Bulgaria's Belene Nuclear Project

Why is the E.C. Spooked About Bulgaria’s Belene Project?
Hint: It May Have Nothing to do with Nuclear

By Nancy E. Roth

The European Commission is trying hard not to show how nervous it is about a €4 billion ($5.8 billion) reactor construction contract at the Belene site in Bulgaria that Russia’s Atomstroyexport signed in January. At a press conference sometime after the contract signing ceremony in Sofia the spokesman for Energy Commissioner Andris Piebalgs, Ferran Tarradellas, told reporters that the E.C. would have no comment about the contract Russian President Vladimir Putin had just endorsed during a state visit to Bulgaria.

But all pretense of neutrality dropped when the E.C. spokesman added, “We believe that the integration of the Bulgarian market into the European market will help Bulgaria reduce its dependence on one supplier or another,” according to the Bulgarian national news agency BTA. The E.C. expected Bulgaria to “promote competition, which means having multiple suppliers on its market and using different types of energy,” said Tarradellas, noting that the commission would like to see Bulgaria harness renewable energy sources as well.

How interesting that the spokesman never invoked the name of the big neighbor to the east, which had not only won contract but also had earmarked up to €3.8 billion ($5.5 billion) in its national budget to help Bulgaria finance the project. That is to say, Russia is laying out some serious money on a bet that this Bulgarian contract will lead to plenty more projects in Bulgaria and elsewhere, and is so eager to secure those opportunities that it is literally willing to pay for them in advance. Atomstroyexport officials told reporters that the contract should “open up new prospects for Russian nuclear technology in Europe.”

The Back Story: Gas and Oil Anxiety

Tarradellas’s comments notwithstanding, the E.C. could not have been pleased about Putin’s visit to Bulgaria. That’s because of the two other energy trade agreements Putin signed while in Sofia. The E.C. is far more nervous about Russia’s increasing dominance of natural gas and petroleum supplies in the E.U.—and the growing dependence on it of many E.U. members.

One agreement established a company to supervise the construction of the Burgas-Alexandroupolis oil pipeline, which will bring Russian oil to Greece by way of Bulgaria. Russia will have a 51% stake in the project while Bulgaria and Greece will each take 24.5 %. As the Economist pointed out in April 2007, the pipeline will be the first Russian-controlled installation on E.U. territory.

Putin also inked an even more momentous agreement between Russia’s energy giant Gazprom and the Bulgarian government. The planned South Sea gas pipeline (a joint venture of Gazprom and Italy’s Enel) must span Bulgaria after crossing the Black Sea from Russia on its way to Italy. Negotiations on the deal had stalled for some time, as Gazprom hesitated to give Bulgaria more than a 49% stake in the project. But intense late-night negotiations on Thursday, January 17 produced a 50-50 agreement in time for the signing of the €10 billion $14.5 billion deal on Friday, the Associated Press reported.

The E.C., however, did not exactly relish the news. The South Stream pipeline would directly compete with the planned U.S.- and E.U.-backed Nabucco gas pipeline, which would transport gas from Turkemenistan across the Caspian Sea and through Turkey, directly into Bulgaria, Romania, Hungary and Austria, bypassing Russia altogether.

But Tarradellas denied that the South Stream deal would imperil the Nabucco project. “In the worst case scenario, the two pipelines will be complementary,” he told the BBC.

But not everyone agrees. One analyst who is sounding alarm bells about it is Ariel Cohen, a Heritage Foundation senior research fellow, who wrote last November that the South Stream pipeline “will increase E.U. dependence on Russian energy.” Cohen understands the South Stream pipeline as an example of one of a series of Russian strategies to dominate energy supply in Europe. He has pointed out that Russia has cut off energy to its dependent neighbors to push its political agenda in the recent past, and warned of dire consequences for U.S. foreign policy should Europe grow more dependent on Russian energy supply.

Should the E.C. Be Afraid?

The locus of E.C. concern in the realm of nuclear energy is not Russia’s potential control of infrastructure, but of its ability to capture a dominant portion of the E.U. market for enriched uranium, which goes into fuel assemblies for European reactors. Russia has the world’s largest uranium enrichment capacity, operated by state-owned enrichment company Techsnabsexport (Tenex).

But the Euratom Supply Agency, the E.U.’s nuclear-fuel trade regulator, has been fairly effective at confining Russian enriched uranium sales to European utilities. Under the provisions of a protocol adopted in 1994 during foundational talks in Corfu, Euratom allows E.U. member utilities to purchase only 20% of their enriched uranium from Tenex. Russian officials have chafed under the import limit for years.

In addition Europe has ample international supply relationships as well as advanced domestic facilities that let it compete head-to-head with Atomstroyexport and Tenex, in Europe and abroad. But Europe has can in no way compete with Russia’s fossil-fuel supply capacity.

Partly because many E.U. members want to preserve a secure and independent energy supply, some have grown more interested in nuclear energy in recent years. For example, the U.K.’s business minister John Hutton named energy security as a key reason his government had approved a sweeping nuclear new-build initiative, when he announced the decision to the British Parliament on Jan. 10.

Russia also appears to so desperately want nuclear business in the West that it may comport itself differently with its nuclear trade partners there than it has with its more fossil-fuel dependent neighbors. Switzerland, a non-E.U. member, has given its utilities free rein in contracting with Russia, which buy far greater proportions of their fuel needs from Russia with no apparent difficulties.

Sergei Kirienko, head of the Russian nuclear programs, has recently signed an amended uranium trade agreement with the U.S. that gradually lifts trade restrictions on imported Russian enriched uranium—but keeps the amount to 20% of utilities’ requirements. Kirienko flew into Washington for one day on Feb. 1 to sign it, although, ironically, it holds the imports to the same limit Euratom has retained in the E.U.

Euratom and Russia are due to renegotiate that 20% limit this year. Appropriately or not Euratom’s reluctance to allow more imports of Russian enriched uranium may reflect the E.U.’s lack of confidence that it can withstand Russia’s expanding supply initiatives in gas and oil.