Bulgaria Prepares Government Backed Funding for South Stream

Despite proclaiming that is has suspended all work on the South Stream pipeline, the Bulgarian government have been moving ahead to ensure that funding is in place to start construction on the portion on the pipeline which will cross through its territory after emerging from the Black Sea at Varna.

Earlier this month, the European Commission launched an infringement procedure to launch a procedure against Bulgaria for non-compliance of the South Stream pipeline section with EU legislation and requested the Bulgarian authorities halt construction of the pipeline.

Brussels believes that the project has issues of public procurement, competitiveness and incompatibility with Europe's Third Energy Package, as Bulgarian draft bills could prevent third-party access to the pipeline.

However, Capital newspaper reports that government agencies Bulgarian Development Bank (BDB) and Bulgarian Export Insurance Agency (BAEZ) are to undertake guarantees in case of litigation and financial claims against the project. 

BDB is expected to issue a guarantee on the amount of approximately EUR 100 million, representing the Bulgarian part of the initial downpayment.  The risk will be insured by BAEZ, although Capital points out that in this case, no question of an export of goods or services or for securing receivables from foreign customers.