The story around the tender for construction of Bulgarian leg of the TurkStream seems to be semi-detective and very much destructive for the international image of Bulgaria as investor-friendly country guided by European rule of law principles. The Bulgarian leg of the TurkStream is crucially important for EU’s energy security. It is even more important for Bulgaria, because it brings important investment, infrastructure and jobs. It also elevates Bulgaria’s role as a reliable transit country and potentially – one of the energy hubs of the region.
The competition for the role of a major transit country is quite serious. From Greece to Serbia and Macedonia – many countries in the Balcans are fighting for role in building the pipeline that goes to the heart of Europe, and the geopolitical importance that comes with it.
However, Bulgaria seems to be losing its chance to enhance its economic potential and the status within EU. It is also failing to do what is best for its citizens who are relying on the government to protect their interests. The reason is embarrassing delay, caused by a legal dispute around the issue of the pipeline and unclear position of Bulgartransgas.
It is known that ARKAD consortium won the tender by offering somewhat lower price than Italian Bonatti-led GDEB consortium. However, Bulgartransgaz and ARKAD consortium led by Saudi ARKAD Engineering were unable to sign a contract and start work on the pipeline because the Saudi firm did not provide all the paperwork required by law, even taking into account several postponements granted by Bulgartransgaz.
As result, Bulgartransgaz changed its initial decision and awarded the construction contract to the Bonatti-Max Streicher consortium. ARKAD filed a complaint against Bulgartransgaz’s decision to the Commission for Protection of Competition (CPC), an anti-monopoly body tasked with ruling on public procurement disputes. The GDEB Consortium appealed the CPC’s decision before the Supreme Administrative Court, reopening the lawsuit and delaying the construction.
International analysts are puzzled as to why the GDEB Consortium, which completed hundreds of world-class pipeline projects, has lost to ARKAD.
GDEB consortium is uniquely positioned to complete the pipeline. It has already secured agreement from the gas supplier to fill the pipeline with gas, in full compliance with European energy regulations. GDEB also delivered a shipment of pipes and supplies worth several million dollars to Burgas port so that the pipeline could be completed ahead of schedule by the end of 2020. These pipes are sitting in the port, taking up storage space and creating uneasiness for the port workers and thousands of Bulgarian construction workers who were supposed to be involved in completion of the Bulgarian segment of TurkStream.
Based on opinions of local analysts, ARKAD seems to have all indicators of a fake company. Its key partner, Saudi-based ARKAD Engineering and Construction, is an embattled business entity with competencies nowhere even close to the ones necessary to build a major pipeline in Europe. Not only ARKAD failed to provide a bank guarantee to take part in the tender – it has failed to honor its payment commitments to over 2000 employees, who have not been paid for over 3 months. The non-payment issue led to a large-scale protest in front of ARKAD’s main (and only) office in Khobar, where workers not only complained about non-payment, but also about ARKAD not being able to deal with their exit visas necessary for leaving Saudi Arabia in due and legal manner. These protests have intensified lately, and the last protest outside ARKAD’s offices took place on July 29th, 2019. The workers have lost their hope and are extremely unhappy about the situation they ended up, because of ARKAD’s questionable business practices and lack of resources.
So, there are a lot of questions as to likely reasons for ARKAD’s victory, which led to major delay in the process of pipeline construction. Among obvious reasons that need to be investigated are political pressure, exercised by certain members of Bulgarian ruling elite and politically connected oligarchs, as well as private interests of certain people who had inside knowledge of tender procedures and influence over decisions inside Bulgartransgas and who made sure that unlikely victory of ARKAD becomes reality. Bulgartransgas’ failure to do due diligence and award victory to an entity based on fake documents and wrong documentation is surprising to say the least, and has led to long-term damage to reputation of Bulgartransgas.
As result Bulgarian government and energy sector look dysfunctional and weak. The Bulgarian segment of TurkStream was supposed to guarantee EU’s and Balkans’ energy security and reduce its dependence from Ukraine.
By allowing private interests and dubious practices dominate in its energy sector, Bulgaria is indeed starting to look like Ukraine – a country plunged in chaos and marred with corruption, not able to reliably guarantee transit of gas to EU via the Ukrainian gas transport system. The Balkan countries will be most impacted by potential shortages of gas supplies in case of serious problems with Ukrainian transit, raising disastrous prospects of disruptions in heating of households and public facilities.
It is indeed time for the Bulgarian government and society to restore control over this important issue and make sure that the Bulgarian leg of TurkStream is completed on time. Bulgaria has a lot to lose in case this project fails or its construction is delayed by many years because of dubious arrangements. EU’s leadership should also look into the issue of the tender, conduct a review of how it was handled by the Bulgarian authorities, and make sure that there is no place for corruption and inefficiency in such important matters.