There has been much talk recently of a return to the balance of great power interests and spheres of influence. President Trump’s transactional foreign policy is an epitome of this return to two centuries old doctrines and the paradigm of interests before principles.
President Macron has joined and suggested a restart of the geostrategic partnership with Russia, to balance off China and the US, calling for dropping sanctions and a return to business as usual. The French President seems not only to be seeking to lead post-Brexit EU but also to step in the shoes of his great predecessors De Gaulle and Napolean. He has managed to veto opening up accession talks with Albania and North Macedonia, disregarding prevailing EU common ground.
Paris is engaging in the Kremlin appeasement in more than one area of foreign affairs. France is dragging its feet on ratifying the Protocol of North Macedonia’s NATO accession, while its president has openly declared NATO brain dead. Few politicians doubt such tunes top the personal favorites chart of President Putin.
We have been recently versed by both Ukrainian, Russian, and French media that a transactional type of diplomacy rests at the core of the preparatory work for the forthcoming Normande format talks. Igor Kolomoisky, generally accepted as the closest oligarch to President Zelensky, suggested that the Crimean and East Ukrainian issues should be treated separately. No wonder, shortly after his statement, a Ukrainian vice prime minister admitted that compensation for Ukraine in the event of Russian sanctions removal is on the table.
It seems that for now, the Normande format is stalling and unlikely to deliver on President Macron’s hopes. Hence the invitation to Presidents Putin and Zelensky to Paris on December 9th for direct exchange, possibly to remove hurdles that the normal diplomatic process has failed to eliminate. The hidden message is that Chancellor Merkel is not helpful, and France is better suited on its own to take the initiative. The tough sell of whatever is agreed is to the Ukrainian people, not to President Zelensky.
This story is a vintage case of President Macron trying transactional diplomacy, ignoring the ire of his EU partners. If he succeeds in his East Ukrainian “sanctions for compensation” deal, peace will not befall upon the region. It is more likely that the current French president will just do an encore of President Sarkozy’s appeasement of Moscow, 10 years later, which led to the fragmentation of Georgia.
Analysts most often refer to Trump and Macron as backers of strategic deals with Russia, ostensibly at the expense of Eastern Europe.
The forthcoming trip of PM Borisov to Washington is offering ground for transactional policy diagnostics. It is hard to define the returns and their ultimate beneficiaries, but a look into the possible Kremlin playbook context is worthwhile. It might involve different transaction scenarios, with some developments well above the Bulgarian’s PM league.
Regardless of how the official narrative goes in Sofia, the F-16 deal, although groundbreaking, does not qualify on scale and consequences, for the transaction, that would explain the reception at the White house. The talk in Sofia of this visit started at least three months ago, and ever since I have been scanning for a deal involving high stakes at the top both in Moscow and Washington, that could position PM Borissov in the spotlight, at least for a short while.
The trip last month to the US of the heads of the Bulgarian Special Services might also fit into the prep work for a transactional visit to the White House. The trip, kept in secret, was generally portraited as a US nod of approval for the new General Prosecutor and an insurance against reverse turns in the Corporate Commercial Bank proceedings. The CCB case, now in court, is pivotal for the survival of the current power mix in Bulgaria. It depends on the continuous balancing between Kremlin’s and White House interests.
Fresh evidence has emerged from a recent Anti-Corruption Fund investigation, alleging deliberate neglect of the newly elected General Prosecutor Ivan Geshev for the role of the notorious media mogul Delyan Peevski in toppling the bank. The latter’s personal and corporate direct and indirect indebtedness to the CCB was estimated at BGL 550 million. Problems with repayment and plans by the CCB management to take him to court shed new light on the possible motives and the role of the General Prosecutors Office in the run against the bank. A more critical US interest in the CCB case might unearth more hidden skeletons in the cupboard, risk international criminal investigation, and even possible sanctions.
The group of oligarchs-politicians and prosecutors seems to coordinate with Putin’s closest entourage around the VTB how to avoid this case coming to the attention of US Congress, the US Treasury, and the State Department. Hence the move out of the Kremlin playbook to try transactional diplomacy with the White House.
PM Borissov is following in the footsteps of PM Orban and President Erdogan, and other hard and soft autocrats who seek to trade leniency and balancing relations with Russia for deals with President Donald Trump.
For Russia, there is both a strategic and business imperative in Borissov trip. The strategy line is exemplified with the permits PM Borissov granted for Russian military planes, carrying the S-400 system, to fly over Bulgaria en route to Serbia. This is the Bulgarian government’s equivalent of Erdogan purchase of the S-400 – seeking free space to engage with Russia, that President Trump could tolerate personally, bypassing the Congress and the State Department. Without a permanent air bridge to Belgrade, Serbia’s attempt to navigate a non-NATO pattern of EU accession will ring hollow. This will be the toughest part of Borissov’s pitch, where he will be more on the defense, offering new purchases of US military hardware.
The business deals that could potentially qualify for a transactional type of diplomacy involving Bulgaria are new purchases of planes, radar, and other military hardware or energy-related trad-off. Moscow needs the White House to drag its feet on sanctions against the Turk Stream, which is a critical piece of the strategic gameplan of Moscow. PM Borissov might also test the water on Washington’s reaction to the NPP Belene, which could see a strategic Russian-Chinese partnership with long-term strategic implications for the EU and NATO. The most PM Borissov could hope is for President Trump to focus on the piece of the pie for US companies.
All PM Borissov and the Kremlin seek for the Turk Stream, and the NPP Belene is time until they become an accomplished fact, and the ball passes on to the Brussels’ court.
Bulgaria’s role in securing the White House tacit nod becomes indispensable. Not as a principal deal maker, but as a critical player in Putin’s gameplan, which might explain why the Kremlin has not reciprocated in kind and in time for the expelled Russian diplomat in Sofia and why President Putin seemed protective of Borissov for “for being under pressure”, while consoling the top Russian agent of influence in Bulgaria. Kremlin watchers will tell how unique this is.
The first attempt at transactional diplomacy in this ongoing Turk Stream operation was the unexpected entry of a Saudi company with no previous track record in comparable scale projects in the EU. Bulgaria dispatched in haste its first-ever ambassador to Riyadh, in time for the closure of the Turk Stream segment in Bulgaria. PM Borissov also visited Saudi Arabia, following external advice, to establish contacts with MBS, known for his close ties to the Trump family. The Bulgarian PM thus expanded his already active private foreign policy with the Gulf States to Saudi Arabia.
Then came the news that the Saudi Arkad corporation miraculously managed to strike a deal with its Russian led competitor in the auction, involving the procurement of pipes from the US sanctioned Russian pipe maker. This line of interpretation might explain why the pipes for the gas duct were delivered before the main contractor Arkad had even managed to sign any contracts, without any advance payment.
The second, more obscure part, is the financial package behind the deal, it’s hidden terms and the collateral. Arkad is nominally under a turnkey contract, self-financing its work and potentially borrowing to make the project happen. However, a simple risk test would discern it hard for the Saudis to quantify and mitigate investment risk in a new market with no prior experience and numerous project variables and unknowns. Funding the Bulgarian leg out of Arkad’s cash flow is a utopia. Despite its reputation – the Italian affiliate of the Arkad Group would find it challenging to secure project financing from EU banks, given the project structure and management deficits.
The only plausible explanation for the funding scheme is a back to back project funding from the principal mover in the Turk Stream – Gazprom. Possible sources for financing the Bulgarian leg of the Turk Stream are funds left behind from the unsuccessful South Stream Bulgaria operation, which at their peak levels, shortly before President Putin canceled the project in December 2014, exceeded 660 million euros. Some of them might have vanished in the CCB bankruptcy, but Gazprom could have been more than lavishly compensated in other ways – higher gas prices, extended privileges, etc.
Another potential source could be the 125 billion rubles purpose tranche extended in October 2018, by Gazprom’s affiliate Gazprom Transport Krasnodar, owner of the stock of South Stream Transport BV with the task to complete the Turk Stream segment in Turkey, Bulgaria, Serbia, and Hungary.
Both the Kremlin and Borissov need the US to remain lenient or passive on the Turk Stream. This will also be a hard sell at the White House.
Given the fact that the Bulgarian national gas company Bulgargas has so far failed to engage directly in purchases of US LNG, it is likely that PM Borissov will commit to US gas, but not with serious volumes undermining Gazprom’s monopoly status.
It will be difficult to predict how his offers will be perceived at the White House, given his track record of unmet promises. Adding doubt to the grand picture is the fact that the operator of the Revithoussa terminal in Greece DESFA, recently acquired by Snam, Enagas, and Fluxys, which is the only EU entry point for LNG into the region, has denied Bulgarian and Romanian companies slots for cargoes in 2020.
The trip will crown PM Borissov’s long-term efforts to sideline the Bulgarian President in foreign affairs and confirm him as the ultimate strongman in Bulgaria.
He will get a photo op and a tap on the back. Whether substance will follow and the US President will engage in containing the resolve of US Congress to sanction the Nord, and Turk Stream, and allow PM Borissov a maneuvering space to accommodate vital Kremlin interest, remains a wild guess.