So let's talk about the Magnitsky Act. The second batch of sanctions came out last week, a little after we sent out the newsletter. So you've had a whole week to digest it, if you're into that sort of news.
But even if you're not, let us try to summarize why they are important, what they signal and how, in our opinion, they will shape the coming political year.
In short, the US sanctioned yet another batch of Bulgarian public figures for corruption. This time there are 2 former ministers, 2 former MPs and energy officials on the list (read all about it here).
A notable inclusion is the presence of ex-finance minister Vladislav Goranov from GERB. Goranov is not a nobody: he was central to all 3 Borissov cabinets, de facto ruling the state finances and all the other expenditures, controlling the oversight of EU funds and money for municipalities.
The Americans say they included him because of allegations from ex-gambling mogul and also Magnitsky-sanctoned Vassil Bozhkov (not named directly), that Goranov and ex-PM Boyko Borissov extorted money from him to keep his lucrative business going under state protection. Those allegations, you might remember, also led to the high-profile arrests of Borissov and Goranov last year, when a reformist government came to power. The arrests ended in ignominy after the prosecution service didn't do anything and refused to examine Bozhkov because he is in Dubai.
End of story, GERB hoped.
Now the mighty finger of the US is pointing right at Goranov. He is, of course, nothing more than a scapegoat and a cover for a party which wants nothing to do with him at present. Yet it's hard to escape the fact that out of the three people in Bozhkov's story, only one remains off the Magnitsky list.
The guy in question spent the whole week traveling the country and promising to vote through the new anti-corruption law which holds the prosecutor-general to account ASAP. But such a pre-election blow will be yet another reason for Borissov to think hard whether he can strike a deal which will see him bow out of politics.
And speaking of elections, it's also noteworthy that the new list includes Bulgarian socialist party members. If you discount Nikolay Malinov, who is a long-time Russian puppet and seems just a late add-on, the others are members of the "energy lobby". Their common bond is the Nuclear Power Plant "Kozloduy" which is currently the last holdout of Russia on the Bulgarian energy scene. You can safely suggest the US is killing two birds with one stone: muddying the image of the Pro-Russian socialists in the run-up to the election while sending a strong signal to people who might disrupt the transition from Russian fuel to get out of the way.
Yes, I know. Politics is a dirty game, and geopolitics is even dirtier - you can ask the Ukrainians about that.
And last, but not least - the UK is on board this time, certifying sanctions against the first batch (Delyan Peevski, his associate Ilko Zhelyazkov and Vassil Bozhkov). In practical terms this might not mean much, because they are already isolated, but the message matters. Let's not forget that Peevski's subordinates from the MRF party spent a whole year in the European parliament and in Sofia explaining he is an innocent victim of a smear campaign. Not exactly so, says London (or anyone doing business in Bulgaria for the past 10 years for that matter).
Which brings me to my conclusion. After the first round of sanctions, nothing much changed. The US must have been dumbfounded by this, yet It's a well known fact (at least for those of you who read our humble newsletter regularly) that Bulgaria exists in a legal vacuum. There are laws, there are regulations and there are institutions designed to implement them. Yet none of that happens beyond a certain threshold.
And it's not only because the state has been captured. It's that the capture has been going on for so long, and with such impunity, that the rot is now everywhere and you need fast and strong antibiotics to save the body.
EU institutions are left in the uncomfortable position of having a member state with 8 public figures sanctioned for corruption by powerful allies, who face absolutely no repercussions at home. They don't like the Americans to poke fingers, yet simply closing their eyes is not exactly helpful either.
Something's gotta give.
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POLITICS THIS WEEKAnd speaking of elections: The key developments
A new coalition
We Continue the Change (WCC) is to formally join hands with Democratic Bulgaria to form an anti-status quo coalition. The move follows last October's elections which crushed WCC's naive hope that they could repeat their earlier success. Their stated goals are recognizable: anti-corruption, judicial reform, help for Ukraine, eurozone membership and a reform of the rotten state.
They hope that their common efforts will help them overtake GERB for the first place. This seems like a plausible bet, especially with what we just discussed, yet a lot of the details around it are vague: who gets what chunk of the subsidy; who gets electable seats in the party lists; is there going to be a joint program etc.? Look out for those.
What's left or who's left
And while the centrists unite, the leftists keep on disintegrating. The national congress of BSP took place on Sunday and ended with several troubling decisions. First, it appears that party leader Kornelia Ninova has completely wiped out her internal opposition, kicking out 14 of the last remaining critical voices from its decision making organ.
In an effort to speak to what is left of her electorate, torn between the center-left WCC and the fringe pro-Russian Vazrazhdane, Ninova went all out. She announced that the party would not form a coalition with GERB, will support the effort to organize a referendum against the adoption of the euro and pledged to launch something called a "national referendum on gender ideology in schools".
This will hardly prevent BSP from losing support, as local branches keep on splitting from the core. Just last week it lost Pernik and Plovdiv. Ninova's foes are organizing under the banner The Left! and will compete for votes on 2 April.
In the first poll which took place before the new Magnitsky sanctions announcement and before WCC and Democratic Bulgaria formally announced their coalition, GERB is less than 1% in front.
Fun fact: the President, buoyed by high ratings for over 6 years, is now disliked by 47% of respondents with only 43% liking him. This means there are now no public figures with a positive approval rating.
ECONOMYConsumption remains the sole driver of growth
The Bulgarian economy is gradually slowing down and its only engine remains consumption, according to flash estimates for GDP growth in the last quarter of 2022 of the National Statistics Institute (NSI). The indicator increased 0.5% compared to Q3 and 2.1% year-on-year, which is in line with the performance of the rest of the EU.
Estimates for the last three months of 2022, however, show that the only growth driver left is consumption, which is growing at 4.7% year-on-year and 1.4% quarter-on-quarter. This comes against a backdrop of inflation of over 17% in the last three months of the year, which is however somewhat offset by income growth - over the same period, the increase in the average wage in the country was 16.6%.
Both imports and exports grew in 2022: NSI
According to data released by the NSI on Monday, Bulgaria's exports in 2022 grew by an astounding 38% compared to 2021, for a total of 94.3 billion levs. However, imports also rose by an even higher rate of 41% year-on-year, totalling 108.3 billion levs. In the period January - November 2022, exports from Bulgaria to the EU increased by 41.3% compared to the same period in 2021. Bulgaria's main trading partners were Germany, Romania, Italy, Greece, France and Spain.
Is the winter economic forecast of the European Commission for Bulgaria's GDP in 2023.
Is the inflation rate for January 2023, continuing its slow decrease from the 19% peak in September of last year.
Is the official median wage in the end of 2022 when wage growth accelerated dramatically in the last quarter - a 16.6% jump compared to 2021.
Speaking of salaries, the state-owned operator will raise its wages by 19%, and will add a 100 leva voucher to that. This will end the strike its workers were due to stage.
CinemaCinema City The Israeli chain sees its cinemas top the charts for yet another year. But 2022 was a good year overall: Bulgarian movie theaters are back on track to be filled: they registered 4 million viewers and had 42 mln. levs of revenue, data from Capital shows. This is 55% and 70% growth accordingly compared to the previous two years, although still below 2019 levels.
ENERGYThe revival of a ghost
This week ended with the signing of a memorandum between Bulgaria and Greece for the construction of the oil pipeline Alexandroupolis- Burgas. At first glance, the agreement does not mean anything in particular, just an intention from both governments to build a pipeline which can transit oil from the terminal in the Alexandroupolis port to the refinery in Burgas. However, the caretaker cabinet made clear on several occasions that the project has to begin as soon as possible and be completed by 2024. This is the same project that was killed off in the second Borissov government, mind you, because it was not deemed profitable. What a bunch of warships and an oil embargo can do to a country, huh?
On Thursday the European Commission announced that it will take 11 Member States to the Court of Justice of the European Union for failing to notify it of failures to adopt two copyright-related directives. Bulgaria, Denmark, Finland, Latvia, Poland and Portugal will be referred to the court over failure to notify complete transposition measures on copyright and related rights in the Digital Single Market, while Sofia is also taken to court for its failure to transpond another directive - on copyright and related rights applicable to certain online transmissions - alongside Finland, Latvia, Poland and Portugal. According to a Commission statement on the matter, the two Directives aim to "modernize copyright rules for consumers and creators to make the most of the digital world".
No diesel buses after 2030The Commission proposes 2030 zero-emissions target for new city buses and 90% emissions' reductions for new trucks by 2040. In line with the European Green Deal and REPowerEU objectives, this proposal will also have a positive impact on the energy transition, by lowering demand for imported fossil fuels and enhancing energy savings and efficiencies in the EU's transport sector.
WATCH OUT FOR:People
The young and vocal socialist expelled from the party by Kornelia Ninova for daring to say Ukraine needs military assistance, is going to join forces with WCC-DB for the elections and will be heading the list in Gabrovo.
The head of the huge financial conglomerate Assen Hristov came out publicly last week all guns blazing against the Romanian financial regulator ASF. This follows ASF's decision to notify the Romanian prosecution and to request in the near future a huge new capital investment of 400 million euros from the Romanian branch of Evrohold - Evroins Romania.
Evroins Romania is the current leader in the country's insurance market. Hristov brands this ""blackmail" by several high-positioned members of the board of ASF who, he says, seek to punish him for not buying out the bankrupted ex-leader on the Romanian insurance market.
More salient still is that the Bulgarian financial regulator hasn't been notified about that, even though it is one of the responsible institutions, given that the main company is here. It might be murky on the other side of the Danube, after all
That's the deadline the caretaker government has set for presenting its "new vision" for Bulgaria's Recovery and Resilience Plan. This is a code for "how to keep the coal mines" and means Sofia will try to renegotiate the Plan goals with the Commission. This will probably end badly, but we all know that already, don't we?
On the other hand, if you are a business and you don't want to wait for coal to end, you can finally start applying for PV and batteries, financed by you guessed it - the National Recovery and Resilience Plan. You can get between 75 000 and 1 million levs. Also, we all will probably need to return this money to Brussels anyway, so this means the budget will fund them, but hey, who cares about 2026, right?