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Daniel J. Graeber

Daniel J. Graeber

Daniel Graeber is a writer and political analyst based in Michigan. His work on matters related to the geopolitical aspects of the global energy sector,…

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Sofia Winning the European Energy Game

Sofia Winning the European Energy Game

The Bulgarian government finally divorced itself from the Belene nuclear power plant after dumping almost a billion dollars into the project. The decision was expected given Sofia's new-found reluctance to deal with Russia on most energy projects. At the same time, however, the government has shown that you can have your Russian cake and eat it too because, as it was balking on the nuclear power plant, it was giving priority status to Russia's natural gas pipeline for Europe, South Stream.

Prime Minister Boiko Borisov said the Bulgarian economy couldn't stomach the cost of limping along with plans for the 2,000 megawatt facility on the Danube River and decided instead to focus on a new natural gas plant. Two years ago, the government had already signaled it didn't have the finances to move ahead with the nuclear power plant after German energy company RWE pulled out because of funding woes. Later in December 2010, Sofia took another swipe at Russian energy projects and balked on the Burgas-Alexandroupolis oil pipeline nearly 20 years after it was proposed.

The Bulgarian government since 2009 has stepped away from Russian energy projects, saying few of them were economically feasible nor where they in the national interest. Sofia has likely the weakest economy in the European Union and already spent close to $1 billion on the Belene project. Meanwhile, the government has embraced Nabucco, the natural gas pipeline once hailed as the panacea for European energy security. The European government, along with its partners in Washington, has expressed concern about Russia's grip on the energy sector and it appears Sofia's decision on Belene means Bulgarian national interest are coordinated with the West's.

But not so fast. This is the Balkans, where Western and former Soviet interests started colliding long before the Berlin Wall was even dreamed up. Borders may change but geopolitical dynamics rarely do. At the same time that Sofia was washing its hands of Belene, it was cozying up to South Stream, Moscow's counterpart to Nabucco. But it did so in exchange for cheaper natural gas, no easy feat with Russia.

For countries along the de facto border between the West and the rest like Ukraine, it's not so easy to change valence states and move from one geopolitical pole to the other. Kiev on one hand wants a better relationship with Europe, but its political record under the Yanukovych administration suggests there may be some Cold War allegiances remaining in Kiev. Meanwhile, it's paying some of the highest rates for Russian natural gas in all of Europe.

Bulgaria gets nearly all of its natural gas from Russia and state-owned Lukoil owns most of Bulgaria's only refinery in working order. By playing its political cards the right way, however, it walked away from Belene but gained gas assurances from South Stream and Nabucco. Sofia only managed short-term concessions from Russia's Gazprom on natural gas, but if it continues on its current course, it may become a key strategic energy hub in southern Europe because it knows how to play the European energy game.

By. Daniel J. Graeber of Oilprice.com




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