Who do Balkans belong to? (Part 4)

Part 1. Serbia

Part 2. Macedonia

Part 3. Bosnia and Herzegovina

Part 4. Bulgaria

Once a part of the huge Socialist camp, Bulgaria like former Yugoslav republics has always been interesting to Great Powers. Sofia repeatedly suffered from political games; it was involved in bloody wars, and the Bulgarian people faced hardships unlike the political elite reigning in the country. Unfortunately, the collapse of the Soviet system, the policy towards European integration and even EU membership that was granted in 2007 brought no prosperity and welfare to Bulgaria. Like before, the country is affected by endless confrontation of Big Powers in the region and its sovereignty is becoming more and more ephemeral - Bulgaria’s political line fully depends on the West and Russia. Like in Serbia, Russia’s influence is quite big in Bulgaria. The other Balkan states are less dependent on Moscow. As discontent with activity of European officials grows in Sofia, many experts say EU tries to freeze the situation in Bulgaria to keep its assets there and not to lose control over Sofia to Moscow.

It is no secret that Brussels controls Bulgaria, both politically and economically. By official data, Bulgaria has been developing sustainably for the last 5 years (3.6%-3.9% economic growth annually), and its GDP exceeded record-breaking 50 billion EUR in 2017. Yet, suffice it to say that GDP of Belarus, for instance, exceeded $52 billion last year, though the country has no access to sea, no such favorable climate for agriculture and it is not even an EU state. Moreover, $52 billion is a quite low indicator for Belarus, as the country is experiencing crisis now and receives no large foreign financing. Although official unemployment rate fell to 5.6% in Bulgaria, its real rate and the exact number of employable citizen who have left the country is not known. Besides, salaries in Bulgaria are 5-6-fold lower than in Germany, for instance.

Although the country has accrued record-breaking 22 billion EUR gold and forex reserves, many in Bulgaria say the EU treats them as “second-class people” not as “native Europeans” and their national economy no longer belongs to them. There is some truth in this.

In early 2000s, German by origin, Simeon Borisov Saxe-Coburg-Gotha was elected Prime Minister of Bulgaria, he proclaimed himself the monarch of Bulgaria yet in 1955. Under his reign, all the national utilities were privatized by Czech, Austrian, French and German companies. Copper mining industry was transferred to Belgians. Gold mine Chelopech was sold to a Canadian company just for $2 million. Now the country received some 2% of recovered gold, and the government has no idea how much gold is extracted from the mine.

The situation should have improved with Bulgaria’s accession to EU, but it turned out that neither Brussels nor the Western companies grabbing the country’s economy care for the national welfare of Bulgaria. Although statistics showed certain economic growth in the country, it was on paper only. In fact, the government sold enterprises and infrastructures to new EU partners, while privatization funds were recorded as investments. Unfortunately, many of the new owners still fail to relaunch the privatized facilities. All this proves the assumptions of Bulgarian experts saying that EU has privatized and frozen Bulgarian enterprises just to keep control over the country’s economy.

The situation in the two main sectors of local economy, tourism and agriculture, is not better. After lifting the ban on sale of real estate to foreigners in 2012, the local government sold lands for development of tourism infrastructure to German, French, Scandinavian and Russian companies. At present, the rush around Bulgarian real estate has died out, but construction of large shopping centers still continues. Local analysts warn that these centers help exporting local capital instead of creating new jobs for locals.

As regards agriculture, the situation is even worse here. Bulgarians blame new “partners” for it. Bulgarian agricultural products proved uncompetitive in the EU market, as West-European farmers receive more subsidies than they in Sofia may afford. Besides, any protection measures for national agricultural producers were prohibited with accession to EU. In 2010, EU even banned production of “eastern” tobacco in Bulgaria leaving 200,000 people unemployed. It is worth mentioning that European financing policy, including in the field of agriculture is a very fertile ground for corruption. Bulgaria ranks among the most corrupt European states. For instance, using mechanisms of distributing European financing for acquisition of expensive agricultural equipment and facilities, some big agricultural producers having access to European capital and ties with European officials have gradually monopolized the sector. According to statistics, in 2017, 4% of producers controlled 80% of agricultural lands in Bulgaria.

It is important to recall the situation in the energy sector. Electricity rate is so high in Bulgaria that monthly bills are usually 1.5-fold higher than average pension is. This prompted public protests in 2013. The reason of such high rates is the transfer of two TPPs built yet by Soviet specialists under management of AES and ContourGlobal, U.S., in 2001. Ivan Kostov’s government undertook a commitment to buy electricity to be generated by these plants at an extremely high price within 15 years. Later, Washington made the country shut down its project of the second nuclear power plant Belene. To join the EU, Bulgaria was required to shut down also its operating Kozloduy nuclear power plant. Eventually, four of the six power units of the NPP were suspended and the country had to buy green power (solar power stations also belong to U.S. companies that invested $1 billion in them) at a price 10-fold higher than the electricity generated at Kozloduy NPP and 15-fold higher than electricity generated at NPP. As a result, the country has become more dependent on foreign financing.

Noteworthy that in the country where about 80% of the polled support Russia and Russian assets in Bulgarian economy are incomparable with European and American ones, Moscow is blamed for the current situation. Slogans like “Russia’s imperial policy in the Balkans” and “Energy dependence on Russia” have resulted in cancellation of South Stream and Belene NPP, inherently favorable projects for Bulgaria. Yet, there may be some breakthrough in the Belene NPP project – in February 2018, Bulgaria suggested completing the construction of Belene NPP (Sofia has already paid for two reactors) as an all-Balkan project funded by EU. Last autumn, Bulgaria suggested using reactors produced by Atomstroyexport, Russia’s NPP and service exporter, for seventh power unit of Kozloduy NPP.

At the same time, Russia still has a serious influence on Sofia through the energy sector. Since Bulgaria’s reactors were designed yet in Soviet time, it needs to buy fuel rods from Russia. Gazprom holds half of the shares in the largest gas distribution company of Bulgaria and supplies almost the total volume of gas it needs. In addition to it, the largest chain of fuel stations and the largest oil refinery in the Balkans (located in Burgas) belongs to Russia’s Lukoil Company. Bulgaria imports oil mostly from Russia. It is obvious that Russia is not going to yield that sector to anyone.

Last autumn, Power Machines global power engineering company has suggested possible expansion of cooperation in reconstruction of energy facilities in Bulgaria. Besides, Rakurs Engineering LLC reaffirmed its plans to involve in restoration of hydro power capacities in Bulgaria and help introducing digital technologies at Bulgarian thermal power plants. Besides, National Union for Power Saving of the Russian Federation expressed an interest in joint projects to modernize Bulgarian coal power plants in compliance with new European environmental requirements.

In addition to it, Rosatom expressed an interest in the project of decommissioning 1-4 power units of the nuclear power plant funded by International Fund Kozloduy. This is a small part of the areas where Moscow is not going to let any foreign competitions in. Furthermore, according to a series of surveys, including West-European ones, Russia directly controls about one-fourth of Bulgaria’s economy and is one of the biggest investors in Bulgarian real estate (according to Novinite news service, in 7.2 million-strong Bulgaria, 84,000 Russian citizens own real estate, mostly on the Black Sea shore).

As to global and regional powers, their influence on Bulgaria is not so high yet. However, China weighs acquisition of some Bulgarian assets and actively develops cooperation with Sofia within One Belt – One Road project. On Nov 22, 2017, the sides signed a Memorandum founding a joint research center of China, Central and Eastern Europe for investment cooperation and construction of transport infrastructure.

One should not forget Turkey either. Turkish investments in Bulgaria’s economy keep growing. In Jan-Sept 2017, Turkey invested 58.8 million EUR in Bulgaria and the commodity turnover of the two states grew for 17.4%. Turkey invests mostly in banking, hotel business and tourism, chemical industry and production of paper, aluminum, beer, sugar and clothing. Nevertheless, Turkey’s influence on economy and policy of Bulgaria is not high.

In fact, Russia and the West use Bulgaria as a foothold to expand their influence in the region and are not going to let a third power into that platform. What remains uncertain in such situation is Bulgaria’s fate. It appears that the country has not decided yet what route to choose for further development.

Yuri Pavlovets