The pipeline that no one celebrates: the operability of Balkan Stream and the future of Europe’s energy security

“[With] the Balkan Stream project, Bulgaria will become a regional strategic gas distribution center and guarantee the diversification of gas supply ”

– Boyko Borisov, Bulgarian PM

Competition from the “Balkan Stream” (BS) extension of the Turk Stream gas pipeline has received little attention. This is curiously true even in the countries crossed: Bulgaria and Serbia. Nonetheless, the pipeline has the potential to change the geopolitics of natural gas supply. How is South East Europe going to exploit this opportunity, if at all?

The pipeline that was not …

On December 29, Serbian President Aleksandar Vucic ad that Russian natural gas would begin to flow through the Balkan Stream pipeline. The new pipeline will allow Russia to supply gas to Central Europe by extending the more controversial Turkish Stream. Meanwhile, the EU and the Western Balkans (WB) will be able to diversify gas routes by bypassing still unstable Ukraine (figure 1). By bypassing the turbulent areas of the former Soviet Union (FSU), the BS hands over Moscow more leverage on Kiev and Minsk. In fact, both countries are heavily dependent on transit fees Russia pays to use Ukrainian and Belarusian pipelines. Being able to move a significant portion of these supplies further south would devastating blow to these savings. Meanwhile, he gives the EU some trump cards in its relations with Turkey and the eastern neighborhood.

However, due to BS, Brussels would face a much more complex issue. As South East Europe (SEE) regains its central place in the geopolitics of energy, new risks are emerging. The World Bank, and in particular Serbia, as well as Bulgaria, a member of the EU, have acquired an important part in the game. How will their government take advantage of this new position?

Enter Bulgaria

The ambitious Turk Stream pipeline project has started in 2014. On December 1, a memorandum of understanding on a pipeline crossing the Black Sea to Turkey was sign. The long-term nature of the project was evident: the construction started in 2017 and the pipeline started operational in 2020. The Bulgarian government seized a historic opportunity when Italian courts blocked the construction of another pipeline from Turkey. The Trans-Adriatic Pipeline (TAP), was supposed to bring gas from Central Asia in Europe reduce the EU’s dependence on Russian gas. As construction on this project halted, Sofia offered to build extension pipes extending the Turk Creek into the Old Continent. From there began the for what is now the BS pipeline.

According to the Bulgarian authorities, the project has had a positive effect on the local economy. Indeed, the sites employed 2,500 people directly. During this time, the Bulgarian treasury will earn approximately 180 million euros each year in transit costs from 2021. In addition, the SB required a systemic modernization of the Bulgarian gas network and, consequently, new investments. In the Sofia plan, the BS is only the first stepping stone in a much larger and more ambitious project.

“You see how huge this facility is, it will allow us to transport Azerbaijani, liquefied, Russian gas and other types of gas. […] and will ensure the diversification of the fuel supply. “

—Boyko Borisov on the BS

The said Balkan Hub should help the EU achieve energy security through diversification by reducing blackmail power. In addition to Russian gas, the BS is expected to accommodate liquefied natural gas (LNG) if Thrace, Azerbaijani gas and hopefully some local extraction in the Black Sea.

Serbia should benefit

Announcing that the connection of the BS to the Serbian gas transmission network, Aleksandar Vucic underlined: “This is a great day for Serbia, the economy, the citizens and the industry.” In another statement reported by the Russian news agency TASS, Vucic linked BS to the development of the Serbian economy. In the chair own words:

We will start pumping gasoline by the end of the year; our economy will develop and occupy the first place in Europe by the level of growth this year and in the next three years.

Indeed, during a press conference, Vucic noted that Serbia will need massive investments in the years to come. Grant the perfect operability of the BS “a lot of money would be invested in the construction of roads in the eastern part of Serbia ”. If Serbia keeps these promises, it could return to its usual single-digit growth level in 2021. After all, gas is pivot in the Energy strategy developed by the Serbian government for years to come. The “planned development of distribution networks” should determine a “increased demand for natural gas»For domestic and industrial consumption.

In addition, the BS is a chance for Serbia to score purely political points in the regional arena. For starters, it becomes a way to put pressure on neighboring Bosnia and Herzegovina (B&H). Serbia is pulling even deeper into orbit one of B&H’s constituent entities, the autonomous Republika Srpska (RS). The RS already controls the all gas entering the country, all from the border with Serbia. Nevertheless, the RS ad its intention to link its network to BS by building a pipeline to the populated city of Banja Luka in 2020.

Looking at the big picture, Serbia is using the BS to force Russia to refrain from open hostilities. Indeed, relations between Belgrade and Moscow have been neither friendly nor stable in the last few years. Yet Bulgaria is even more unpredictable from a partner of Russia, because recent events have proven once again. Thus, Russian President Vladimir Putin needs Vucic’s assent if he wants to reiterate his threats of “alternative options to supply gas to southern Europe ”if Borisov is not sufficiently compliant.

Provide

The WB and Black Sea pipelines offer Bulgaria and Serbia the chance to take center stage. Both governments have tried to make the most of this situation. Yet, one should not be blinded by the successes listed above.

First and foremost, Russians always have the perception that “when it comes to Sofia, everything is fine“. In addition, the country is now experiencing a period of several months of unrest and contestation. Government faces spring general election and less business-friendly BSP victory is not improbable. Thus, Bulgarians lose their chance to dismantle the belief that they do not have “the capacity to act as regional partners“.

At the same time, Belgrade’s attempts to increase consumption of natural gas are not at all convincing. The government Energy strategy provides a 31% contraction of gas production in 2023 compared to 2018 levels. At the same time, coal consumption is expected to decrease by less than 3% by 2030. Moreover, attempts to deceive Moscow may turn against them as soon as Sofia ensures tolerance. After all, BS gives Russia the ability to enter the EU market bypassing the FSU, and Serbia is not a piece of the puzzle.