Bulgaria Moves to 'Exclude' Nabucco Construction Funds from Budget Deficit

Nabucco Consortium head Mitschek has said that the procurement of the funding for Nabucco's construction is the responsibility of individual shareholders such as Bulgaria. Photo by cdn.wn.com

Bulgaria's Cabinet is working to convince the EU that the EUR 1,3 B that the country will have to pay for the construction of the Nabucco gas transit pipeline should be counted as part of its budget deficit.

Bulgarian PM Borisov has already mentioned that his government will ask the European Commission to agree that any loans and credits that his Cabinet might take in order to fund the construction of Nabucco, the EU-sponsored gas pipeline, should not be factored in the country's budget deficit. Otherwise, it is very likely that Bulgaria will not be able to reduce its budget deficit below the 3.0% required by the EU Stability and Growth Pact.

This idea that the funding for Nabucco, a project recognized by the EC as an EU priority, should not be counted when calculating the participant's deficits, was presented on Tuesday by Bulgarian Foreign Minister Nikolay Mladenov to Reinhard Mitschek, Managing Director of Nabucco Gas Pipeline International GmbH, the international consortium based in Vienna, established for building and managing Nabucco.

In an interview for the Bulgarian National Radio released on Wednesday, however, Mitschek declared that the issue about the shareholders' budget deficits and the way they will secure funding for Nabucco does not affect directly the project company. Securing the money for their shares is the job of the shareholding countries, Mitschek said.

He explained that Nabucco is estimated to cost EUR 8 B, and that Bulgaria, as a partner with 1/6 of the shares, will be expected to provide 1/6 of the total sum, or about EUR 1.3 B, rather than finance just the section on its territory.

The Nabucco shareholders are: Bulgarian Energy Holding (Bulgaria), Botas (Turkey), MOL (Hungary), OMV (Austria), RWE (Germany) and Transgaz (Romania), Each shareholder holds an equal share of 16.67% of Nabucco Gas Pipeline International GmbH.

The Nabucco gas transit pipeline is supposed to be ready by 2015. Mitschek has made it clear that the project company is certain of Bulgaria's commitment. He has also expressed confidence that the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB), and IFC - a member of the World Bank Group, will support the project with respect to finding funding.

He also mentioned that the technical documents on Nabucco have already been signed with Austria, Bulgaria, and Romania, and that some technical issues are still be worked out with Hungary and Turkey.

Bulgarian Foreign Minister Mladenov visited Mitschek in Vienna on Tuesday to express Bulgaria's support for Nabucco. His visit comes after last week Turkmenistan said it could provide 40 billion cubic meters, more than Nabucco's planned capacity of 31 billion cubic meters. For the time being, only Azerbaijan and Iraqi Kurdistan have been confirmed as official Nabucco suppliers but their quantities might not be enough to fill up the pipe completely.

Mladenov's meeting with Mitschek also takes place a couple of weeks after Russian President Putin's visit in Sofia when Bulgaria and Russia signed the agreement to set up a joint venture for constructing the South Stream gas transit pipeline, the Russian-sponsored competitor of Nabucco.

On Monday, EU Energy Commissioner Guenther Oettinger for the first time formally conceded that the two pipelines are competitors.

In June, the center-right Bulgarian cabinet revised the state budget increasing its 2010 target for deficit to 4.8% of GDP on a cash basis and 3.9% of GDP under EU accounting rules, far wider than initial estimates.

Final Eurostat data released recently showed that in 2009, Bulgaria's budget deficit actually was 4.7%.

The 2011 state budget provides for a deficit of 2.5%, without factoring in any loans and contributions to the construction of Nabucco.

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