Bulgarian-Russian Relations Enter the Deep Freezer

Георги Минчев - българо-руска търговска палата

The economist Georgi Minchev to “The BANKER”

Geogi Minchev is an economist, chairman of the Bulgarian-Russian Chamber of Commerce and Industry (BRCCI) since 2017. He is a former chairman of the National Association of Bulgarian Shipping Agents (2006-2012) and current chairman of its Board of Directors.

Mr. Minchev, it has already been announced that the 46th President of the United States is Joe Biden. Where would the world go if he took the oath and entered the White House on January 20 next year?

Let's start a little further back. Generally speaking, Donald Trump's policy can be formulated this way: "Nothing personal – just business." And as with any business, the door to any tactically shorter or longer agreements with the competitor remains open. For him, the U.S. economy is a top priority, and profit is a major goal. Therefore, liquefied natural gas (LNG) supplies to south-eastern Europe, for example, are mainly carried out by US companies. Although very often we are talking about Russian gas, which is relatively cheaper and is not chartered (that is, it is not negotiated for a long period ahead – editorial note). By comparison – Qatari gas, for example, is freighted and volumes for the free market are small.

The Democratic Party's concept is fundamentally different. Its main goal is to resuscitate politics from the early 1990s, when the American economy was part of the world one, but the United States was a global financial and military hegemon.

Or, if I have to summarize the situation, for Trump and the Republicans, the EU and NATO were instruments of diminishing value, while for Biden and the Democrats the EU is a fundamental tool to ensure the global order as we know it.

How will the change of power in Washington affect our major Russia-related energy projects?

The U.S. stance on Russian-Bulgarian relations – including in the field of energy and transportation – has not changed in decades, regardless of who is the occupant of the White House. It has always been, is and will remain persistently negative.

The reason is more than clear – the development of Bulgarian-Russian relations is necessarily seen as a threat to American and Euro-Atlantic interests in the region. The difference is how state priorities are graded in the concepts of Republicans and Democrats. This difference, however, is tactical, not strategic. Under Trump, the main enemy was China, and Russia was a rival that had to be attracted or neutralized. And for the Democratic Party, Russia has been and remains its main enemy, while China is seen as a major competitor.

Tactical realignment of priorities requires the concentration of anti-Russia forces to create conditions under which relations with China can be balanced. Biden will therefore ultimately heat up anti-Russian politics, including on Bulgarian soil.

Does this mean that Washington's push to end Russian-involved energy projects will increase?

 Yes, definitely. The other thing to expect is that this part of the Bulgarian political elite, which has historically been closely associated with the global financial elite, and in particular with the Democratic Party, will be supported by the US in its efforts to come to power and radically change Bulgaria's foreign policy course.

That is – our highly negative foreign trade balance with Russia – about $3.3 – 4 billion will decrease?

We certainly cannot fall below some minimum volume of imports, as there are no other sources of raw material and energy resources with which to replace Russian ones.

Yes, but there has already been a roadmap for the transition of Kozloduy NPP to American nuclear fuel. In the coming years, we will gradually replace Russian gas with Azeri, US or other gas. So far, there has been no alternative for a large part of the oil, since LUKOIL owns the Burgas refinery and holds a good part of the market. Do you think there is a chance of completing the Balkan Stream?

The Bulgarian section of Balkan Stream can be completed by the time Joe Biden enters the White House. However, what quantities of natural gas will be transited and where it will come from is a completely different matter. You know we have a signed agreement with Azerbaijan for 1 billion cubic meters, you also know about Turkey's newly discovered deposits in the Black Sea, you also know about Recep Tayyip Erdogan's appetites to redesign the energy map of the Mediterranean. All this, however, takes time. So if we're only talking about 2021, nothing radical is going to happen. But if we look three or four years ahead, things with gas supplies in the Balkans can change a lot.

What are the prospects for the Belene NPP project?

Specifically for the Belene Project, it is worth remembering that it was suspended after a surprise visit of Hillary Clinton to our country, as well as of three senators, two of whom were Republicans. So, for the foreseeable future, this project will continue to exist on paper only.

With regard to the transport links with Russia – is there a chance to rebuild the ro-ro ferry Burgas – Novorossiysk?

With the existing turnover between the two countries, it is unlikely.

There have been no direct flights between Bulgaria and Russia for more than 7 months. Is there any chance of a change in this direction, be it just because of the New Year holidays?

This depends mainly on the pandemic environment, although we are witnessing how the story of the coronavirus is used to build a new type of iron curtain. The fundamental principle of the global liberal order – the free movement of people –has already been under review and this trend will be sustainable in the coming years. Restrictions on the free movement of persons will be institutionalized rather than freedom before the pandemic returned. The barriers will be both political, administrative and purely economic – simply overseas travel will once again become a luxury, not a routine.

Won't that lead to an improvement in global ecology?

It should. But there is another thing – the destruction of the global supply chain, which is already an objective fact, cannot be turned in the opposite direction. The process began as early as 2008, but now, during the pandemic, it has become obvious. The trend aims at regionalization of the production cycle in order to reduce transport costs. This form of global labor division, where the average distance for deliveries from China is over 3,000 km. one way, becomes economically unjustified for some and politically unacceptable for others. In their place, new local supply chains are already being formed. The future lies in the increasingly one-way encapsulation of national economies and regional economic clusters.

In conclusion?

We don't have anything joyful waiting for us for the foreseeable future. The trend is obvious – the crisis will not only continue, but it will also deepen. Surely Joe Biden and his team will make every effort to implement the “Three seas” project, which will act as a sanitary cordon against Russia. So the Bulgarian-Russian economic relations enter the deep freezer. As a result, in the coming year, when the parameters of the real picture are already outlined globally, our politicians, taking into account the new realities, will need to adapt quickly and correct themselves. We can expect that declaring Russia the main enemy will lead to an escalation of tensions and regional conflicts. The prediction of some political observers that Bulgaria will become a front-line state for a while may come true. There is no optimism – there is growing anxiety.


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