Reports. In-depth reports on the risk factors and threat implications of economic and financial statecraft.

Although Bulgaria elected a pro-EU and pro-Western Prime Minister in Boiko Borisov in October 2014, the country has been fairly divided over the degree to which Bulgaria should lean in that direction at the expense of its historically close relations with Russia. Bulgarias competing mainstream political parties, notably the Bulgarian Socialist Party and the Movement for Rights and Freedoms Party (now in the opposition), are inclined to prioritize the countrys relationship with Russia, deepen Bulgarias bilateral economic and financial ties to Moscow and rebuke Western objections in certain cases. While this debate plays out in national elections, the amount of business being conducted between the two countries continues to be significant.

Russias most noteworthy E&F initiative targeting Bulgaria over the past several years has been the South Stream natural gas pipeline project. The pipeline was designed to transport Russian gas under the Black Sea, bring it ashore at the Bulgarian port city of Varna, and traverse Bulgaria to Serbia and onward to a number of other southeastern European countries and beyond. Since its announcement in 2007, this pipeline had been a central pillar of Russias economic and financial strategy to reinforce European dependency on Russian natural gas supplies over the long-term and gain leverage across the continent by establishing lucrative relationships for each country involved in the pipeline by way of transit fees and discounted deliveries of natural gas. Reports even documented heavy-handed, backroom and corrupt efforts by South Stream proponents some deployed from Moscow to make sure local officials and business leaders gave their support to the project.

The EU, however, objected to the pipeline project on the grounds that it violated the terms of the Third Energy Package and ordered Bulgaria to halt its construction work. PM Borisov complied. After months of seeking to establish a way forward, President Putin abandoned the project, when PM Borisov was elected back into power with a clear mandate to comply with EU instructions. Russias economic and financial activity in Bulgaria, however, goes well beyond the South Stream project. Russia has been among the largest investors in Bulgaria over the past decade with trade figures that are on the rise. A number of large transactions have been carried out, involving key business leaders with possible loyalties to Moscow, key industries and strategically significant infrastructure projects.

Excerpted Deals and Transactions:

• Gazprom provides 90% of Russias natural gas imports via one import route, the Ukrainian-Western Balkan pipeline. Bulgaria has been slow to develop natural gas interconnectors with its neighbors to diversify its sources of supply. These efforts need to be supported and defended against interference. There are two interconnectors under construction: one with Romania; and one with Greece, which will enable Bulgaria to purchase gas from Azerbaijan and Greek LNG terminals.

• Gazprom owns at least 50% of Overgas, Inc., one of the two main natural gas companies in the country that is involved in constructing and operating Bulgarias gas pipeline and gas transmission networks. The remainder of the firm is held by shareholders that are opaque to public scrutiny (involving offshore holding companies).

• Bulgaria has an inordinate dependency on the oil refinery plant owned and operated by Russias Lukoil (i.e., the Lukoil-Neftochim-Burgas oil refinery), which, according to reports, produces a troubling 25% of the countrys annual tax receipts.

• Over a number of years, Russia has been pursuing a contract to build Bulgarias Belene nuclear power plant, which would reportedly bolster significantly electricity exports to the region (due to the likely excess of power generation capacity that the country would have, if the plant comes online). Accordingly, control over such a facility could provide a strategic point of leverage, not only as a largescale infrastructure project within Bulgaria, but also regionally. The cost and terms of the contract have been a point of contention between Moscow and PM Borisov, whose government is skeptical of the assumptions being made in the pricing of the project and the commitments made by Rosatom during the bidding process. Bulgarias opposition parties, however, have been more willing to move forward.

• Bulgarias media industry has emerged as vulnerable to the takeover attempts by a shady, non-transparent web of businessmen with apparent connections with Russia. Most recently, this has come to light in the purchase of significant Bulgarian media assets from the bankruptcy proceedings that followed the arrest of their previous owner. Russian information warfare has moved into high gear in Bulgaria and the region and these transactions should be publicly exposed and investigated.