The Kremlin has long realized that Russophilia in its traditional formula is unfit to assist its goal of having a firm grip on contemporary processes in Europe. It is ever more difficult in an integrated continent that is gradually reinforcing internal connectivity to the extent that external influences are isolated or at least marginalized so that they are unable to serve as a tool of Russian foreign policy.

06

The energy “grand slam” that was planned for Bulgaria was part of a larger arrangement which was supposed to give Russia guarantees that even after joining the EU, Bulgaria would remain critically tied to Moscow’s interests. This brought about Ambassador Chizhov’s statement that Bulgaria would serve as Russia’s “Trojan horse”, being a nation of Russophiles by vocation and interest.

The perimeter of actions by Bulgarian politicians and businessmen, sympathizers and affiliates of Russia, was wide and potent. However, we achieved such levels of European integration as to expose inconsistencies and incompatibility with European standards in many areas of our joint projects with Russia.

This is not a problem specific to Bulgaria since similar Russian projects with other EU countries suffer from implementation issues too. Whilst in Western Europe Moscow managed to “slip” North Stream-1 thanks to Chancellor Schröder, its equally important venture South Stream, intended to virtually cut off the path of non-Russian gas to Central and Eastern Europe, was blocked. It turned out that the Kremlin strategists failed to notice, not only the consequences of their own geopolitical short-sightedness, but they also failed to take account of their own changed capacity. Russia is unable to either impose its self-centered policies that are inconsistent with European integration policy, or to mobilize support within the EU at the expense of the exploitation of sensitive areas of vulnerability in member countries, even those most faithfully pro-Russian.

Moscow’s influence and resources are invariably declining, which is a function not only of the internal economic and financial implosion in Russia, but also due to the proportion of Member States population which is ready to sacrifice unlimited prosperity and security for the interests of Moscow.

The objective reasons behind these processes are rooted in the deepening crisis in the Bulgarian-Russian trade and economic relations, which are ceasing to motivate pro-Russian moods and generate Russophilia. Many Bulgarian businessmen, who worked for years in the Russian market, have quickly sobered up to the new realities, including the impossibility to anticipate and manage political risk in Russia. So instead of using the interests of Bulgarian citizens and corporations in expanding their presence in the Russian market, Moscow has minimized the chances of Bulgarian entrepreneurs of reaching Russian consumers and thus to stimulate new generations of Russophiles.

A lot could be said on this topic, but it remains a fact that the complete exclusion of Bulgarian companies from the Russian markets in a number of traditional sectors only happened with the direct participation and assistance of Russian politicians and business structures. The situation of the export of Bulgarian cigarettes and wine is indicative of this process. Whilst it was never plausible that Bulgaria would sustain its monopoly position in cigarettes and tobacco exports to Russia, it was even more absurd that its market share should be shrunk to less than one percent or even to the extent that it could not be sustainably measured. Bulgarian Russophile businessmen made a significant contribution to this process including self-destructive operations with major brands, in cooperation with their Russian partners and with the continuous silent consent or participation of Bulgartabac management. Many Western tobacco giants used a “dead hand” grip on Bulgarian exports and willingly took advantage of the services of corrupt Russian politicians and businessmen which prevented even high-quality Bulgarian tobacco brands from reaching their consumers.

Russia employed the same methods in the wine trade. Bulgaria made a breakthrough with its quality products in such competitive markets as Europe and the US, but in Russia we primarily sell bulk wine, which serves as raw material for the business arrangements of Russian traders. I have personally experienced all sorts of improvisations in the use of Bulgarian wine under different brands throughout Russia. However, good Bulgarian wines are not to be found in reputable restaurants in Moscow and other big cities. Local importers have stopped the supply chain and do not give access to Bulgarian products to end users and consumers.

The exports of many goods and services for which there is a demand in the Russian market are in the same state. Almost everywhere Russian importers are closing the opportunities of Bulgarian exporters to expand their presence in the Russian market and reinforce the part of the added value chain they control.

It is difficult to ascertain whether sanctions against Russia have caused as much damage to the Bulgarian business as the administrative arbitrariness, bureaucracy and corruption encountered by our companies. Let us recall the main points; arbitrary changes in safety standards for food products, games played with laboratory tests, procrastinating administrative border and customs handling of goods, problems with recognition of contracts and dispute settlement in Russian courts and other extras from Russian/lack-of/ market reality – the list is long. If a Bulgarian businessman managed to succeed, the various departments monitoring financial flows were alerted immediately.

The major problem with our Russophiles is that they are never to be found when it comes to protecting Bulgarian interests in Russia. This fact only proves that their mission and task is only to serve the interests of Russian foreign policy and economy in our own country. It is not easy to name a big Bulgarian project or success by a Bulgarian company in Russia over the past decade. Let us recall the promises and dreams beyond projects that we expected to secure in Russia when compared to the strong positions of Russian companies in our country.

Bulgarian construction companies and suppliers hoped to cater for Russian energy sites and facilities in exchange for imports of fresh nuclear fuel into Bulgaria. Outcome – zero.

Gazprom was expected to be buying goods and services for a certain percentage of natural gas imports into our country. This scheme lingered in an arrangement with Overgas in the Noughts of this century, but has long since faded. Even at the time it achieved nothing significant.

Regularly at meetings of the intergovernmental commission there was exchange of long lists of goods and services which the Russian party considered with alleged seriousness for delivery from Bulgaria. Outcome – zero.

On countless occasions the Moscow government promised to take direct deliveries of fruit and vegetables, wine and food products to stores in the Russian capital? Outcome – zero.

 

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Let us move on to tourism, which according to our Russian partners’ concept had to balance the asymmetry of Russian-Bulgarian relations. An in-depth analysis of the issue of who profits from Russian tourists in Bulgaria will only produce frightening results. Despite the relatively high levels of Russian tourism in our country, it is highly questionable where the majority of net benefits goes. Not only because Russian investors purchased, built and manage a growing part of accommodation used by Russian tourists, but also because a significant portion of Russian citizens residing in Bulgaria conduct business, whether gray or legitimate, the income from which does not stay in our country. Not to mention employment in Russian businesses in Bulgaria, which in most cases involves other Russian citizens. Hence tourist ghettos are born which contribute little revenue to Bulgaria’s budget and even less to the image of its tourism.

On the other hand, while one would have a problem naming a successful Bulgarian company in Russia, it is much less difficult to identify the symbols of successful Russian businesses in Bulgaria – Lukoil, Gazprom, VTB and related networks of bigger or smaller Bulgarian businessmen, to name a few.

A similar picture emerges not only in trade and economy, but in the field of culture too. How many Bulgarian orchestras, singers, theaters, pop singers and bands visit Russia to balance visiting Russian groups and singers in our country? Not many. This is valid not only for pop music but for every sphere of culture and music where we expect certain balance and reciprocity. Just ask about ways to arrange – the expression is accurate, to reach an agreement or to get an “ok” for cultural events with commercial dimensions in Russia and the picture is clear. Russia defends its market and income generated from the sale of culture and music only for Russian writers and artists – call it cultural nationalism.

We as Europeans are normally more open, but the balance of payments in cultural exchanges are also important. Many Bulgarian musicians and singers who visited our embassy in Moscow would know what I mean. Nowadays we are left with only the Days of Bulgarian Culture in Russia, but things there are tightening ever more.

As Bulgarian Russophiles do not care about promoting Bulgarian interests in Russia, they increasingly rely on the ever shrinking financial flows and on direct and indirect benefits from the political business with Russian interests in the country. The more the share of such business shrinks, the more intense the competition among different groups. For many of them this is the only source of income and idealists are the ones who suffer.

If there are no new energy projects in place, no exchanges of money for influence, financed by the Kremlin, can be accomplished.

Projections for the future of social movements, associated with Russian business interests, are not optimistic, mostly because the crisis and the implosion in the motherland are not very optimistic either.

It is because of the gap between what Russia needs as influence in Bulgaria, and what our Russophiles can offer that the Kremlin is shifting its strategy and channels for influence towards its information and propaganda centers in Europe, and often in America too, through networks of NGOs and political parties that can be mobilized on a “case by case” basis. So the “Russian connection” is increasingly more European, making it more difficult to detect and analyze in the sea of hybrid instruments.

Hence the blocking of shale gas exploration in the EU as it presented an imminent death threat for the Kremlin. Local Russophiles played a supporting role in this process, without exposing the participation behind the scenes of European centers of Russian influence. In this particular plan the Kremlin succeeded, but in a broader perspective it lost its energy weapons. A similar scheme is being applied now to prevent signing the agreement for investment and trade between the US and the EU.

Gazprom is restructuring its presence in Europe, getting rid of assets and moving into a defense strategy, resulting in the parallel reduction of its market shares. It will inevitably affect Bulgaria too, despite protection from high places. A similar fate awaits the ownership of Lukoil Bulgaria; the company president has already announced that it will sell its stake in the Burgas refinery. Replacing it with another Russian strategic investor will not be a simple task. South Stream is completely blocked. VTB’s deal with BTC is not going smoothly either. Not to mention the attempts to resurrect the NPP “Belene” project.

Russia has virtually no chance of implementing any new big projects in Bulgaria in the foreseeable future, which throws into panic those relying on their share of the “cake” amongst Bulgarian politicians and businessmen who identify themselves as Russophiles. This explains why they are clenched in a desperate fight for the realization of any project with significant financial flows.

A large number of politicians and businessmen who in the past have relied on business with Russia as the foundation of their political and business power have now shifted their interests towards the EU and the US. Even those who serve as textbook examples of businessmen relying on politics at home are no longer guaranteed power in governance as the base of their real or virtual wealth.

 

Own money is not used to win elections, but political investment from outside and help by connected oligarchs is. Business with politics in our country has no sound economic logic hence those who rely on Russophilia are doomed to a difficult future.

 

By Ilian Vassilev

 

Translated by Sacha Nikolova

One thought on “Economic dimensions in Russophilia or how to convert ideas into business – Part Three

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