Thursday, 21 January 2016

Why did the Prime Minister of Turkey Ahmet Davutoglu pay a visit to Bulgaria very shortly before the EU Summit in Brussels?
Prime Minister of Turkey Ahmet Davutoglu arrived in Bulgaria two days before the EU summit in Brussels. After the meeting with Bulgarian Prime Minister Boyko Borisov on 15 December 2015, he said, "Bulgaria is a gateway of Turkey to the EU". Immediately after the visit to Bulgaria Turkish Prime Minister traveled to Belgium. What were the reasons for a snap working visit to Sofia only two days before the Brussels meeting?

The talks between the leaders of Turkey and Bulgaria were focused partially on an escalating migration crisis in the European Union since the summit of eight EU countries on 17-18 December was held for further discussion of ways to stem the flow of Syrian and Iraqi refugees. However, Bulgaria had relatively little involvement in management of the waves of migration towards Europe because they entered the EU through the Greek-Turkish border.

Therefore, this issue was hardly the only major reason for the visit, and even more so in respect of migration such a comparison of Bulgaria with "a gateway of Turkey to the EU" is not completely suitable.

Focus Information Agency. Bulgarian Prime Minister met with Prime Minister of Turkey Ahmet Davutoglu

Reportedly, the talks in Sofia also included bilateral issues of mutual interest. A speed train from Istanbul to Sofia was mentioned as one of major future transport projects to be carried out. Is that indeed all so? It is evident that the question has not fully disclosed to the public why Prime Minister of Turkey paid this visit to Bulgaria.

The Bulgaria's desire to revive the South Stream gas pipeline project - a serious topic of concern of Turkey
One would assume that the trip of Turkish Prime Minister to Sofia might be also caused by a number of circumstances pointing to the fact that in recent time Bulgaria has taken a more active stance on the resumption of the South Stream project.

Perhaps no surprise that Bulgaria continues with procedures for the South Stream project. Bulgaria has been discussing with the European Commission for several months the possibility of building an abridged version of the South Stream project consisting of two offshore lines, which would deliver Russian gas to a receiving terminal near Varna. As Deputy Prime Minister for Economic Affairs Tomislav Donchev stated in the Bulgarian Parliament, "The last months there have been ongoing meetings and discussions with representatives of various structures of the European Commission in order to carry out a precise legal analysis with their help of what options would be possible according to European legislation to transit gas coming from the Russian side in the Black Sea".

Besides, following the plans of the European Commission, Bulgaria agreed with Greece on the construction of a gas interconnector. Shareholders in the joint project company ICGB signed a final investment decision on the construction of intersystem gas connection Greece – Bulgaria on December 10, 2015 in Sofia. As noted, this project will provide a real possibility to diversify natural gas supply to the South East Europe region.

In addition, Bulgaria's desire to facilitate a return of the South Stream project back to life is indicated by the fact that Bulgaria did not join the group of EU countries, which signed a collective letter against the construction of the Nord Stream II pipeline. "I will defend the position for the construction of Nord Stream II and a gas hub in Bulgaria - it is advantageous for the country and nobody can reproach me for that," Bulgarian Prime Minister Boiko Borisov told Reuters.

The Bulgaria's initiative to establish a regional gas hub "Balkan"
The idea to create a gas hub had first been presented at the energy forum in Sofia on February 9, 2015. The European Commission has supported Bulgaria in principle. In December, according to Reuters, Bulgaria's deputy Prime Minister Tomislav Donchev and Klaus-Dieter Borchardt, director of the EU's Internal Energy Market Directorate informed that the European Commission and Bulgaria set up working group in order to begin assessing the legal, regulatory and financial requirements for creating the Balkan gas hub.

Gas distribution functions of the hub will be carried out based on a new UGS to be constructed not far from the Black Sea city of Varna. From this UGS near Varna the gas will be distributed to Bulgaria, Romania and Serbia. It is planned that in total about 43 bcm are to be delivered to Central European countries.

Turkey zealously monitors current development of Bulgarian initiative to create a regional gas hub. An article in Turkish Weekly, published in early January, was entitled "Bulgaria wants to become main gas hub in Europe."

Even in the absence of comments of the Turkish officials, it is obvious that Turkey itself claims to be a leading supplier of gas on South Eastern border of the EU and the prospect of competition in achieving this goal would unlikely be delightful.

Regional gas hub requires major sources of stable and competitive gas supply
The success of Bulgaria in the implementation of plans to achieve a leading position in the regional gas transport infrastructure will depend not only on the approval of the European Commission regarding mentioned above legal, regulatory and financial requirements. Regardless of how all these conditions would be successfully implemented, as Platts experts correctly noted, "question marks remain over what sources of gas can help create a Balkan hub."

Presently, interconnector with Greece (IGB) is the only one source of gas, which will be actually available for the hub operations in Varna. This gas connection has a length of 140 km on the Bulgarian territory and the planned initial capacity of 3 bcm per year. The IGB pipeline is expected to become operational in 2018. In the next stage, a maximum annual capacity of up to 5 bcm should will be achieved. The IGB pipeline will deliver to Bulgaria 1 bcm of gas, which will start flowing through the TANAP / TAP pipelines by transit via Turkey to Greece in 2019.

Future supplies from other sources of gas, such as regasified LNG from Greece and offshore gas production on the shelf of the Black Sea in Romania and Bulgaria, do not have yet certain implementation timelines. All of them can be considered only in the longer term.

South Stream - a way of ensuring access to capacities of gas sources necessary for the hub "Balkan"
The reply to the question of where to get enough gas in order the Bulgaria's hub really acquires a status of regional distribution center, is suggested by many tens of thousands of pipes stored at the ports of Burgas and Varna, which were originally prepared for the South Stream project. As was known, the two lines of that pipeline had a planned annual capacity of 32 bcm that would be enough to raise of the Bulgaria's hub operations up to the expected level.

Nevertheless, as practice usually proves, just only political declarations and public expression of desire is not sufficient to make anything like that happen. The revival of the South Stream project would require certain actions and decisions obviously not only at the level of the European Commission, but also in Bulgaria itself. For example, to demonstrate serious intent with regard to the South Stream Bulgaria also should reform its domestic energy act, especially since it does not comply with European law.

Two contenders to gas from Russia
Turkey is still counting on imports of gas from a terminal, which is being built on the Black Sea coast of Russia. Despite a dramatic deterioration of relations between Turkey and Russia, anyway the former has not given up its plans to enlarge gas supplies by means of Turkish Stream pipeline.

All Ankara's attempts to arrange replacement of Russian gas have not, as of yet, yielded tangible results. President Recep Tayyip Erdogan's visit to Turkmenistan where he held talks with President Gurbanguly Berdimuhamedow ended in nothing. It was assumed that the Turkmen gas would go to Turkey via Iran, although the existing infrastructure is not sufficient for transit of large volumes. Meanwhile the continued political tensions in the region disrupt these plans. In December, Tehran even halved existing supplies of gas to Turkey, referring to the increase in domestic consumption due to the harsh winter.

Thus, both Bulgaria and Turkey are contenders to Russia's gas. In this regard, returning to the question about the reasons of the working visit of Prime Minister of Turkey Ahmet Davutoglu to Sofia it can be assumed that it could be an attempt to persuade Bulgaria to change its position on the revival of the South Stream project in return for a promise of gas supplies from Turkey.

As one can see, the ultimate goals of the two countries are very similar. Each of them seeks to ensure new supplies of gas within a reasonable time, without which it would be impossible to realize ambitious plans to take the lead in developing gas transport infrastructure in South East Europe, let alone adequately meet growing needs of their national economies.

Klaus-Dieter Borchardt, director of the EU's Internal Energy Market Directorate, explaining the EU position on that question to the Bulgarian news agency, said that Bulgaria and other countries in the region had been focused on large-scale pipeline projects such as the South Stream and neglected the development of regional infrastructure.

There is no arguing the regional infrastructure is necessary, but precisely in order to distribute gas from these large-scale pipelines, without which it becomes simply useless.

This is well understood in Germany, which intends to secure Nord Stream II despite the fact that several EU countries as well as the USA have taken position against its expansion. The implementation of this large-scale project will provide opportunities for creating a regional gas hub in Germany that will encourage further development of regional gas infrastructure in several EU countries, including Austria and Italy.

Why does the European Commission accuse some member states of too much enthusiasm in promoting large-scale projects and limits its own activity (with the exception of TANAP / TAP) by supporting only a development of regional gas infrastructure? Had our countries not learnt yet that they do not need these regional pipes and underground storages without gas?

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