RUSSIAN INFLUENCE IN BULGARIA

Few European countries are as closely interconnected culturally and economically to Russia as Bulgaria. Despite membership in NATO (2004) and the European Union (2007) Bulgarians remain largely sympathetic toward Russia. For many Bulgarians being both pro-European and pro-Russian is not mutually exclusive but a national necessity that has manifested itself in the country’s policies.

There is not a single primary driver of Russian political influence in Bulgaria but rather an interplay of reinforcing networks that range from politicians and like-minded political parties to energy majors and Bulgarian oligarchs.

Bulgaria is one EU country where Russia has the most significant economic footprint.

1. Russia dominates the energy sector as Gazprom is Bulgaria’s sole natural gas provider. Gazprom which supplies close to 97 percent of Bulgaria’s gas needs, also owns 50 percent in the country’s largest retail gas distribution company, Overgaz and has also expanded its presence on the fuels market via its subsidiary Gazprom Neft.
2. Rosatom and its subsidiaries have a dominant position in the country’s nuclear energy sector, responsible for reactor fuel supply and nuclear waste management. Nuclear energy makes up around 20 percent of the total final primary energy consumption and around 34 percent of the total electricity generation in the country. All nuclear power is produced by the Soviet-built Kozloduy Nuclear Power Plant. It is fully dependent on the import of reactor fuel from Russia via the Russian company TVEL, a subsidiary of Russia’s Rosatom and ships all of the plant’s spent fuel back to Russia for processing.
3. Lukoil controls Bulgaria’s only oil refinery and over 50 percent of the wholesale fuels market. Currently Lukoil Neftohim is the largest company in Bulgaria with roughly € 3 billion revenues. Together with its wholesale and retail-fuel-distributing subsidiaries, Lukoil is also the largest taxpayer controlling indirectly roughly one-quarter of all budget revenues in the country.
4. Russian banking groups have long established presence in Bulgaria. Chief amongst them is VTB
5. Russian FDI is also concentrated in other strategic sectors such as finance, telecommunications, real estate, transportation, industrial, construction and the media.

Russian influence manifests itself in the management of state-owned companies, the large energy infrastructure projects, the distribution of public procurement contracts, the approval process of mergers and acquisitions, the exploitation of corporate governance loopholes to block policy initiatives against Russian corporate and strategic interests.

As Russia has gained considerable influence over Bulgaria’s economy, it has used its dominant position in strategic sectors to strengthen existing relationships and cultivate new ones with corrupt politicians and local oligarchs. These businessmen, in turn, are linked to prominent politicians over whom they exert considerable control. The politicians cut deals that benefit businesses and deepen their power within the country’s corrupt networks and over state institutions. Increasingly, the middle step is removed and the pro-Russian local businessmen enter politics themselves and attain positions of prominence within state institutions to directly promote pro-Russian business interests and politics. Accompanied by Moscow’s sponsored political parties and rapidly formed organizations that support Russian policies on any given topic, pro-Russian actors succeed in influencing Bulgaria’s national policy debate and government, which directly benefit Russia. Should there be an instance where the European Union or NATO requests that Sofia takes steps that are perceived to work against Russia’s interests, the Bulgarian government would come under enormous pressure from pro-Russian parties, prominent businessmen and organizations that mobilize a full range of tools to change the policy in Moscow’s favor.

On 13 November 2016, Rumen Radev was elected president of Bulgaria. Supported by the opposition Bulgarian Socialist Party (BPS), he received nearly 60% of the votes in the second round. He promises to strengthen cooperation with Russia and remains sceptical of NATO reinforcement in the Black Sea region. The Bulgarian authorities are particularly interested in improving relations with Russia. Russia plays a crucial role in the Bulgarian economy. Even with the EU sanctions on Russia, it remains Bulgaria’s second-largest trade partner. However, this trade fell by about 33% from €5.35 billion in 2013 (just €150 million less than with Germany at that time) to €3.55 billion in 2015. The Bulgarian tourism industry was badly affected. In 2013, almost 700,000 Russians visited the country, but in 2015 fewer than 500,000 entered, a drop of nearly 30%.

Bulgaria is considering new energy projects and sees Russian participation in them not as a threat but as an opportunity to strengthen its own political position and gain investment. In 2013, the European Commission put on hold the construction of a nuclear power plant in Belene. As a result, Bulgaria had to pay $620 million in compensation to a Russian state company that had invested in the project. At the end of 2014, Russia abandoned the South Stream gas pipeline project, which would have run via the Black Sea directly from Russia to Bulgaria. Russia took the decision in light of questions by the EC about whether the project complied with EU public procurement law.

Strengthening relations with Russia appears to be significant to Rumen Radev. Although not a priority, Rumen Radev promised to strive to cancel the sanctions on Russia because of they are detrimental to Bulgaria’s economy. He also proposed modernisation of the country’s military and does not exclude cooperation with the Russian defence industry.  All the main political parties in Bulgaria favour ending the sanctions  Although Bulgaria is unlikely to block the extension of EU sanctions, it will question them more openly and try to persuade other countries to take the initiative.