Electricity in Exchange for American Political Support

Vice Premier Zotev, labelled as a Russian lobbyist, was accused for postponing the conclusion of the electricity deal with two American companies.

AIM Sofia, April 26, 2001

God forbid for a Bulgarian to be accused of being a Russian lobbyist – he is finished. It's quit another thing if he enjoys the reputation of an American lobbyist - that is allowed, and even commendable.

Lately, storm clouds are gathering over the head of Vice Premier Petar Zotev. Everything happened out of the blue, only a day before the working visit of Prime Minister Kostov to USA on April 23. On that day, Ognjan Mincev, a political scientist who is thought to be close to the authorities, accused him of delaying and sabotaging the work of a commission entrusted with finalising the deal with two American companies. These are AES and ENTERDZI companies which want to invest USD 1.4 billion in thermo-electric power plants Marica-Istok 1 and 3. According to Mincev, the Vice Premier and his friend Rumen Ovcarov (Deputy President of the Bulgarian Socialist Party) are lobbying for the Russian firm ATOMENERGO that allegedly neither wants competition nor Bulgaria to become independent from the Russian supply of power.

It is hardly a coincidence that such an accusation came from a political scientist of Mincev's calibre and, in addition, from the web site of the electronic edition of "Mediapool" which could not be called anti-governmental (it is edited by Stojan Georgijev - former supporter of Kostov's Government). The more so as the scandal broke literally a few hours before Prime Minister's plane took off for Washington.

There was no doubt that everything was staged - one of the major topics of Kostov's visit to USA was Bulgaria's transformation into the Balkan power generation center with the assistance of American investments. However, someone had to take all the blame for procrastinating such a large investment in the power sector. In such cases the easiest thing to do is to accuse someone as a Russian lobbyist.

It is true that this is a fourth year that these two American companies are trying to make the mentioned deals - ever since DS came to power. The question is why did the Government take so long to bring a decision on this when its exceptionally favourable inclination towards all American wishes is common knowledge. It would be frivolous to claim that Kostov did not know what was going on. Last year alone he received three letters on this subject - two from a group of American Congressmen explaining the importance of this project with the participation of ENTERDZI and one from the then State Secretary, Madeleine Albright. American Ambassador to Sofia Richard Miles also used every opportunity that presented itself during his meetings with Kostov to remind him of the postponed projects.

There were other responsible factors in the power sector in the last four years during which the deals could not be finalised - Zotev's predecessor Evgeni Bakardzijev, for one. However, all this time Ivan Siljaski was the chief of the Energy Complex (NEK). Thus, if someone should take the blame for the lack of progress with these deals then it is no one else but Siljaski. It is therefore strange why wasn't he stigmatised as a Russian lobbyist. He always obeyed the Prime Minister's orders so that the deal would have been closed long ago had such an order been given. As far as Zotev is concerned, he is a hard nut to crack. Also, he is not a SDS member, but primarily an expert. That is why he was appointed chief of inter-ministerial working group, which the Government had set up this February to get acquainted with all projects under the Contract for the purchase of the thermo-electric power plants Marica-Istok 1 and 3. The task of this group was to give its opinion on these projects, and not to prepare the Contract for signature. The group assessed that projects were risky and should not be approved unless altered. Which risks were in question?

No one is willing to disclose the details regarding offers, but it came out that one of the Contracts - the one with the American giant AES on the thermo-electric power plant Marica-Istok 1 - entails a serious risk of a significant rise of electricity prices in Bulgaria. Under that Contract the state would be under the obligation to buy electricity at above average national rates over the next 15 years. The rate agreed with the Americans was 4.5 to 5 cents per kWh (kilowatt-hour). It is even above the one at which Bulgaria exports electricity to Turkey (3.5 cents). That would mean that the average price of electricity in Bulgaria would have to go up and that the population would be the one to bear the brunt.

On the other hand, there are no problems with the project with ENTERDZI for Marica-Istok 2 thermo-electric power plant. NEK will be buying electricity from ENTERDZI at the price of 3.13 to 3.15 cents per kWh, which would not entail the rise of electricity rates for the population. It is quite another thing that IMF, World Bank and the EU are against this country entering a long-term contract on the purchase of electricity before finishing the reform of its energy sector.

Guarantees that the electricity would be bought from Marica-Istok 1 and 3 thermo-electric power plants would put other producers in Bulgaria at a disadvantage. They have only one-year Contracts. Consequently, economic risks were the reason behind Siljaski's long delay in finalising draft contracts. However, all of a sudden these reasons turned from purely economic into political ones, and the Vice Premier was labelled Russian lobbyist. Apart from power interests of Moscow, which doesn't want another alternative on the Balkans, the nuclear lobby, which is against strong thermo-electric power plants and instead wants a new nuclear power plant in Belen, also took certain actions.

Bulgaria's attempt at protecting its economic interests at this point and, for example, withdrawal from the power deal with the Americans, would cast a shadow on relations between Sofia and Washington. That would adversely affect the SDS's prospects at the coming parliamentary elections on June 17.

There is no doubt that Kostov was forced to promise Washington that he would straighten things out. If these deals are not approved until the elections it is hard to say whether they will ever be, for it is unclear whether the currently ruling party, with Kostov as a leader, will succeed in preserving its current position.

Bearing in mind that Kostov's visit to Washington was hanging by a thread until the last moment, it is quite possible that the American power interests prevailed which is why the Bulgarian Prime Minister was invited to come to America. Thus, Kostov will have to repay this favour hoping that he can count on future political support of the "big brother" across the Ocean.

However, no matter how the power deals with the Americans turn out, there will always remain a suspicion that this was done at the command of political circles. Scandals usually follow such deals. That happened with the "deal of the century" on the export of electricity in exchange for construction works, which was closed with Turkey. Prime Minister Kostov personally gave his blessing to this Contract. It turned out subsequently that the selected company DZEILAJN HOLDING was in financial troubles up to its neck and that "friends" who guaranteed for it, had been accused of bribe-taking. However, irrespective of the scandal, DZEILAJN does not want to give up a profitable contract and is even threatening Bulgaria with international arbitration.

The problems with ENTERDZI and AES are similar - both companies want the state to give some guarantees for these projects. True, these are not direct state guarantees for private credits, such as was the case with DZEILAJN. Things are different now - the Bulgarian Government is demanded to send an official letter stating that it is behind these two projects.

It never happened that the USA asked for something and did not get it on a silver platter. In this case things have just took too long. Intentionally - mind you. Firstly, to have Prime Minister Kostov invited to the White House and secondly, to elicit open support at the coming elections.

Ad, as far as Vice Premier Zotev is concerned - he simply served as an ideal alibi.

Plamen Kulinski

(AIM)