Russia is back, Parliament is stuck, universities and politics don't mix well, and Sofia Airport is now private

Russia is back, Parliament is stuck, universities and politics don't mix well, and Sofia Airport is now private

K Insights 23/04: Some problems in the budget and a hope for sunshine in North Macedonia

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Vrbetice is more than 1000 km away from Sofia. Yet no distance can keep you safe from the Russian military intelligence (known as GRU), so it seems.

Last week the Czech authorities suddenly pointed a finger at GRU and claimed several of its agents traveled specifically to this small village in the east of the country in 2014, to sabotage an arms depot. The reason? A Bulgarian arms dealer kept its shipments there, before exporting them to Ukraine - at that point a war zone for the Russian army (albeit not openly).

Given the background of this story, already told by "Capital" and the investigative site bellingcat: the arms dealer Emiliyan Gebrev was later poisoned by the same GRU agents who poisoned Skripal in the UK and two explosions happened at a Bulgarian arms depot in Iganovo in 2015 - Prague's conclusions are probably sound.

As with any spy story, this one is fascinating to follow. Yet don't let it distract you from the larger picture here. Russia is returning to Central and Eastern Europe - with a vengeance. And I'm not talking about money (although if you follow our newsletter you already know that Russian oligarchs are keen on buying things in Bulgaria), or soft power. It is once again roaming around the region militarily - not with tanks, but with spies, and an online army of saboteurs.

The same GRU unit obviously traveled around countries, blowing up depots, targeting people and generally helping the military in its Ukraine mission. But since at least 2014, Russian-backed propaganda and disinformation campaigns have also been doing the rounds in CEE - on every divisive topic from the Istanbul convention to anti-vaxxers.

This will not stop, nor will it be fixed by diplomatic expulsions (Bulgaria did expel 2 more Russian diplomats last month). Since its entry into NATO and the presence of American bases here, the region is considered fair game by Russia.

And Bulgaria is right in the thick of it.

POLITICS THIS WEEK

Not that there is much to be done about it now

Bulgaria has always been reluctant to criticize Russia, but outgoing Prime Minister Boyko Borissov has turned that into an art. He managed to follow the sanctions regime against Moscow while simultaneously allowing a huge new pipeline "TurkStream", which serves Russian interests almost exclusively, to pass through Bulgarian territory.

This will oblige the state to fork out for decades to come. As with "NordStream", this pipeline - completed two months ago, allowed Russia to bypass Ukraine on the gas routes to Western Europe. Coincidentally, Russian troops amassed near the Ukrainian border, threatening a new wave of fighting in Donbas (pictured above).

We expel diplomats, yet don't dig too deep

Russia sent two Bulgarian diplomats home this week, a tit-for-tat for two Russians expelled last month for espionage. Yet don't expect a thorough investigation of the type the Czechs did: none of the investigations so far has shed light on Russian activities here, including the one about Gebrev, which was entirely based on bellingcat info.

And considering that we don't have a government yet

GERB assumed the responsibility of forming a government since it is the biggest group in Parliament. Yet that will lead nowhere - no one wants to cooperate with them. Which means by this time next week we will know if the second-in-command - Slavi Trifonov's TISP - will be forming a cabinet. They are still strangely silent.

A possible coalition partner, Democratic Bulgaria, is waiting for the call. You can read a special interview here with one of the leaders of its three factions, the Greens' Vladislav Panev, who seems to have grudgingly accepted that the crushing of GERB may be a drawn-out process. In other words fresh elections later in the year.

Anti-GERB: still not a working coalition

Everyone except GERB managed to agree on a moratorium on all the actions of the outgoing government: including concessions, new debt and new appointments to the boards of state-owned enterprises. Yet this is a bit too late, given that most of the cards are already dealt and GERB, for now at least, managed to secure lots of institutions for years to come.

Yet there are cracks in the anti-GERB coalition - there is still no agreement on what needs to change in the electoral law, neither is there an agreed order on what will be voted. And that is a pity, because there are...

Some good suggestions: disband the specialized court and lower the interest fees

Democratic Bulgaria - and again, refer the interview with Vladislav Panev - filed some rather promising proposals this week. Among them were the disbanding of the specialized court and prosecutions service, devised 10 years ago to fight corruption and turned into a vengeance machine by the ruling party.

Also - lowering the penalty interest for delayed payments, which still stands at 10%, even though the market rates are much, much lower.

And another suggestion: keep universities out of politics

In a blatant display of asskissing and hidden patronage, the rector (or president for American readers) of the University of National and World Economy (UNWE) fired an outspoken critic of the former Prime Minister. Martin Osikovsky - an assistant professor was dismissed several weeks after announcing publicly his displeasure with Boyko Borissov's visit to UNWE to check on a new building. Borissov was using the university as part of his election campaign, claimed (with full justification) Osikovsky.

The UNWE rector was, in turn, clearly rattled - he personally took Borissov on a tour of the building that the government had bankrolled. It is worth mentioning that the whole building procedure was laden with scandals, cost a lot more than planned and reeked of conflicts of interest.

ECONOMY

So deficit-wise, we're ok

Bulgaria's budget deficit topped 4 billion levs or 3.4% of GDP in 2020, according to Eurostat. Meanwhile, government debt increased from 20% of GDP to 25% or 29.7 billion levs. See how that compares to other member states:

Yet, the budget may be in need of a revision. According to Minister of Finance (in resignation) Kiril Ananiev, the budget may need to undergo a revision if the pandemic worsens.

Why? Because funds earmarked for anti-crisis measures have been estimated under the assumption that they'll be needed only until halfway through the year. According to the minister, this is common practice agreed upon between finance ministers at the European level. Read more about the budget's progress in Capital editor Vera Denizova's piece.

It's a good thing then, that as of Tuesday, Sofia Airport has a private owner - concessionaire Meridiam Fund will have it under contract for the next 35 years. At the beginning of the week, the initial fee of 660 million levs (330m euro) was paid by Sof Connect. That temporarily abated some of the pressure building in public finance since the start of the year.

The supervisory board of the concessionaire company includes Iliana Tsanova (former Deputy Prime Minister, who worked for the EBRD and the so-called Juncker Plan) and Filip Gunev (former Deputy Minister of Interior) as independent members. It took almost three years for the concession of the largest state asset to be approved and granted.

The road agency (RIA) will seek EU funding for the Sofia-Belgrade highway. The agency is looking for a consultant to prepare the documents for applying for European funds for a total of 33 km of the Europe highway from Sofia to Belgrade. The agency announced a tender for over 224 million levs (112m euro) sans VAT for the remaining 16.5 km of the road. The other 17 km were completed by GBS - Infrastructure Construction in November 2020.

The central bank has asked Fibank to reclassify over 300 million levs in loans as non-performing loans for 2019. The news stems from a remark left by Fibank's auditors (Mazars and BDO Bulgaria) in its 2020 annual report. The bank has yet to do so, and the Bulgarian National Bank reassures that the risk is covered by the bank's capitalization following the European Central Bank's tests of the Bulgarian banking system (which found a significant gap in Fibank's capital).

Against a background of 38.9 million levs in profits for last year, the amount is significant, and non-compliance may lead to sanctions. This is the second year in a row that auditors have left the remark in Fibank's report.

And last, but not least - Bulgarians are byuing houses like mad.

This is what the data shows, with the housing market reaching new heights. Read more here

BUSINESS

Tech

Payhawk

Local fintech startup PayhawkCom has raised $20m in a Series A round led by the US-based fund QED Investors, making this the biggest investment on the Bulgarian startup scene. Sources say Payhawk's valuation reached $80m. Payhawk is developing a platform and corporate cards in partnership with Visa, which make it easier to manage SMEs budgets. "Over the next year, we are keen to provide great support to finance teams across 30+ countries to manage company cards, invoices and payments in a unified and efficient way. We plan to significantly expand our integrations to existing ERP systems, and also easily connect on top of every business bank account across Europe and beyond," says Payhawk CEO and founder Hristo Borisov.

Dairy

Meggle

German Meggle shuts down its milk production in Shumen because of its size and lack of profits. The Shumen factory in northeastern Bulgaria has been owned by Meggle for 12 years, its main products - milk and yoghurt. In recent years, its turnover has hovered around 30 million levs, and employee headcount was a little over 100. During this period the Bulgarian factory turned a very small profit and traditionally relied heavily on financial assistance from the German parent company.

Manufacturing

El Bat

Lead manufacturer El Bat is planning to acquire former submarine battery maker EnerSys, according to a notification submitted to the Commission for Protection of Competition. The buyer will be the company "Recocycling", which is owned by Dimitar Popov - the majority shareholder in the lead waste processor. The EnerSys plant in Targovishte region in northeastern Bulgaria has not been in operation since 2019 when its American owner EnerSys decided to shut it down due to weak demand for its products.

Finance

BNP Paribas Personal Finance

Customers of BNP Paribas Personal Finance can now apply for consumer loans through their digital wallets. The bank has developed and launched its digital wallet which will allow customers to apply for quick approval of consumer loans up to 4,000 levs, the funds from which can then be used for contactless payments and ATM withdrawals. The bank has accelerated its digitalization strategy, partly because of the shift in consumer habits following the pandemic

ENERGY

Natural gas prices to go up 25% in a few weeks

The increase in the price of natural gas was delayed by the Ministry of Energy because of the elections, but was bound to happen in the end. The state operator Bulgargaz submitted its application for a new gas price to the Energy and Water Regulatory Commission (EWRC).

The regulator decided that the price will be valid retroactively - from the beginning of April.

However, instead of the initial 13%, the increase will be 16% because of the price dynamics on international markets. Moreover, on April 27, the EWRC will also discuss the price for May, which will likely be 10-11% higher than prices in April.

Cumulatively, there will be a price shock of 25% on natural gas on May 1. Natural gas prices are expected to continue their upward trend, as gas market prices in Europe are also going up.

Bulgarian Solarpro to build a solar park in Northern Macedonia

Bulgaria's renewables firm Solarpro will build a large solar park in Northern Macedonia. On April 16, 2021, a tender was held with the participation of three international companies, and the local Solarpro Holding was chosen as a partner to the state energy producer ESM in the construction of one of the future photovoltaic power plants. Through a public-private partnership for construction, operation and transfer, the company will build a photovoltaic park with an installed capacity of 50 mW.

WATCH OUT FOR

PEOPLE

Slavi Trifonov

Who still has to break his silence and come to Parliament, as well as announce whether his party is going to form a cabinet

Iliyana Tsanova

The new head of the Supervisory board of Sofia Airport and her ambitious plan to make the place more connected to the community

DATE

26 April

The Oscars are coming along, this time with a Bulgarian presence - Maria Bakalova is nominated for Supporting Female Actress.

THE EVENT

DIGITALK - The biggest event of the year is coming up !
While we are gearing up for the hot topics of the Digitalk summit, here is a preview: Cybersecurity will be a big topic during this year's event. One of the key speakers will be Koen Gijsbers (Major General ret.) who is a digital and cyber strategist. He is former lead of NATO's IT and Cyber Agency and former Chief Information Officer of The Netherlands Ministry of Defense.

Djamel Agaoua, CEO of Rakuten Viber, will explain how people stayed connected during the pandemic and will look into the future of communication.

Words of the week

Meniscus - tear of the knee A trauma often afflicting football players, which plagues the current Prime Minister. Boyko Borissov entered hospital this Tuesday for a fifth time for a meniscus operation. Rather conveniently, this happened right before he was due in Parliament in front of an irate crowd of deputies.

It remained a mystery why Borissov, who, simultaneously, has resigned, is on paid leave and on paid sick leave, decided to play football rather than focus on his party, as he promised.

This led to a flurry of online jokes, one of which suggested he go by the name of Prime-Meniscus.

Vrbetice is more than 1000 km away from Sofia. Yet no distance can keep you safe from the Russian military intelligence (known as GRU), so it seems.

Last week the Czech authorities suddenly pointed a finger at GRU and claimed several of its agents traveled specifically to this small village in the east of the country in 2014, to sabotage an arms depot. The reason? A Bulgarian arms dealer kept its shipments there, before exporting them to Ukraine - at that point a war zone for the Russian army (albeit not openly).

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