Much has been said and written about Russia’s proverbial “gas weapon”. The argument goes that high dependence on Russian natural gas makes nations in East and Southeast Europe think twice before they consider making any move against Moscow. The Kremlin is in a position to punish those daring to oppose it by introducing harsh clauses to gas deals or, worse still, cutting off deliveries. Friends, on the other hand, get rewarded. Case in point: the “incredible” deal Russian President Vladimir Putin gave Serbia, which many believe ensured Serbian President Aleksandar Vucic’s re-election.
However, we have seen recently that this so-called “gas weapon” does not really exist. On April 26, Gazprom turned off the tap for Bulgaria and Poland after they refused to comply with a unilateral change of their supply contract dictated by Putin and to pay for their monthly uptake in roubles. Several weeks later, both countries are doing just fine. The Russian decision has not unleashed pandemonium in either economy. It has not triggered a domestic political crisis, much less led to a major shift in Polish or Bulgarian foreign policy. If anything, the cutoff has strengthened those countries’ resolve.
Even Bulgaria, the most dovish amongst doves when it comes to Russia, has shown some courage. On April 28, hours after gas stopped flowing, Prime Minister Kiril Petkov travelled to Kyiv to discuss with Ukrainian President Volodymyr Zelenskyy what Sofia can do to help. Though Bulgaria is formally not sending military assistance to Ukraine, it is a public secret that munitions and arms from its defence manufacturers are being transferred via third parties, notably Poland.
Bulgaria’s response to the disruption of the gas flows from Russia merits special attention. In contrast to Poland, which currently takes less than half of its gas from the Russian Federation, the Balkan country is reliant on Russia’s Gazprom for over 90 percent of its supplies. But unlike previous cutoffs in 2006 and 2009, this time around the government in Sofia clearly had a plan. For instance, the state-owned trader Bulgargaz has contracted shipments of liquefied natural gas (LNG) that are now entering Bulgaria through the Revithoussa terminal in Greece. Additional volumes are also arriving from Romania, through the Trans-Balkan Pipeline which, until TurkStream started work in 2020-21, served Gazprom. The fact that the disruption happened in summer, after the end of the heating season, is making the Bulgarian authorities’ life easier, too.
The main thing, however, is that Bulgaria’s long-delayed interconnector pipeline with Greece (ICGB) is due to come online on June 30 or soon thereafter. Once it is up and running, Bulgaria will be importing one billion cubic meters (bcm) – corresponding to about one-third of its annual demand – from Azerbaijan, as ICGB connects to the so-called Trans Adriatic Pipeline.
LNG will be coming from the terminals in Turkey and, after the end of 2023, from a floating storage and regasification unit (FSRU) next to the northeastern Greek port city of Alexandroupolis. On May 3, Prime Minister Petkov witnessed the launch of works on the FSRU in the company of Greek Prime Minister Kyriakos Mitsotakis and EU Council President Charles Michel. Also present were Aleksandar Vucic and Dimitar Kovacevski, North Macedonia’s prime minister. The war in Ukraine has given tailwinds to new infrastructure projects that will diversify gas deliveries to the Balkans and redraw the supply routes.
Yet, in the short term, it is business as usual. Despite being shunned by Gazprom, Bulgaria is not stopping flows from Russia to Serbia and Hungary through TurkStream. Sofia generates income from the Russian shipments passing through, doesn’t want to spoil relations with Budapest and Belgrade, and also wants to appear to be acting in good faith on its contractual obligations vis-à-vis Moscow in light of the looming arbitration case.
Contrary to popular belief, Southeast Europe does not depend on Russian gas. The main reason is that local countries consume limited volumes: three bcm per year for Bulgaria and Serbia each and six bcm for Greece. Romania, a large market where annual demand stands at 12 bcm, meanwhile, barely takes any Russian gas at all. With the right infrastructural links, Gazprom can be replaced by alternative suppliers.
That is why Greece and North Macedonia are mulling an interconnector pipeline that could also be extended to Kosovo. The same for Bulgaria and Serbia. There are long-standing plans for an offshoot of TAP into the Western Balkans: the Ionian-Adriatic Pipeline that could serve Albania, Montenegro and Bosnia. More immediately, gas itself can be replaced by electricity, particularly if prices shift in favour of the latter. Thanks to large spare capacity, Bulgaria and Romania both export electricity to the likes of Greece and Turkey, where demand often outpaces supply. Last but not the least, there is the green transition. Investment into renewable energy and energy efficiency – a priority on which the European Union is as keen as ever – will shape the future of Southeast Europe.
The question, really, is about the price. These days, Russian pipeline gas based on long-term contracts and indexed to oil is cheaper than what spot markets – reflecting supply and demand – charge. Diversification away from Russia has a price tag. However, tomorrow the balance may change. A slowdown in global economic growth and depressed demand for energy will make gas cheaper, too. Then Balkan countries will be in a much better position in negotiating with Gazprom, should the Russians want to shore up their market share.