Rexhepi: Tax is not the the problem, but Bulgaria’s contract with Gazprom, which forces us to buy Russian gas

Skopje is not greatly affected by the additional taxes Sofia has imposed on Russian gas transported through Bulgarian territory, but by the long-term contract the Bulgarian operator has with Gazprom on the management of the interconnector to which the gas is transported to North Macedonia.

“The problem for us is not this tax, but the long-term contract by which the Bulgarian operator sold the gas transmission on the interconnector with North Macedonia to Russia’s Gazprom.” “This means that I will levy this tax on one side, while on the other side it will force to use Russian gas,” says for The Geopost Bajram Rexhepi, the director of the state energy company for the transmission and operation of the natural gas transmission system “NOMAGAS.

“Taxes are not so much a problem as Gazprom’s monopoly”.

A week ago, Bulgaria introduced a tax on Russian gas entering the European Union (EU) and the countries of the Balkan region through its territory. The decision took effect immediately, setting a tariff of $10.76 per megawatt-hour.

Rexhepi says this is a political decision and therefore requires a political solution.

“We cannot influence the decision of the Bulgarian parliament, but we have done everything in our power to minimize the consequences of this decision,” he added.

Due to the two countries’ different views on pre-World War II history, Northern Macedonia is in an open context with Bulgaria. Bulgaria claims that events and historical figures before 1945 that happened or acted in what is now Macedonia are Bulgarian, which Skopje disagrees with. In 2020, this led Bulgaria to veto Macedonia, which prevented Skopje from starting negotiations to join the European Union (EU). Last year, the parliaments of both countries approved the French proposal to include ethnic Bulgarians in the country’s constitution as a condition for continuing talks with Brussels.

Therefore, Rexhepi is careful not to worsen relations with Sofia, even when it comes to the problem of the no-alternative supply of Russian gas.

“Last year we signed an agreement to release the annual capacity of 180 million cubic meters outside the Russian gas. However, this is not enough, as we consume about 400 million cubic meters a year. “This means that we as a country are forced to use more than 220 million cubic meters of Russian gas due to the problem in Bulgaria,” says Rexhepi.

He discloses that intensive communication has taken place these days to draw the attention of all relevant European institutions to release other necessary capacities so that sources other than Russian gas can be used.

“I believe we will find a solution,” Rexhepi says optimistically.

Dependence on Russia’s gas

Bulgaria itself does not use Russian gas for domestic needs. After Russia’s aggression against Ukraine, Moscow stopped selling gas to Bulgaria because it refused to pay in Russian currency. Until 2022, Gazprom was one of the main gas suppliers in Bulgaria. However, after the sanctions imposed by the EU against Russia, Bulgaria remained one of the few routes for the supply of gas from Gazprom to the EU and the region. Nearly half of Russian pipeline gas destined for the EU currently flows through Bulgaria, arriving via the TurkStream pipeline.

Can the EU and the Western Balkans region become independent of Russian gas?

“The concept of independence is multidimensional,” Rexhepi answers. According to him, a state is fully independent when it creates political, military, economic or energy independence.

“Energy independence is becoming more difficult because of its importance to a country’s economy. A country’s economic growth is inversely proportional to its energy costs. The more free energy you have, the more competitive you are in the market and the higher the gross profit. “This is a consequence of production that is increasingly based on technologies and machines that work with energy,” Rexhepi says.

He estimates that Europe in general and the region in particular, as well as North Macedonia, have moved very slowly toward energy independence and diversification of energy sources. “Unfortunately, Russia has used this loophole for amazing economic benefits and expanded its geopolitical influence.” This has caused many problems. And unfortunately, there are no acute solutions to these problems, because energy projects are multi-year and long-term,” Rexhepi stresses.

According to him, before the aggression in Ukraine, Russian gas was dominant in Europe and accounted for about 45% of this market. “I don’t know if this was an intentional or unintentional mistake, but in fact the strongest economies in the EU were significantly dependent on Russian gas,” he says. “The search for alternatives in these two years leads to a great economic trauma in the EU, especially in Germany, which is facing the inflation and recession crisis this year,” Rexhepi stresses. Given the large investments to diversify energy sources both in Europe and in the region, Rexhepi is optimistic that the necessary energy independence will be achieved.

What winter awaits us?

Due to the low consumption of natural gas, North Macedonia is not directly affected by the consequences of the war in Ukraine on the energy sector. However, the country has invested very little in this sector and is therefore very unstable.

“In North Macedonia, there has been very little investment in new energy capacity since independence. This has created a very volatile energy market based mainly on lignite. “In recent years, there has been a lot of investment in new energy capacities and sources, so I am sure that in the next three to four years the energy map of our country will look completely different and there will be a radical change,” warns Rexhepi .

What this winter will look like in terms of energy prices depends on many factors, according to Rexhepi. He says the war in the Middle East has shaken energy markets significantly, leading to pronounced price unpredictability. But given the size of the EU’s natural gas reserves and the increasing diversification of resources, Rexhepi is optimistic that we won’t see shocking price situations like last year.

Written by: Xhelal Neziri, associate from North Macedonia