The Wider Black Sea Region After the Cold

The Wider Black Sea Region After the Cold War: Focus on Bulgaria and Romania

Definition of the Wider Black Sea Region The Black Sea 10: Armenia Azerbaijan Bulgaria Georgia Greece Moldova Romania Russia Turkey Ukraine

Geopolitical and Security Implications Eastward shift EU and NATO firmly planted on the Black Sea Russian pushback Impact of energy

Problems of EU Integration Corruption Lack of Judicial Independence Political inertia (gridlock) Labor/demographics and Mass Emigration (brain drain) Bulgaria and Romania placed emphasis on closer ties with Western Europe and the United States, a policy which proved successful as both countries joined NATO in 2004 and the EU in 2007.

Population: 6,981,642 President Rosen PLEVNELIEV (since 22 January 2012); head of government: (GERB/Independent) Prime Minister Plamen ORESHARSKI (since 29 May 2013) (BSP) GDP $51.02 billion (2012) GDP Per Capita PPP $14,500 (2012) Unemployment 11.1% In the early 1990s an economic crisis triggered Reforms that began in 1997 and helped stabilize the economy European and US FDI steadily flowed into the country Admitted into NATO in March 2004 and the EU in January 2007 Corruption caused the EU to block cohesion funding Socialist-led government was voted out of office in the July 2009 Boyko Borissov Citizens for the European Development of Bulgaria (GERB) February 2013, anti-austerity protests against rising energy costs forced his resignation Changing demographics Shrinking labor force Emigration of younger and/or skilled workers Indicative of broad systemic, rather than cyclical, problems with the labor market Skills to labor mismatch is pushing up wages and creating inflationary pressures Imports more than 85 percent of its gas and 95 percent of its oil from Russia Exposed position, a condition highlight by the Russia-Ukrainian gas disputes of 2006 and 2009 Khan Aspurah offshore gas field estimated at 40 to 80 bcm Could meet Bulgaria's domestic demand for the next 15-20 years (Petroleum Intelligence Weekly July 9, 2012). Bulgaria Overview

“Mutual confidence between the State institutions and cooperation with the private sector, NGOs and citizens, with the NATO and EU allies and partner countries,” “The inseparability of the national security from the NATO and EU Security,” “National Security Strategy of the Republic of Bulgaria,” 2011. Section II. The Fundamentals, II.1. National Security Policy Principles, Article 18. “Development of regional Black Sea cooperation,” “National Security Strategy of the Republic of Bulgaria,” 2011. Section II. The Fundamentals, II.2. National Interests, Article 20 Bulgaria Overview: National Security Strategy

“The geostrategic situation of the Black Sea region and the dynamic and disparate developments in the political, economic and energy spheres therein determine its impact to our country’s security. The cause of regional security risks is the existence of frozen conflicts, the actions of terrorist groups, sharp ethnic and religious disputes, high levels of organised crime, corruption and the illegal trafficking of weapons, narcotics and humans.” “White Paper on the Defence and Armed Forces of the Republic of Bulgaria,” 2009, page 14 “The specifics of the international security environment predefine that the threats to our national security will be largely met beyond our state’s borders, wherever they emerge, and above all with the participation of military forces in international UN, NATO and EU operations and missions.” “White Paper on the Defence and Armed Forces of the Republic of Bulgaria,” 2009, page 15 Bulgaria Overview: National Defense Strategy

Population: 21,790,479 (2013) President Traian BASESCU (December 2004); Prime Minister Victor-Viorel PONTA (May 2012) GDP: $169.4 billion (2012 est.) GDP per capita: $13,000 (2012 est.) Unemployment: 5.6% (2012 est.) Emerged from the 1989 revolution with weak growth caused by a decrepit and obsolete industrial base Campaign to address these weaknesses By 2000 the Romanian economy had experienced a turnaround High growth, low unemployment and declining inflation 2008, GDP growth was 7.1 percent, one of the highest rates in Europe Global recession shook the Romania economy, contracting over eight percent in the following two years (EEF 2012) Romania is also plagued by governmental corruption, putting it at odds with Brussels which has delayed disbursing cohesion funds Romanian GDP growth in 2012 was a weak 0.8 percent, though labor and market reforms implemented before the recession are expected to help it recover to 2.2 percent in 2013 and 2.7 percent in 2014 (EEF 2012) For over a century Romania was one of Europe’s foremost oil and gas producers. Oil production peaked in 1976 at 308,000 b/d, By 1979 imports exceeded domestic production, and by 1986 production had fallen to 227,000 b/d. With known oil reserves at 600 million bls, the country produced 94,000 b/d of oil in 2011, meeting less than half of national requirements, forcing the country to import, mainly from Russia, to make up the shortfall (CIA, Romania, date accessed May 19, 2013; European Commission Directorate for Energy and Transportation 2008). Natural gas industry decline with 1976 output of 34.7 bcm falling to 26.8 bcm in 1986, and Bucharest to import increasing large quantities of gas from the Soviets (Geographic.com; accessed May 19, 2013; CIA Romania, date accessed May 19, 2013). With 60 bcm of natural gas reserves, production is now 11.5 bcm per year, against consumption approximating 14 bcm per year. Romania Overview

Romania opened up its energy sector to foreign investment and implemented stronger oversight to remove political interference and opaque management practices The existing oil and gas infrastructure, with a refining capacity of 500,000 b/d and an extensive oil and gas pipeline infrastructure and experienced workforce, makes Romania attractive for investment Anxious to attract FDI and diversify from Russia Romania has allowed Caspian producers access to EU markets. In 2007, Kazakh state-owned oil and gas company KazMunaiGaz began investing in Romania SOCAR is another foreign company interested in Romania’s energy assets, with 2013 investments expected to total $66 million, much of this investment is in gas stations In October 2009 Romania agreed to buy 7.3 bcm per year of Azeri gas In February 2012, Petrom, ExxonMobil and OMV announced the discovery of an estimated 42 to 84 bcm, or a potential 6.5 bcm per year Neptun gas fields off Romania’s coast Effectively eliminating Romania’s gas production shortfall Supporter of Nabucco, but realized the project had an unsure future and agreed to cooperate with Gazprom on South Stream Gas transmission company, Transgaz, formerly the state-owned, Romgaz, was privatized and unbundled Romania Overview (Cont’d).

“In the modern world, security and prosperity are inseparable terms of the same equation – Romania’s progress, prosperity and national security can only be the major result of a complex process designed to promote and guarantee national and community interests. Their range comprises, basically, the following: full membership of the European Union and responsibilities arising from membership of the North-Atlantic Alliance; maintaining the integrity, unity, sovereignty, independence, and indivisibility of the Romanian state; developing a competitive, dynamic, and highly-performing market economy; radical modernization of the education system and effectively turning to good account the human, scientific and technological potential; increasing the well-being, standard of living, and health condition of the citizens; asserting and protecting the national identity, culture and spiritual life, in the context of the active participation in building up the new European identity.” The National Security Strategy of Romania, 2007. I. The Premise of a Realistic, Bold and Pragmatic National Project, page 9 “As a dynamic vector of democratic security, economic stability and prosperity, Romania has a fundamental strategic interest in seeing the wider Black Sea area stable, democratic and prosperous, tightly connected to the European and Euro-Atlantic structures. Subordinated to this interest, the strategic goal of our country is to give an impetus to the European and Euro-Atlantic involvement in the region.” The National Security Strategy of Romania, 2007. VI. Romania--Dynamic Vector of Security and Prosperity in the Black Sea Region, page 32 Romanian National Security and Defense Policies

Impact of Brent Crude Price on Economic Performance

GDP Growth Source: The World Bank

Source: The World Bank 395% or 18.8% per year

573% or 27% per year

Economic Freedom Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Freedom from Corruption Labor Freedom Source: http://www.heritage.org/index/about Intangible Measurements

Political Rights (Freedom House) Electoral Process Political Pluralism and Participation Functioning of Government Civil Liberties (Freedom House) Freedom of Expression and Belief Associational and Organizational Rights Rule of Law Personal Autonomy and Individual Rights Intangible Measurements (Cont’d) Source: Freedom House

Romania and access to the Danube

3rd Energy package

Sources