President Georgi Parvanov: It Takes Pragmatism and Leadership to Make an Energy Strategy and Policy
08-09-2009 13:30 |
About four months ago, I proposed the parameters of a national consensus on our gas policy. While there is some progress with respect to some of these, and stated common positions on others, third are still plagued by seemingly unbridgeable differences.
Meanwhile, members of the new government have made highly contradictory statements on the major energy projects, and as it turned out, without being sufficiently familiar with the issues. Prime Minister Borissov was likewise obviously unprepared for his talks with Vladimir Putin, his Russian counterpart.
The situation around us has been developing very dynamically: for instance, the talks between Russia and Turkey, the stated intentions of other countries to join South Stream, the forthcoming decisions of the Copenhagen Forum all require a proactive attitude and effective work on the part of our institutions.
Now, a few months after the material mentioned above, let me say this: when consensus is unattainable, what is needed is strong will, character and pragmatism; what it takes is leadership in our energy policy.
In this article I propose some of the main guidelines and specific actions, to be taken on board by the institutions of Bulgaria, a step further.
I. Bulgaria needs continuity in its energy strategy and policy. This country must reconfirm its willingness to participate in the major projects for transit of natural gas. Both NABUCCO and South Stream are necessary for Europe’s energy security and correspond to Bulgaria’s national interests. It is essential that this country should continue in the future to establish itself as a key transit country for gas supplies along the southern European route.
An unbalanced, sluggish and unjustified policy on the part of Bulgaria may bring about the all-too-real possibility of these projects passing us by (as, by the way, it has happened in the past with the Blue Stream project).
The new Bulgarian government has already confirmed its unconditional support for both projects. This is good as an expression of political will, yet there remains the feeling that those in charge fail to grasp the main issues and to work for resolving them. It is necessary to defend our equitable participation in NABUCCO, to parry any attempts to restrict our share while addressing the matter of financing and securing the Bulgarian participation in the project.
Since the very outset, negotiations on the South Stream project have been far from easy and involving some serious demands on the part of Gazprom. These issues were discussed at the beginning of this year, incl. during my visit to Moscow. Then we upheld our positions and received proper understanding at the political level.
In recent weeks, the Russian side has been trying to revive already settled issues at the political level:
1. About using the already existing gas transit network in Bulgaria for the purposes of South Stream. (On that matter, there had been an agreement with Russia’s leadership since January 2008, to the effect that a new pipe should follow the current transit route – a position that was once again reconfirmed in February 2009.)
2. Russia’s new proposal, on restricting the possibilities for the Bulgarian side to participate in other gas transit projects in the region, is unacceptable.
3. It will become necessary to once again reject Gazprom’s renewed proposal to buy out the Bulgarian Energy Holding’s share in the project company.
4. There are outstanding issues pertinent to the financing of the South Stream project.
5. It is essential that this project should comply with the EU requirements of free access also by other natural gas owners to the proposed pipe, subject to capacity availability.
Instead of claiming that all is well with South Stream, Prime Minister Borissov should have used his meeting with Mr. Putin to object against any such demands on the Russian part.
Ultimately, while reconfirming in no uncertain terms Bulgaria’s participation in the project, the government must also be in a position to support with concrete arguments everything that has been achieved so far.
II. Bulgaria must keep up and strengthen the dynamics of its energy diplomacy. Over the past few years, we managed to negotiate another over 4 billion cu m of natural gas for Bulgaria. And, instead of jealousy (as can be detected behind the not particularly fresh joke about promises made at wedding banquets in Bankya), the Government must join in the implementation of these agreements. This will be far from easy, as there are geographic and geopolitical obstacles, there is pressure being put on producer countries, and there are, still, a lot of question marks along the routes.
- The option of transit of the agreed gas quantities from Turkmenistan by means of Gazprom pipes was proposed by me at the beginning of this year, in the immediate aftermath of the gas crisis. It was then rejected by the Russian side, even as a compensatory measure, and we can hardly expect it to be realized in the near future.
- Another proposal, for a pipeline across the bottom of the Caspian sea, would be hard to implement on account of outstanding issues regarding the delimitation and use of natural sources in the region.
- Gas transit via Iran is contingent upon resolving issues of a geo-strategic nature.
All of these obstacles pertinent to the gas routes are also facing the major European project of NABUCCO.
Bulgaria must not stand idly by; it must be the active factor, the trusted partner in these negotiations, since there is no other European nation with such a proactive policy towards the countries of the Black Sea and the Caspian regions.
Moreover, Bulgaria may preemptively attain some of its national goals and secure natural gas for itself even before the launch of NABUCCO: from Azerbaijan, Turkmenistan or Egypt.
There are several favourable prerequisites for this to happen:
1. With Turkey, we have an agreement in principle on the use, on a reciprocal basis, of its gas transit network, subject to the same conditions and prices as those of Russian gas passing via Bulgarian territory en route to our southern neighbour. Turkey has pledged its cooperation to that end, yet here, too, we need a more proactive attitude in addressing long-shelved projects (e.g. the construction of Tundzha Dam).
2. The preemptive attainment of our national goals also becomes possible on account of some other steps that have already been made. Of significance in this respect has been the agreement for building the intersystem link with the Greek gas system along the Komotini-Dimitrovgrad line. Similar links with Turkey and Romania will open up some very serious opportunities, and not just as stand-by options in the event of a gas crisis but strategically, as an alternative to the traditional routes.
3. Our national goals require that Bulgaria’s energy diplomacy should address in earnest the subject of a liquefied gas terminal, to be developed jointly with our southern neighbours. This idea received a real boost during my talks in Qatar, where the other side stated its willingness to participate in such a project.
4. Bulgaria can play an active role in the realization of ideas for transit of compressed gas across the Black Sea. Talks to that effect are already underway and it would be advisable for the Bulgarian position to be formulated at government level as well. There are leading European and other companies that could join in such a project.
Inexplicably, the Prime Minister and his team never raised the issue of a new long-term agreement with Gazprom, one that would achieve better and more flexible conditions for supply of natural gas until the year 2030 (or perhaps, they are in favour of the intermediary companies remaining in place and making enormous profits at the expense of Bulgarian consumers?).
III. We cannot but feel bothered by the government’s erratic positions and confusing messages regarding the fate of the Belene Nuclear Power Plant project and the future of this country’s nuclear power.
The Government is not only entitled, it is mandated to analyze all activities conducted so far for the implementation of this project, to rectify any irregularities and bring those who have done wrong to justice.
The implementation of the Belene project necessitates a high level of transparency. Perhaps the new executive branch will find a way to raise the level of managerial professionalism.
In pronouncements made by the Prime Minister and members of the cabinet one detects a desire to shelve or even cancel (weren’t these words a taboo for the new cabinet?) the project. Supporting arguments are derived from the crisis, the high cost of the project’s implementation, Bulgaria’s one-sided commitment to Russia, and national security.
1. The crisis is an argument in favour, rather than against, the construction of Belene. In conditions of crisis it is normal to save money, but this should be done at the expense of the many unnecessary costs burdening the state budget. Investments in major infrastructural projects, including Belene, can easily become the required engine that would pull us, both economically and socially, out of the crisis, instead of having to wait passively for the crisis to end in America or Europe.
Some, who tend to think in terms of the duration of their own terms of office, believe that the available capacities would suffice to cover the energy needs of Bulgaria. OK. But what do we do come 2015, and then, by 2030? The development of the Belene NPP and other major energy projects is not only a chance for us to end the crisis; it also opens up broad opportunities for this country’s post-crisis development.
2. The forthcoming decisions of the World Forum in Copenhagen this fall on the reduction of harmful emissions will galvanize the development of nuclear energy in Europe and the world.
It must be absolutely clear to us that nuclear technology is, and will remain for a long time to come, the most secure component of the energy mix.
Bulgaria needs the kind of policy that would preserve the place of nuclear energy as a key factor of this country’s energy balance. The Belene project will increase by over 35% the production capacities of the system and will constitute an important contribution to our efforts for attaining a cleaner energy mix.
In the years of the transition, Bulgaria has had the political will and a high level of public support for the development of nuclear energy. Resistance came from isolated political and economic circles that served as mouthpieces for domestic and foreign lobbies. The current invigoration of those circles lies at the core of resistance to the project at this stage.
By the way, if the government has been bickering for months over the 500 million Euros necessary for Belene in the course of this year, how come that it decided, in a matter of minutes, to unfreeze the Gorna Arda project at the identical cost of 500 million? Or perhaps such swiftness of action should be explained with the position held until recently by the Minister of the Economy and Energy as a representative of the principal contractor?
3. The construction of the Belene NPP must continue because it is a strategic project for our energy security and for our national security as a whole.
We must continue to develop nuclear energy in the future – certainly in compliance with current requirements for safety, efficiency, reliability and radiation protection.
Now, as we witness yet another rekindling of the debate about the Belene NPP, I want to make this clear: Belene will be in full technological compliance with the European and world requirements for operational safety throughout the entire production cycle.
4. Bulgaria not only must develop its own nuclear energy. We can, and should, participate actively in the European debate and support with proper arguments its future within the framework of a common strategy for the EU.
5. In case that we opt for the national model of funding for the Belene NPP, it would be of particular importance to find the formula of sharing the market and cost risks between Bulgarian industrial consumers and potential shareholders with interests in the regional energy market.
As a matter of fact, it would also be possible, using some European examples, to invite local companies as shareholders, whether traders or consumers of electric power, which would help reduce the investment risk.
Generally speaking, it is advisable to aspire for an optimum correlation between own and loaned capital, to use the model of cost and risk sharing among a large number of participants in the project.
Energy is one of the areas, though, where the state must not abdicate its commitments.
6. The construction of the Belene NPP will imbue with real meaning our big goal of establishing ourselves as the regional energy hub, especially in the context of the continuing, chronic electric power deficit in the Balkans. Let me recall that a long time ago, at one of the forums of nuclear energy, I put forward the idea of expanding the range of participants in the realization of the Belene project by including some neighbouring countries. The leaders of some of these have already expressed such a desire, i.e. the project may become a regional one not just because the electric power generated by it will cover part of our neighbours’ deficit but also in terms of the manner of its construction.
In the coming decades we are to witness even greater challenges facing the development of the energy sector. I believe that the broad integration of the energy systems within the region may yield significant advantages for the sustainable development of the Balkan nations, where the population is relatively small, incomes lag significantly behind European standards, and there is low labour productivity and energy efficiency.
The implementation of the regional approach to the development of the energy sector in South Eastern Europe may turn out to be a winning strategic solution.
The regional scale-up will allow the reconfiguring of the Belene NPP and, in the future, even an increase of its capacity, which would significantly reduce the cost of electric power generated there.
The establishment of a regional nuclear company may be a step towards an even more ambitious plan for setting up a common electricity and gas market in South Eastern Europe, operating in accordance with the standards and principles of the EU.
7. I consider it essential for the government team to raise again the issue of the cost indexation of the Belene NPP.
Annex 5 to the main contract, signed in 2008, provides an escalation clause using the EUROSTAT inflation index for Bulgaria. The signatories of that document will have to bear their liability as the cost increase for Bulgaria will be great. The Bulgarian government will have to insist on the adoption of the EU-27 escalation index. If this happens, 1 billion Euro will be saved from the contractual cost.
This issue was raised at the beginning of this year in my top-level talks and the Russian side showed understanding of the need to change the payment scheme.
IV. The government’s position on the Burgas-Alexandroupolis oil pipeline smacks of indecision. The proposition voiced by the Bulgarian Prime Minister before Mr. Putin was that, while the government has nothing against it, on account of the two referenda it would be up to the ‘Russian technologists’ to convince the populace.
This pipeline is important because it provides one of the shortest routes for the oil Europe needs; because it is an element of the diversification of transit routes (as is, by the way, the Burgas-Vlore oil pipeline).
The truth is that we must seek and attain utmost guarantees for a clean environment not because the people need to be convinced. Compliance with the strictest international environmental norms has no alternative. And a broad public awareness campaign is important in order to showcase the experience of other countries where a technology similar to that proposed for Burgas-Alexandroupolis is used on a large scale without any problems. By the way, Bulgaria must insist on a mechanism enabling it to actively participate in the monitoring of the Bay of Burgas.
Our position also comprises a number of ideas for protecting the interests of Bulgaria also through a significant increase of the profitability of the Burgas-Alexandroupolis project, namely:
- through the establishment of a joint company to provide for the oil transit across the Black sea for the needs of the pipeline;
- through participation in the installation works;
- through subcontracting a number of other activities (including design);
- through insisting on the inclusion of a clause for payment of transit rights across the country’s territory, the so-called ‘royalties’.
At least four consecutive governments have been working on the Burgas-Alexandroupolis project. Its implementation can happen now, with a stronger Bulgarian position. Or, we can always find a reason to back out of it and allow the route go via our southern neighbours.
This is a project of national significance and its fate cannot, therefore, be decided by a local plebiscite. (Tomorrow Municipality X may hold a referendum and vote against the government’s pension policy. Do we cancel it then?)
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These are projects that contribute to strengthening our national security while having their regional and European dimensions. Any delay in their implementation leads to a further major cost increase, triggering direct and indirect losses.
The implementation of these projects requires a combination of different economic, market and technological policies; it requires effective coordination between the institutions and bodies of government, as well as new forms of public-private partnership and interaction with the private sector, academia and the non-governmental sector.
The presidential institution will take a constructive and responsible part in the implementation of this and other policies on the actual agenda of Bulgarian society and the people of Bulgaria.
In ten days’ time, we shall be conducting a public hearing of the ideas proposed by a large team of experts for a way out of the crisis.
The election campaign is over; it is time for proving governance abilities and skills. The kind of angry pathos that is part of any election campaign no longer works.
There is a deficit of competence in the energy policy of this government. Nobody was born knowledgeable, but ignorance should not be used as a campaign tool.
A leader is not obliged to know everything. Yet he or she must be sufficiently familiar with the matters at hand so as to be able to make an ‘informed and supportable decision’.
There is also another way: that of covering up one’s ignorance and lack of will behind fabricated scandals. But for how much longer? And at what cost?
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