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Bulgaria/Russia: Natural Gas Dispute Nears Resolution

Prague, 28 November 1997 (RFE/RL) -- A dispute between Moscow and Sofia over Russian natural gas deliveries is nearing a resolution. As a result, the two countries are moving forward with a series of related economic agreements.

The development also means that Multigroup, a private conglomerate with alleged ties to Bulgaria's Soviet-era ruling elite, has lost its most powerful advocates in Moscow.

The path is clear for Bulgarian President Petar Stoyanov and Russia's Boris Yeltsin to sign a series of lucrative gas supply contracts. The signing is expected when Stoyanov visits Moscow on December 19 and 20. The deal guarantees gas deliveries to Bulgarians and would allow the construction of pipelines to carry Russian gas on to Turkey and other Balkan countries.

Meanwhile, Moscow this week also proposed an investment project to refurbish Bulgaria's state-owned steelmaker Kremikovtzi -- a loss-making enterprise that is, by far, the largest Bulgarian consumer of Russian gas.

The Kremlin also has signed a protocol for paying its $100 million foreign debt to Sofia. Half of the debt is to be settled through deliveries of military equipment. The other half would be paid with supplies to Bulgaria's metals industry.

Bulgarian Foreign Minister Nadezhda Mihailova is scheduled to visit Moscow on Monday (Dec. 1). Her agenda is aimed at preparing the groundwork for Stoyanov's Kremlin trip.

Just two months ago, relations between the two countries had been frigid. Russian Foreign Minister Yevgeni Primakov refused to meet Mihailova on the sidelines of the United Nations General Assembly in New York. Bulgaria declined to invite Russia to NATO talks in Sofia with U.S. Defense Secretary William Cohen and defense officials from across southeastern Europe.

On the surface, it appeared that the new Bulgarian government's bid to join NATO was souring relations with Moscow. But time has shown that the dispute had little to do with Sofia's new Western orientation and everything to do with the pipeline politics of Gazprom, the Russian gas monopoly.

Gazprom had been insisting that a Multigroup subsidiary, Overgas, serve as an intermediary for most gas deliveries within Bulgaria.

Gazprom also wanted the Russo-Bulgarian joint venture Topenergy to have control of Bulgaria's existing pipeline network for nearly 50 years. That would have given Gazprom control of the Buglarian network because the Russian firm owns 50 percent of Topenergy and had the allegiance of Multigroup, which owns a 30 percent stake.

Prime Minister Ivan Kostov insists that the state-owned Bulgargas should control deliveries of gas to Bulgarian consumers. Kostov's cabinet is suspicious of Multigroup's alleged underworld connections and its history of plundering state assets through hidden privatizations. One example is Multigroup's Intersteel, a private firm that profited immensely by conducting the trade operations of state steelmaker Kremikovtzi.

The dispute between Sofia and Moscow appears to have been resolved through a November 14 meeting of Topenergy shareholders in Moscow. At that meeting, Gazprom reversed its position and voted for a proposal that would force Multigroup to sell its Topenergy shares to state-owned Bulgargas by December 16.

A message sent by Yeltsin to Stoyanov this week said Russia does not want Bulgarians to think that the Kremlin has a fixed attitude about the Gazprom-Multigroup squabble.

Yeltsin said he wants all economic issues causing discord between Sofia and Moscow to be clarified before Stoyanov's visit. Yeltsin said economic relations should not lag behind political developments.

With Multigroup's deadline for selling its Topenergy shares coming just three days before Stoyanov's arrival in Moscow, it appears that only a stalling game by Multigroup can set back relations between Sofia and Moscow.

And with both Yeltsin and Gazprom apparently lining up with Kostov's government, there seems little likelihood that Multigroup will get in the way.

Improved relations with Moscow on Sofia's own terms, as well as a victory over Bulgaria's most powerful financial-industrial group, represent major reform achievements for Kostov's cabinet.