Author: Vladimir Socor, Eurasia Daily Monitor

On September 10 Bulgarian Minister of Foreign Affairs Ivailo Kalfin outlined the country’s goals to join transport corridors for Caspian oil and gas. Kalfin spoke in the wake of an official visit to Kazakhstan and Turkmenistan, the first such visit by a senior Bulgarian official in more than a decade. Bulgaria is eager to join either Russian-led or Western transport projects, depending on opportunities at hand, amid weak policy guidance from the European Union.

In Kazakhstan, Kalfin discussed possible terms for that country’s participation in the Bulgarian section of the Burgas-Alexandropolis oil pipeline project. To run from Bulgaria’s Black Sea coast to the Greek Aegean Sea, this is the first Russian state-controlled pipeline project in European Union territory. Transneft, Rosneft, and GazpromNeft hold a combined 51% stake, with Transneft as project operator. Bulgaria and Greece hold initially 24.5% each, with the right to sell portions of their stakes to oil companies that would co-finance the construction and use the pipeline to ship their oil.

Kalfin confirms the prediction made when the inter-governmental agreements were signed (see EDM, March 2, 16) that this project is mainly intended for oil from Kazakhstan. As he notes, the Burgas-Alexandropolis pipeline is a prolongation of the Caspian Consortium’s pipeline (CPC) that runs from Kazakhstan to Russia’s Black Sea port of Novorossiysk. The Kazakh oil would be shipped from Novorossiysk by tankers to Burgas and from there by pipeline to Greece and the open sea.

The project’s fourfold strategic goal is to increase Russian physical control over the transit of Kazakh oil, Russian state rents from that oil’s transportation, Russian political leverage over U.S. and European oil majors that have no other outlet from Kazakhstan, and Russian economic and political clout within Bulgaria and Greece.

Unsurprisingly, the temptation is high for Bulgaria, which desperately needs the transit revenue and is unable to co-finance construction of the pipeline’s section on its territory. Bulgaria would eagerly sell part of its stake to Kazakhstan’s oil and gas state company KazMunayGaz and would undoubtedly also consider such a deal with a Western company that extracts oil in Kazakhstan. There, Chevron in particular is under Russian pressure to co-finance the Burgas-Alexandropolis pipeline’s construction, for the uncertain privilege of exporting ChevronTexaco-extracted oil from Kazakhstan via Russia. Meanwhile, TNK-BP discusses using the Burgas-Alexandropolis pipeline for the oil that the company extracts in Russia and ships out of Ukrainian Black Sea ports.

As Moscow stacked the cards on this project, oil-producing companies involved in Central Asia and using this pipeline are reduced to minority status while Russian state companies that do not use the pipeline hold the control over it.

The Burgas-Alexandropolis project competes against the European Union-backed Constanta (Romania)-Trieste pipeline project, which would provide access for Kazakh oil to the open seas through the Adriatic at Trieste or the nearby Croatian Omisalj. The Constanta-Trieste/Omisalj project is a late-starter and less fleshed out than its rival at this point. Implicit in this project is an intent to bypass Russia’s territory. KazMunayGaz and Western companies would ship their oil from Kazakhstan across the Caspian Sea and Azerbaijan to Georgia, using Georgian Black Sea terminals to forward the oil to Constanta and into a pipeline to the Adriatic.

Moreover, Burgas-Alexandropolis is a rival to the planned export of Kazakh oil to Turkey’s Mediterranean coast through the Baku-Tbilisi-Ceyhan pipeline. This U.S.-backed plan would see the BTC line used at full capacity -- indeed expanding its capacity -- and for a longer period of time than earlier envisaged. The prerequisite is to develop a massive trans-Caspian transport system westward. However, Russia seeks to absorb the lion’s share of Kazakhstan’s future oil into the Russian-controlled CPC pipeline northward. To do so, Moscow must provide an outlet to the open sea from CPC and Novorossiysk that would avoid the over-congested Bosporus.

By the same token, the availability of an outlet from Burgas to Alexandropolis would enable Russian companies to continue shipping their oil through Ukraine’s Brody-Odessa pipeline into the Black Sea. Such “reverse-use” contravenes this pipeline’s rationale, which was to ship Caspian oil northward, from Odessa to Brody and onward to Poland.

In sum, a Burgas-Alexandropolis pipeline would allow Russia to expand the CPC pipeline’s capacity and prolong it across the Balkans, absorb even more Kazakh oil, prevent Ukraine from transiting Caspian oil to Europe, and reinforce its near-monopoly on oil transport in a vast corridor from Central Asia into European Union territory.

Chronically weak leadership in Brussels has led to a situation in which EU member countries Bulgaria and Greece join this Russian-backed competing project. Kazakh President Nursultan Nazarbayev is due to visit Romania in November to discuss the EU-backed project. However, Kalfin on his visit to Astana invited Nazarbayev to Bulgaria as well for discussions on KazMunayGaz’s participation in the Burgas-Alexandropolis project.

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