Serbia, Bulgaria and the attempt to escape Russia’s ‘gas embrace’

The Presidents of Serbia and Bulgaria have marked the start of work on the construction of a gas interconnector between the two countries, marking their official intention to free themselves from Russian dependence.

Diversification. A word often used in official statements after the Russian invasion of Ukraine. If they had succeeded in doing so, they would have freed the two countries from dependence on Russian gas, which Kiev claims to be paying for with ‘blood money’.

Unlike Bulgaria, Serbia is not yet a member of the European Union and its officials are reluctant to impose sanctions against Russia. Bulgaria, which borders Serbia to the south-east, has imposed sanctions against the Kremlin as an EU member.

However, both countries are coping in their own way with their almost total dependence on Russian gas.

The case of Serbia

Serbia is currently fully dependent on Russian gas. It manages to meet just under 13% of its needs through domestic production, importing the rest exclusively from the Russian Federation.

This gas is supplied to Serbia via the Turkish Stream pipeline, which runs through Serbia from the Bulgarian to the Hungarian border.

The project itself is part of Russia’s long-term ambition to minimise gas transport through Ukraine by building alternative routes.

The extent to which gas has become a political issue is demonstrated by the fact that in October 2021, Serbian President Aleksandar Vucic confirmed that Russia had proposed to make gas three times more expensive than it is now.

In the months since the expiry of the gas price contract, Serbia and Russia have been negotiating a new price.

The outcome of the negotiations, as announced by Vucic in November 2021, is that the price will remain unchanged for the next six months, i.e. at 270 dollars per thousand cubic metres.

Six months later, and three months after the Russian invasion of Ukraine, Vucic, after talks with Russian President Vladimir Putin, announced that Serbia would have a very favourable gas price and that the contract would be signed for three years.

Vucic said that the price would be between $340 and $350 per 1 000 cubic metres of gas, but that “this is not the final price because it will depend on the quantity to be supplied”.

Although Serbia is a candidate for membership of the European Union (EU), it refuses to impose sanctions against Russia, despite calls from the West.

The case of Bulgaria

The Russian state energy company Gazprom announced at the end of April 2022 that it would stop supplying gas to Bulgaria.

A month before, the Bulgarian authorities had announced that they did not intend to pay for Russian gas in roubles, as the Russian President had requested from all EU suppliers of this energy product.

Following Gazprom’s decision to cut gas supplies to his country, Bulgarian Energy Minister Aleksandar Nikolov announced that Bulgaria was a loyal partner to all neighbouring countries.

Until the supply cut, Bulgaria had been meeting more than 90% of its gas needs with supplies from Russia.

After the cut-off, Bulgaria, which according to Reuters needs around three billion cubic metres of gas a year, received one billion cubic metres of gas a year from Azerbaijan and bought the rest on the market.

Bulgaria’s state gas company Bulgargaz has signed a long-term contract with Turkey’s state gas company Botas, giving it access to neighbouring Turkey’s gas network and liquefied natural gas (LNG) terminals to help with supply, Reuters reported on 3 January.

Under the new 13-year agreement, Bulgargaz would be able to use Turkey’s LNG terminals for cargo shipments, which would be transported to Bulgaria via Botas’ gas network.

Diversification

On 1 February, the Presidents of Serbia and Bulgaria, Aleksandar Vucic and Rumen Radev, officially announced the start of construction of the Bulgaria-Serbia gas pipeline in Kostinbrod.

The “Bulgaria-Serbia” interconnector (IBS) in Serbia will be 109 kilometres long and the total length of the two-way pipeline through the two countries is 170 kilometres, from Novi Iskar near Sofia to Nis.

The pipeline has a capacity of 1.8 billion cubic metres of gas per year and is expected to be operational in mid-2023.

European Commissioner for Energy Kadri Simson considered the project important for diversifying gas supplies and crucial for the whole region.

Serbian President Aleksandar Vucic thanked the EU for its financial support. He said that the interconnector will allow Serbia to increase its supply of liquefied natural gas.

“This is a great thing, a European project, we will supply other countries through our country”, Vucic said, thanking Bulgaria that Serbia “has not had a single day of problems with Bulgaria because of the transit of the Turkish Stream”.

He added that the interconnector is financed with €22 million from the budget and will provide more energy sources and connect Serbia to Europe and the world.

The total cost of the Niš – Dimitrovgrad – Bulgaria pipeline is €85.5 million, of which the European Investment Bank (EIB) is lending €25 million, €49.6 million is a grant co-financing from the European Union under the IPA accession funds, and the rest of the cost will be covered by the Serbian budget and the funds of the public company Srbijagas.

The agreement on the construction of the Niš-Dimitrovgrad pipeline was signed in 2010 and work on the construction of the gas connection in Serbia started in February 2022.

Thanks to the pipeline with Greece, which was completed in October, Bulgaria will receive natural gas from Azerbaijan and LNG (liquefied natural gas) through the port of Alexandroupolis in northern Greece.

This pipeline is part of the wider European Union (EU) Southern Gas Corridor initiative, which aims to reduce Europe’s dependence on Russian gas. The main source of supply would be the Shah Deniz gas field in the Caspian Sea, on territory belonging to Azerbaijan.

The gas would go from Azerbaijan to Europe via sections of the South Caucasus, Trans-Anatolian and Trans-Adriatic pipelines./RSE/