Bulgaria is most vulnerable in CEE by the Russian economic influence

Bulgaria is the most vulnerable point, when considering Russia’s influence in Central and Eastern Europe. The Russian economic presence in Bulgaria is strongest, as the key state institutions are under the influence of oligarchs and networks of former agents of the security services associated with Russian political and economic interests, says the latest report of Center for the Study of Democracy (CSD) in partnership with the Center for Strategic and International Studies (CSIS).

Economic impact of Russia amounts to 27% of gross domestic product (GDP) in 2012 and is the highest compared with other countries from the study, including Serbia, Latvia, Hungary and Slovakia. The economic footprint generally vary between countries, such as Hungary and Slovakia, for example, reached 11%.

Because of the fall in oil prices, the sanctions of the European Union (EU) against Russia and the Russian counter sanctions that percentage to date has fallen to about 22%. The full range of Russian economic presence remains unknown, since a considerable part of it is hidden behind a network of foreign offshore companies and accounts.

“We used four indicators to determine what the economic influence of Russia in these countries”, said Ruslan Stefanov from Center for the Study of Democracy. “They include energy presence and energy imports from Russia, which is huge in all countries except Latvia; exports of goods to Russia; foreign direct investment (FDI); corporate networks, whose presence proved much greater than supposed. In all five countries have a significant economic presence”, added the expert.

According to surveys with the start of the financial crisis, Russian companies have further expanded their economic presence in Central and Eastern Europe.

Russia dominates on the Bulgarian energy sector as Russian state company Gazprom is the only supplier of natural gas. At the same time the Russian state atomic company Rosatom and its subsidiaries have a leading position in the nuclear energy sector in the country. Russian private oil company Lukoil, which controls the only refinery in Bulgaria and over 50% of the fuel market, complement the report’s authors.

Russian foreign direct investment (FDI) increased four times during the last years, increasing from 0.8% of GDP in 2005 to 4.4% in 2014. According to published estimates, their share is probably even more than 11.2%. Russian FDI are concentrated in other strategic sectors such as finance, telecommunications, real estate and media.

In order to maintain its economic impact and avoid checking business transactions, Russia uses complex and hidden network of officials in government institutions and the business community. The requirement for concealed conclusion of transactions has created a vicious circle of increasing Russian economic influence in Bulgaria and fall of national management standards.

more recommended stories