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Bulgaria/Russia: Relations Strained Over Gazprom's Pipeline Politics

Prague, 9 October 1997 (RFE/RL) - A simmering dispute over Gazprom's plans for a Balkan pipeline network has grown into a political crisis between Sofia and Moscow.

Bulgarian officials are accusing Moscow of letting Gazprom's economic agenda influence political relations with Sofia. Bulgarian newspapers are going a step further, charging that Moscow is using the Russian natural gas monopoly's economic influence to pressure Sofia into submission on issues like its desire to join NATO and the European Union.

At the root of this dispute is a battle for control of pipelines that carry Russian natural gas across Bulgaria and on to Macedonia, Turkey, Serbia and Greece.

Disagreements between Gazprom and Sofia also have stalled construction for years on a crucial pipeline link to Greece's Aegean Sea port at Alexandropolis. Gazprom insists that a joint venture created for the project, Topenergy, should be given control of Bulgaria's entire gas pipeline network for nearly 50 years. That would essentially give the Russian firm control of pipelines on Bulgarian territory because Gazprom owns 50 percent of Topenergy and has the allegiance of the largest Bulgarian partner, the private conglomerate Multigroup.

Gazprom also insists that a Multigroup-owned distributor, Overgas, should serve as an intermediary for most Russian gas deliveries to Bulgarian consumers.

These demands have angered Sofia's pro-market government, which controls only 20 percent of Topenergy through the state-owned Bulgargaz. Prime Minister Ivan Kostov's cabinet complains that a private monopolist intermediary like Multigroup would force impoverished Bulgarians to pay 30 percent more than German consumers now pay for Russian gas

Instead, Kostov wants gas deliveries within his country to be handled entirely by Bulgargaz. Sofia also wants Multigroup subsidiaries to sell their Topenergy shares to Bulgargaz -- thus raising Bulgaria's state holding to 50 percent.

Bulgaria is dependent upon Russia for oil and gas. Gazprom is the largest and perhaps most politically influential company in Russia. Allegations that Gazprom has a powerful say in Moscow's political decisions arise from the fact that Viktor Chernomyrdin headed the firm from its creation in the late 1980s until he became the Russian Prime Minister in 1992.

Meanwhile, the "Financial Times of London" says Sofia's totalitarian-era ruling elite started many companies under the Multigroup umbrella in the late 1980s and early 1990s. Headed by alleged Soviet-era Bulgarian Intelligence Service agent Iliya Pavlov, Multigroup has been accused of draining the Bulgarian economy by plundering the assets of state firms through hidden privatization schemes.

The late Andrei Lukanov also has been closely linked to Multigroup. Lukanov was the former Communist Party Central Committee member who became Bulgaria's first post-Communist Prime Minister after helping to orchestrate the fall of dictator Todor Zhivkov in November, 1989.

In 1986, Lukanov's friendship with Chernomyrdin helped him negotiate a cheap gas supply contract that did not expire until the beginning of this year. That contract continued to benefit firms like state steelmaker Kremikovtzi, by far the largest Bulgarian consumer of Russian gas, as well as the private Intersteel Ltd., a Multigroup subsidiary that has conducted Kremikovtzi's trade operations.

Lukanov also served as Topenergy's first board chairman, a position which he held until just a few months before he was assassinated by an unknown gunman in Sofia a year ago. His successor at Topenergy was Multigroup chief Iliya Pavlov.

Newspaper editorials out of Sofia this week have complicated relations with Moscow further by charging that Gazprom is trying to retain a monopoly of the gas market for itself and its Multigroup partners in order to give Moscow leverage over the political situation in Sofia.

Russia's ambassador to Bulgaria, Leonid Kerestedjiantz, has called the articles "organized harassment" and warned that such commentaries would not lead to any positive results.

But Prime Minister Kostov and Foreign Minister Nadezhda Mihailova both have said publicly that they are feeling pressure from the Russian government over their disagreements with Gazprom. Mihailova this week urged Moscow not to confuse economic disputes with political relations.

Ivan Krastev, a prominent political scientist in Sofia who sometimes advises the government, says Gazprom is trying to implement a calculated plan that threatens Bulgarian independence on issues like NATO and European Union membership.

Krastev says a pro-Gazprom intermediary could destabilize Bulgaria's entire economic and political situation at will. He says Russia, through a Gazprom-backed intermediary, would have the leverage to limit the sovereignty of small countries by raising gas prices or refusing to deliver supplies to states where Moscow perceives its interests to be under threat.

Krastev calls the alleged plan the "Doctrine of Vyakhirev," after current Gazprom Chairman Rem Vyakhirev.

Gazprom and Bulgargaz failed last week to reach an agreement on prices and terms for deliveries under a new gas supply contract. A delegation of Bulgarian officials returned from talks in Moscow yesterday, but said that a new agreement has not yet been finalized. Last month, Bulgaria's interior ministry went so far as to accuse Gazprom of trying to blackmail Sofia with high prices.

Relations between Moscow and Sofia have been strained further by Bulgaria's refusal to invite Russia to talks in Sofia last week with U.S. Defense Secretary William Cohen and defense officials from eight southeastern European countries.

Mihailova charges that Russian Foreign Minister Yevgeni Primakov retaliated by refusing to meet her last week in New York during the United Nations General Assembly. Moscow denied that the move was an intentional snub. A Russian Foreign Ministry spokesman said Bulgaria had asked too late to arrange the meeting, and that Primakov's schedule was already full by the time they were contacted. But Sofia's foreign ministry says Bulgarian officials had tried repeatedly to confirm a meeting which had been agreed in advance.

Mihailova has since warned that talks between Gazprom and Bulgargaz can not take the place of political dialogue between Moscow and Sofia. She is scheduled to visit Moscow at the end of November. Meanwhile, Sofia's parliament today agreed to schedule a special session on the deteriorating relations between Bulgaria and Russia.