Bulgaria Concerned over Russia's Recession Impact on Energy Projects

The government has estimated Belene costs at EUR 4 B but analysts and sources have said the price tag may tower to EUR 10 B. Photo by BGNES

Bulgaria is in the grip of fears over the financing of its three top energy projects following a warning by the Russian president that his country is sliding into a deeper recession than expected and will have to squeeze spending for the first time in years.

"In 2009, unfortunately, we expect a sharper fall in the GDP than we had thought," Dmitry Medvedev told a Kremlin meeting. "The global economic crisis is far from nearing the end."

Russian government figures showed that the economy shrank at an annual rate of 9.5% in the first quarter. The country may consider borrowing more than USD 7 B abroad next year and an additional USD 10 B in the years to come.

Against this bleak backdrop and the expected sharp fall in foreign direct investments, Bulgaria's ruling coalition is making efforts to secure Russian funding for the construction of Belene nuclear power plant shortly before its term expires in the summer.

Russia's Energy Minister, Sergey Shmatko, who attended the energy forum in Sofia last month was explicit that the Russian Federation was ready to provide any loans necessary for the construction of Bulgaria's second nuclear power plant at Belene, but now it is likely that the promise will not be kept.

Russia holds a majority stake of 51% in the project for building the oil pipeline connecting the Bulgarian Black Sea port of Burgas with the Greek Mediterranean port of Alexandroupolis, while Bulgaria and Greece each have 24,5%.

The IMF sharply cut its 2009 economic forecast for Greece on Monday and urged immediate spending cuts and collect more taxes to restore confidence.

The financial parameters of the third top energy project, Russian-backed South Stream gas pipeline, will be known next year.

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