Pipeline agreement delay

Four months after Russian President Vladimir Putin visited Athens, there’s little left of the euphoria of those days regarding the Burgas-Alexandroupolis oil pipeline. On September 4, 2006, Putin, Bulgarian President Georgi Parvanov and Greek Prime Minister Costas Karamanlis had committed themselves to signing a trilateral agreement to complete the pipeline, a project stalled for over 13 years. But, since then, the three parties have been unable to live up to their commitments. Development Minister Dimitris Sioufas has said that the delay in signing the agreement is due to «the different approaches of Bulgaria and Russia on two issues,» without specifying what these issues are. He appeared optimistic, adding that «in the next few days, and with the help of Greece, the difficulties will be overcome with a little good will, and we will be able to sign the agreement soon afterward.» The delay appears to be connected to Russia’s energy strategy, which is to assert control at all levels. Bulgaria, although much more accommodating than in the past, is not willing to satisfy every Russian demand. It backed down on the issue of control of the pipeline, agreeing that Russian companies should control 51 percent of the pipeline construction consortium, but has since refused to even consider Russia’s demand to control the oil terminal at the Burgas port. From the September 4 summit to the tripartite meeting of government officials in Sofia at the end of December, several issues were resolved but new ones surfaced which will require a new round of negotiations. The main issue involves including companies that exploit oil deposits in Kazakhstan. These are US firms Chevron and ExxonMobil, UK/Dutch firm Shell, Russia’s Lukoil and Kazakhstan’s state oil company, which co-exploit the Tengiz oil field. The Russian side, which already has three companies – Gazprom, Rosneft and Sibneft – participating in the Burgas-Alexandroupolis project, having secured a 51 percent stake, raised the prospect of additional partners which could, it said, guarantee the uninterrupted flow of oil. Since Russia would not cede part of its stake to the newcomers, Greece and Bulgaria will have to scale back their participation. Alternatively, long-term deals could be signed with the companies operating in Kazakhstan. Russia’s move has been interpreted as an effort to control the flow of Kazakh oil. There appears to have been an agreement on most issues regarding the three countries’ obligations. The Greek side appears to have ensured that Greek companies will take part in building the part of the pipeline on Greek soil and to have achieved the right to joint management of that section. On the other hand, it has been obliged to import Russian machinery tax-free and will undertake the cost of land expropriation. As for the agreement itself, it will hopefully be signed in the first quarter of the year.

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