue working on the Belene project and will say whether it can ultimately be turned to profit."

With billions of leva already spent on the project and contract termination damages equally high, Bulgaria had no choice but to continue. "I hate to say it, but the previous government brought us to the point of choosing the lesser of two evils," Borissov said, as quoted by Bulgarian news agency BTA.

Gas concerns

Kirienko was followed by the chief executive of state gas firm Gazprom, Alexey Miller, whose visit on February 16 included meetings with Borissov, Traikov and President Georgi Purvanov.

Invited by Bulgarian state-owned Bulgargaz to discuss speeding up work on the South Stream pipeline, the issue of Bulgaria's gas supply contracts dominated the agenda of the talks.


The sticking point is Gazprom's insistence to treat the contract renewal process as part of the negotiations on the amounts that Bulgaria would receive through South Stream. Bulgaria wants the issues examined separately and fears that bundling the issues could result in lower quantities being pumped through Bulgaria to Greece, Macedonia and Turkey, which would mean lower transit revenue for Sofia, Dnevnik said.

"We are having talks about starting the negotiations, not the actual negotiations [on the contracts]," Traikov said after the meeting. Bulgaria had "an entire list of demands on the gas deliveries contracts, but these cannot be examined unilaterally," he said.

Some of those demands, reportedly, include an increase in the transit fees-now at $1.7 for the transit of 1000 cubic metres of gas for 100km, worth about 100 million leva a year-paid by Gazprom. Traikov said that the fees were half the amount Gazprom pays other countries.

A point of uncertainty was left concerning whether Gazprom agreed to scrap its favoured model of deliveries through partially-owned subsidiaries. A statement by the Bulgarian Presidency said that Miller agreed to Purvanov's request for direct contracts, without intermediaries. Statements released by the Government press service and Gazprom made no mention of such an agreement.


In unrelated news, the planned oil pipeline between Bourgas in Bulgaria and Alexandroupolis in Greece, opposed by environmental groups and tourism associations, is slated to change its overseeing ministry once again. In 2009, it passed from the Economy Ministry to the Regional Development Ministry.

On February 24, the Cabinet is expected to look into a proposal to pass it on to the Finance Ministry as part of the Government's drive to consolidate state assets, Regional Development Minister Rossen Plevneliev said after a Cabinet meeting on February 17.

It gave Borissov another opportunity to say that the project would not go ahead until an environmental impact assessment cleared the project. However, the company that would build the pipeline was yet to request an assessment, Borissov said.
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Title Annotation:BUSINESS
Author:Bivol, Alex
Publication:The Sofia Echo (Sofia, Bulgaria)
Date:Feb 19, 2010
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