Energy minister Rossen Hristov: There is a political decision in Moscow preventing Gazprom to work with us

Среща на премиерите на България Гълъб Донев и на Северна Македония Димитър Ковачевски Росен Христов

Energy minister Rossen Hristov: There is a political decision in Moscow preventing Gazprom to work with us

Среща на премиерите на България Гълъб Донев и на Северна Македония Димитър Ковачевски Росен Христов

© Велко Ангелов©Дневник

Rossen Hristov is the energy minister in Bulgaria's caretaker government that took charge at the beginning of August after Kiril Petkov's cabinet fell. Since then, a lot of controversies have surrounded the new cabinet's energy policies and especially those making a U-turn towards Russia's Gazprom that cut off natural gas deliveries to Bulgaria in April. This interview with Mr Hristov was taken by German freelance journalist Rebecca Stegmann and published exclusively in the Capital Weekly.

Friends of mine have told me that you need to be careful in Bulgaria when you're out in the street during caretaker government selection because the President might choose and appoint you as a minister. Is that how you got the job?

Not really. I'm sure that the President does not pull people from the street and appoint them as ministers. Selection was done carefully. A number of candidates were discussed and were assessed depending on their qualifications.

What qualified you?

Large experience in the energy industry especially on an international level. That was basically my advantage versus the other people that were assessed for the job. They were looking for somebody who can bring international standards and good practices to the ministry. The other thing was my experience in crisis management and considering the current situation in Bulgaria that proved to be quite helpful.

When and where did you gain that experience abroad?

I worked for the past 15 years in the energy sector, working for the Italian company Enel in Italy, Russia, Greece, France, Latin America.

How long did you live in Russia?

I was based in Russia for about five, six years.

From when to when?

From 2000 9 or 10 to 2016, 17.

But even though I was based there, I was also responsible for some international projects. So I was not in the country all the time. But nevertheless, my main project was in Russia and my office was there. Originally, I was in Rome and then moved to Russia after a big acquisition was made. Then I switched to another company, Dietsmann in which I was responsible for Latin America.

When did you work for Dietsmann?

From 2015 to 2017, I think.

In Sofia?

Mostly in Sofia, but also in other parts of the country. I have partners that move around on a daily basis due to the business, with my job being to boost the operations and to bring know-how.

How many companies do you own?

I have different stakes in about five, six companies.

What about your academic background? Where did you study?

I studied International Economics in the United States.

In which university?

Which university? The University of California.

Which one?

San Diego.

When were you living in the United States?

2005 - 2007

So it was a master's degree?

It was a master's degree indeed. Forgot to mention that I lived in the United States around the early 2000s as well.

You have also worked as a catamaran captain?

That is my hobby, sailing. So, yes. I sail boats, catamarans, and racing boats.. . I have participated in regattas as well.

Then let's talk about the serious topic of gas. Why do you want to restart the contract with Gazprom?

What we want to do is to secure gas supplies for the country. With the best conditions possible and the lowest price. Bulgaria cannot handle such a high level of inflation as we have right now. Fuels such as gas contribute a lot to the inflation. We had meetings with the trade unions, with all the professional associations representing most of the companies that use gas. We had meetings with all the municipalities and all of them said that high prices of gas would make their business or their activities unfeasible. So the goal is to supply gas at the lowest price. The contract that we currently have with Gazprom provides such an opportunity. We're looking at all kinds of sources regardless of whether it's Gazprom or not.

What price do you think you will get from Gazprom? What calculations is the price based on?

The contract itself, including the formula and the price are confidential, even though there are many speculations. Informatively, Gazprom is the second cheapest supplier from all the ones that we are currently working with or negotiating with.

The second cheapest?

Yes, after the Azeri gas. And the difference is substantial. I mean, people need to understand that gas at any price doesn't do us any good. Schools will have to close, hospitals will have to close because the municipalities don't have the money to pay for such a high price of gas, businesses will have to shut down because they cannot constantly inflate prices. If I have another option to supply gas from, I will use it and we are using it. Gazprom is not the only one that we're working with and negotiating with. But it is an option that we need to explore. And if possible to get gas at a good price, we should do it. I mean, we have a contract that expires at the end of the year, we have quantities that we need to take, if we don't take it, there is a clause, take-or-pay. So potentially we run the risk of going to arbitrage. So I really don't understand the politicization of this issue. We need to think in a practical way. In the longer run, we're doing everything possible to secure gas supplies from other sources, because Russia may not be as reliable, but price-wise, they're competitive.

But isn't the question of where you get gas from already political? This is not politicized by Bulgaria, but by Russia, who uses it as a weapon?

Of course.

And now if you say you want to go back to Gazprom, you might make yourself dependent again on Gazprom during the winter.

We're working in a way so we don't stay dependent. What I would like to do is to secure gas supplies at a rate of about 130-150% of what we need. In this case, if one of the suppliers for whatever reasons, political, technical, or shortage, is not able to supply the negotiated quantities, we have other sources already lined up and we can compensate. And this is what diversification is. Diversification is not replacing one supplier with another. So if we cancel Gazprom, and let's say, go with LNG, we become dependent on LNG suppliers. There are not too many companies that supply LNG. I'm talking about LNG producers, because dealing with intermediate companies just brings the price up.

But why did you turn down six LNG tankers?

Because exactly for the reason that we were not able to secure slots, the whole deal was designed in a very wrong way. Normally, you should secure the slots, and then ask for an offer for these particular slots. LNG suppliers give you a better offer if they know exactly when they need to supply and what quantity. In this way you get a better price. When date and quantities are uncertain, they put the risk in their formula so they calculate their risk of not being able to supply or they have to do it at the last moment. So of course, the price gets higher.

The deal was all done by the previous government and we are constantly being accused of not arranging the slots. But just think about it, they had a contract with Cheniere in May for two cargoes. So from May until August, they didn't secure the slots. There is a letter from Bulgargaz to the previous minister of energy from the 27th of July. The letter says that we have high risk with the offer of Cheniere because they don't have slots.

Then we had to confirm the offer with Cheniere on the 19th of August. So from the 3rd of August to the 19th, only for 16 days, we were able to secure one slot, something that had not been done for several months. Furthermore, the gas that we have for September was almost 100% contracted by the previous government. And you saw yesterday the announcement that this price is substantially higher than the gas price in August. So just getting gas at any price or from whatever source does not do any good to the economy. We will literally close schools if we continue like that, and the children will not be able to get educated throughout the winter because the schools will stay cold.

Don't you think that's a bit exaggerated?

It is not exaggerated.

But Bulgaria is only dependent on gas for 10, 15% of the total energy mix. Countries like Germany are much more dependent on gas, because their industry and households use gas to a much higher degree.

Yes, but look at GDP per capita. People in Germany have higher salaries, they can pay higher prices. But people in Bulgaria, they get about 350-400 euros in salary. Retired people get 150 euros pension. Now imagine if you have to live with 150 euros and have to pay for all your house needs for food, clothing, heating, utilities. I mean, it is very easy for people in Sofia to say "we are ready to pay for higher price gas as long as it's not from Russia". And I understand them, they have the means to do it.

We're now talking about not 15 - 20% increase of price, we're talking about tripling, four times higher price. So municipalities have no idea how to adjust to that inflation. I know all the negative effects of going back to Gazprom. They can shut down whenever they want to. There are sanctions that can make the contract unfeasible so they can stop providing. Of course, we know that and we are accounting for all these risks. But if I'm able to get this gas that is already contracted, if I'm able to get it, at least partially, at the price of these quantities contracted, that will help the entire mix, of course.

But the price is tied to the gas stock exchange. So?

The price is tied to the gas stock exchange, but also to the oil exchange. And due to this formula, it is cheaper than the gas that is entirely tied to the gas stock exchange, like the LNG. LNG depends on the TTF - TTF minus something, or TTF plus something.

Thanks to the formula that we have in the contract with Gazprom, Russian gas is cheaper. Also, it is a pipeline gas, which means we don't have to secure slots, think about transit, think about swap deals. Because when I get a tanker, even if I'm able to arrange a slot, then I also have to arrange a swap deal because I cannot get the quantity at once. We need a steady supply throughout the month. So basically, when you get a tanker, you also have to contract with a trader which brings an additional cost.

You said in the press conference that it won't be easy negotiating with Gazprom because of all the actions of the previous governments


and that you would have to compensate for that. What do you mean by that? What are you willing to do to go back to Gazprom?

There is nothing we can offer to Gazprom. I just hope that they have the gas that we can buy. They have a contract that they need to fulfill. And they are willing to do that. The previous government reacted very emotionally, breaking ties with them. Of course, they can do this during the summer, when they don't need the gas for heating. However, the winter perspective is completely different.

Well, one of the actions that you also mentioned is the expelling of seventy Russian diplomats. Do you think Bulgaria would allow them back in order to get its gas?

I don't think so. Politically. If you're asking whether we'll make a political move to make Gazprom more happy and agreeable, no. We have not discussed and we're not offering anything like that. But I will be happy to see less tension between the two countries. Now, why would you need a European country to get into an argument with Russia that has already been aggressive in Ukraine? So why would Europe need Bulgaria to be in a position that makes Russia angry and bring danger to the entire European Union? Because if Bulgaria is attacked, for whatever reason, it's an attack against NATO and against the European Union. So why would Bulgaria jeopardize the security of the entire Europe? Historically, willing or not, historically, Bulgaria has been tied with Russia.

But Bulgaria is a member of the EU. And right now what you are considering is to move against what the EU wants, to move away from Russian gas and also the sancitons.

Where are you from?


Germany. So why is Germany complaining that Russia has stopped supplying gas from 31st August until September 3? Why? They should be very happy. Germany should be very happy! Russia stopped the gas. That's it. You're away from Russia! You're not using Russian gas anymore. Why are your entire government, business, journalists, complaining, calling Russia unreliable suppliers? Do you feel the gas supplies will not be resumed? Why - you're from Germany - why is Germany buying Russian gas then? Why is France buying Russian gas? Why is Greece buying Russian gas? It is very easy to be black and white. I'm totally for diversification and security. And this is possible only when you follow a steady policy. When you do it right at the right time.

But you just made a huge U-turn?

We didn't make any turns. We have already contracted this gas. And that is all that we need is to take the contracted gas. We're not discussing new contracts. We're not discussing extensions. We're not discussing the increase of volumes, nothing, just the ones that are already contracted, we want to take it. Meanwhile, I'm securing a diverse line of supplies from all over the world that eventually from next year, will make deliveries from Russia obsolete. If we're able to do everything that we planned - secure gas from Turkey, LNG terminals and secure terminals in Greece. And after securing the slots, we will contract steady LNG supply from a manufacturer, not intermediate companies, but companies like American Cheniere, Sempra, Europe's TotalEnergies, Shell, these are reliable companies with large amounts of gas being produced, so we can rely on them. Then we can say we have diversified, and we can stay away from Russia.

What makes you think that it would be cheaper than it is now?

If we work properly, we can contract large quantities. And what we're actually now trying is to get in touch with the neighboring countries. And with the help of the European Commission, we would like to try to organise a tender for the entire Southeast Europe. If we manage to do that, to have gas supplied to all the countries of the region, then we're talking about a completely different volume from what we have in Bulgaria. Bulgaria is a small market. Of course, when you're small, you can't get the best offer. But if we manage to unite all the countries in Southeast Europe, and with the help of the European Commission, we can organize these tenders and then we should be able to get the gas at a reasonable price. Furthermore, a few days ago, we increased our capacity at the LNG terminal that is now in construction at Alexandroupolis. This will give us access to LNG at a very low transit and slot price. So from 2024, we'll avoid the expensive transit fees. If the LNG is cheaper, but the slot and the transit are expensive, at the end this gas becomes expensive.

When will the interconnector between Greece and Bulgaria be finished ?

It is planned to be commissioned in October. There are some obligatory tests and certifications. The interconnector is very important for us because it not only increases the capacity, but it brings further down the price of the gas from Azerbaijan, because it is embedded in the contract that after the opening of the interconnector this gas will be cheaper.

A lot of experts, not only from the Ministry of Energy, but also from regional institutions, have helped the contractor throughout the process with consultations, with a review of documents. We're helping with the negotiations with the municipalities that still need to do some certifications.

Why did you delay the announcement of the changes in the supervisory board of the ICGB project company at the beginning of August?

It was not delayed by us. This was done the first day when we came into this office, there was an indication that there are some mistakes in the documents related to the name of one of the persons. So what we tried to do is to correct one of the documents and resubmit it. But this mistake was also made in other documents. All these mistakes were corrected a few days later, they resubmitted and everything went back on. If we want to change motive, I can do it at any time. I mean, we have 50% ownership of the pipe. So if I want to change the board, I can do it even now. I can send the request and we can change it. Why would people think that we want to stop the interconnector?

To make it mandatory to move back to Gazprom.

It will not help in any way moving back to Gazprom. All the quantities that we have to receive from Azerbaijan, we receive even now, just at a higher price. Not putting the interconnector in place, we will still continue to get Azeri gas, just at a higher price. Let's say that we want to go back to Russia. Why would I run tenders for LNG? Why would I go to Turkey to negotiate slots? Why would we speak with all these companies, trying to get deals with long tenders all the time? People need to understand that it is not 100% sure that we will be able to get the gas from Gazprom.

Has Gazprom responded to your request to negotiate?

We're still discussing the opportunity at the political level. But the negotiations with Gazprom are not as simple as people think.

What do you mean you are still discussing it at the political level?

There is also a decision in Russia, to prevent Gazprom from working with us.

I don't know if that is official or not. But we tried to send a message to Russia that we are willing to resume negotiations within the current contract. Under certain conditions set by the European Commission that Germany also has.

But then you can't pay in rubles?

We cannot pay in rubles, of course. We indicated that the only way we can pay is the way that Greece, Hungary, Germany and other countries are paying. We will not deviate at all from European policy.

But Bulgargaz is state-owned, while the German gas companies are not, that's how they work around it.

Greece's is also state-owned, and the Hungarian gas company is also state-owned, there is no difference between state and privately owned, because all the regulations and sanctions apply equally to all. German private companies cannot deviate and pay in rubles directly. Even though they are private companies, the regulations are the same.

What we indicate is that within this framework, we are willing to resume and get the quantities that we have within the existing contract. If they are not happy with that, we will not resume gas supplies from Gazprom, it is very simple. But when I say that the negotiations are complicated, we need to extend the deadline if we want to get all the quantities. There is also an arbitration clause built into that contract. We need to make sure that doing this or that will not jeopardize our rights or our defense against arbitration claims. We are very much concerned about the price, we are very much concerned about deliveries month by month because our consumption is different. I need to know exactly how much I can get this month, and secure other quantities from other places. We need to fill in the gas storage in Chiren.

You said that you want to make sure Bulgaria is not dependent only on Gazprom, but Gazprom usually supplies 90% of the gas the country needs, so if you go back to the contract you have Gazprom would supply 90%.

No, if we go back to Gazprom, they will supply 20 - 25 percent of the gas that we consume. Azerbaijan will supply the rest. We will not get even close to 50, we are talking 20 - 30 percent for the moment, until we are ready to fully substitute with other reliable sources at a good price.

But then 20 to 30 percent doesn't make that much of a difference for the price that the consumers have to pay.

It makes sense. When the price of LNG is 50% higher, it makes a really big difference for the price of the mix at the end.

But you cannot talk about the formula that you use to calculate the price of gas from Gazprom?

No. Since we are supposed to start negotiations, we will try to optimize the formula too. I won't expect that they are willing to agree on that but it's worth trying. Basically it's worth trying everything that is going to secure gas supplies at a lower price without going out of the European framework.

Everything - that is also what the protestors are saying, that you "resume funding the war in Ukraine".

Germany receives about 10 times more gas from Gazprom than Bulgaria.

But the German energy minister is also traveling all around the world to try to get different supplies.

What do you think I am doing? I have been here for 3 weeks, I already went to Turkey, I spoke with Greece, I spoke with Romania, I think for 3 weeks that's quite a lot. Now I am going to Brussels, or Prague for the meeting of the ministers of energy. So I think for 20 - 25 days in this office I have done quite a bit of negotiating with all kinds of suppliers. I negotiated with Cheniere, I negotiated, yesterday actually, we had a meeting with Shell. In the morning we had a meeting with TotalEnergies.

I see where you are going, I see that you are one of the people that really want to go away from Russia, and I am also for that - I mean I have worked all my life with Western companies, even when I was in Russia I was working also for an Italian company. So we are not the type of people who really want to be friends with Russia. But we need to protect national interest absolutely the same way as Germany is doing. Germany is buying Russian gas now because they have no other option. But they are extensively looking for substitutes. And this is exactly what we are doing. It is very easy to not buy Russian gas during the summer when the consumption is half less. But during the winter where do we get the other half of gas from?

From Azerbaijan?

We already approached the Azeris. I had a telephone conversation with the minister of energy of Azerbaijan just a couple of days ago. We have already approached them and they have indicated their technical capacity. Azerbaijan supplies all over Europe and they have only one source. Unfortunately, they are very much interested in supplying it at gas exchange prices, which for us is a bit higher. As I said in the beginning, don't forget that in Bulgaria people live with 300 euros a month. It is not so easy to get your apartment heated with 300 euros a month.

Not many people here heat their apartment with gas.

Yes, they stay cold, unfortunately. It is true. You should go into the countryside, go around small villages and see how people live in winter. They really don't heat their apartments.

So they are definitely hit by overall inflation but they are not hit by high gas prices.

Gas and fuel are the base of the economy. Everything that you buy has an element of cost related to transportation, chemicals come from oil, even this recording device has some gas and oil cost factored in it. And when you have such inflation in such basic elements, you have overall inflation. This is what we are trying to do, we are negotiating with the oil refinery Lukoil, trying to lower the cost of fuels. The ministry of economy is also working in different directions, together with us and separately. We are trying to bring down inflation in Bulgaria, so the business can operate normally, people can stay employed, get their salaries, even though they are not so high, it is still better than nothing. And this is how we can pull out of this crisis.

Don't forget that we are very close to Ukraine, Germany is far away but we have mines floating in the Black Sea potentially preventing our ships from doing deliveries. So we are directly impacted by the war, there is a direct danger to our infrastructure and our logistics and this is what we have to deal with on top of what Germany for example is dealing with.

So you are very sure that Gazprom's price is going to be cheaper than the price of LNG that was secured during the summer?

If it is more expensive, we will not buy it. I mean why would we buy gas that is more expensive? By the way, what we did, because we had some deals from the previous government that we saw that don't make any economic sense, we have submitted all these transactions to the authorities for checks. Because if it doesn't make economic sense, probably you had some other interest. We are totally focused on the economy. Geopolitics is also important, we are working on that, medium and longterm. Things need time. Things need to be done properly. Otherwise you can crash the economy or you can stay cold in winter. Nobody wants to do that.

What will you do after your time as a caretaker minister?

I have not decided yet but I would like to go back to my private business. I don't plan on staying in politics for longer than needed.

Why not?

It is not my cup of tea, let's say. I am much more suitable in working in private companies, whether big or small. You see what is happening with politics. They write everything about you, they twist around your words. I like to work fast, being dedicated, having clear targets, get things done, move forward. Here we have a very large bureaucratic system that you need to deal with. The deal that I have is that I will join for this critical period, because I have knowledge, experience and skills, and help. The country deserves that. And then I plan to go back to the private business, where I am better suited to work with, and more efficient and more interested.

Did you personally know the President before you became minister?

Not really. I mean, of course, I knew who he was but we had never been in contact before.

Rossen Hristov is the energy minister in Bulgaria's caretaker government that took charge at the beginning of August after Kiril Petkov's cabinet fell. Since then, a lot of controversies have surrounded the new cabinet's energy policies and especially those making a U-turn towards Russia's Gazprom that cut off natural gas deliveries to Bulgaria in April. This interview with Mr Hristov was taken by German freelance journalist Rebecca Stegmann and published exclusively in the Capital Weekly.
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