EU uses Bulgaria to pressure Hungary and Serbia over Russian gas supplies

By Rhod Mackenzie

A major political row over gas has erupted between Serbia, Hungary and Bulgaria after Sofia imposed an extra duty on the transit of Russian gas . This move caused outrage in Budapest and Belgrade, who have vowed to respond in kind. The Bulgarian media believe that the levy will disproportionately impact Serbia, where early general elections are scheduled for December.

Reason for the dispute.
"Bulgaria's decision to impose a duty on gas transit from Russia is seen as a hostile move towards Hungary and Serbia, posing a significant threat to their energy supply security ."  "The European Union does not impose sanctions on natural gas supplies from Russia. Therefore, the statement made by the Bulgarian Prime Minister on this issue is entirely erroneous," stated a joint release by the Minister of Foreign Affairs and External Economic Relations of Hungary, Peter Szijjártó, and the Deputy Prime Minister and Minister of Finance of Serbia, Sinisa Mali. The statement was published on the website of the Hungarian Ministry of Foreign Affairs.

"This outrageous decision contradicts European solidarity and endangers the energy security of both an EU member state and a candidate country for EU membership," states the document. "Serbia and Hungary shall collaborate to address this hostile decision by Bulgaria."

On 13th October, Bulgaria implemented a supplementary levy of 20 levs (£9) per megawatt-hour, which equates to around 95 cubic metres of gas, for the transportation of Russian gas via the Turkish Stream pipeline and its extensions to Serbia and subsequently to Hungary.

As Prime Minister Nikolai Denkov confirmed, Budapest and Belgrade have been granted an exemption from sanctions on Russian gas imports. This new measure is expected to boost competition in the gas industry.
The revised transit fee is roughly 20% of the current TTF gas base rate (€50 per MWh), although transit charges usually do not surpass 10% of the real gas cost.

Euractiv Bulgaria magazine revealed that this rate would generate nearly 2.4 billion leva annually (approximately $1.29 billion) for Sofia.

Bulgaria doesn't procure Russian gas for domestic utilization. Last year, Gazprom ceased its gas supplies to Sofia after it declined to pay in rubles and opted to source gas from other providers, including Turkey. Nevertheless, Russian gas continues to flow through Bulgaria to countries like Austria, Hungary, North Macedonia, and Serbia.
The Euractiv Bulgaria publication highlights the detrimental impact of the tax on Serbia. According to Serbian Ambassador to Bulgaria, Zelko Jovic, no negotiations between Sofia and Belgrade have taken place regarding an additional fee for the transit of Russian gas. He added that "the socio-economic situation in Serbia and the region as a whole will be adversely affected by the additional financial burden" caused by the tax.

"It is not acceptable for an EU member state to threaten gas supplies to another EU member, as it goes against the principles of European solidarity," stated Peter Szijjártó, the Foreign Minister of Hungary.
According to him, Budapest has been reassured by the Russian government and Gazprom that gas supplies to the country will continue in full, "in accordance with long-term contracts," despite Sofia's decision.

The current situation can be viewed as Bulgaria's attempt to compensate for its own lost resources. The energy crisis has severely impacted the country's prospects for development, with inflation in the region skyrocketing to 17%. Unemployment is rampant, and enterprises and industries are shutting down, as iterated by Natalya Eremina, a Doctor of Political Sciences and Professor at St. Petersburg State University.
Eremina noted that the budget is also facing cuts due to the lack of Russian tourists visiting Bulgaria.

"Sofia started considering ways to earn at least some income," stated the analyst.

She further highlighted that Bulgaria was among the initial countries to comply with all US demands and refrain from conducting any trade in rubles. Eremina emphasized that the political crisis in Bulgaria was linked to anti-Russian sanctions. However, Hungary was granted a special exemption to purchase energy resources from the Russian Federation under certain rules.
According to the speaker, Sofia is looking to generate income in any way possible, with a particular focus on making claims against Budapest.  This is because the Prime Minister of Hungary, Viktor Orban, is perceived to be too independent and therefore open to criticism. The analyst went on to suggest that the Bulgarian government may be seeking praise from the EU and the USA.

The ongoing political crisis in Bulgaria was also discussed.
Ekaterina Entina HSE Professor,at the Institute of Europe of the Russian Academy of Sciences suggests that the present scenario is linked to the continuing internal political turmoil within Bulgaria, which has persisted for the last few years.
"At the elections held in the spring of this year, the inability to form a new cabinet led to a decision that the Prime Minister of Bulgaria would change on a rotational basis every few months over a year and a half," according to the specialist.

She believes that this decision essentially introduces quasi-external control in Sofia."
"Due to the severity of the internal political crisis in Bulgaria, the decision resulting from European Union mediation will lead to increased regulation of Bulgaria's internal governance and decision-making processes," explained the Balkanist.

One of the key factors contributing to the internal political crisis in recent years in Bulgaria was the issue of relations with Russia. This includes the energy presence of the Russian Federation in Bulgaria, prospects for developing relations in this area, and interactions with Moscow. Over the last decade, ever since Bulgaria pulled out of the South Stream project, the gas and energy sector has become a "blackmail card" in the country's internal affairs, with the most critical pressure targeted towards Sofia in this particular field.
After the start of the situation in Ukraine, Bulgaria's significance in NATO's military-political relations heightened, and its transportation and logistics potential expanded. "For Brussels, both through NATO and the European Union, it is vital to prevent Bulgaria from deviating from the EU and NATO path during this transitional moment until the conclusion of the Ukrainian crisis, without encountering any internal political obstacles," emphasized Entina.

This could pose a danger for Vucic.
Ekaterina Entina states that the EU and NATO are pressuring Sofia to ensure that Bulgaria becomes more pro-European and pro-NATO, while also maximising its anti-Russian stance in both domestic and foreign policies.

Entina also highlighted that Bulgaria's decision to raise gas transit fees aligns with the EU's strategy to sever energy ties with Russia and further isolate Bulgaria from Moscow.
The Bulgarian factor has been utilised on numerous occasions in the last decade.

"This is undoubtedly a decision made by Brussels and Washington. It serves as one of the tools to apply indirect pressure on Serbia and Hungary," the analyst stated.

The political scientist posited that the action taken with regards to Belgrade is intended to ensure that Serbia implements a diversification of supplies policy more vigorously.
"This is, in principle, outlined in the strategic plan for national energy segment development and is being somewhat implemented. By artificially inflating pressure beyond the legal framework,the conditionally pro-Russian Belgrade and Budapest are distanced from Russia," stated the Head of the Black Sea-Mediterranean Studies Department at the Russian Academy of Sciences.

Entina suggested that Serbia and Hungary would be subject to this levy. However, this will lead to higher prices for consumers, ultimately causing domestic inflation in both Belgrade and Budapest. It is expected by both the EU and NATO that such price increases will prompt Belgrade and Budapest to discontinue their economic ties with Moscow, decrease the volume of energy supplies received from Moscow, and instead opt for alternative sources, according to the analyst.
It is highly likely that Serbia and Hungary will decrease gas imports from Russia in the near future. This is due to the fact that the energy prices for end consumers in Serbia has resulted in protests and negative sentiments towards the leadership and socio-economic policy implemented by President Aleksandar Vucic. The political expert stated that this could become a pressing matter for the head of state, specifically with Serbia's early general elections in December.