State Capture through Large Energy Projects


RiskMonitor pubished its paper on the South Stream and state capture. The paper is the result of a case study of South Stream as the a proxy for state capture through large energy projects. The report is part of the project ENCAPTURE: Countering State Capture in the Energy Sector with the support of the Think Tank Fund and the Balcan Trust for Democracy.


This policy paper is a result of a two-year research project exploring state capture through large energy infrastructure projects, with a specific focus on the case of the South Stream Pipeline Project (SSPP). The paper offers a set of policy recommendations that would help in the prevention and countering of state capture through the energy sector. It identifies specific problems or flaws in the energy system that facilitate the systematic corruption in the sector and the takeover of key state government functions.

The Bulgarian energy sector is still highly centralized. A significant portion of the energy assets are still state-owned. The lack of a clear policy direction in the sector has led to large public spending for massive projects with questionable economic or public value. This deprives the sector from opportunities to react adequately to global, European and regional trends. The strategic confusion is an important precondition for corruption and capture processes, whose goal is to profit certain private interests and political entities, close to them, at the cost of adopting policies that are aligned with the public interest.
The policy recommendations in this paper focus primarily on the Bulgarian sector, especially from the perspective of state capture via the South Stream but they have a wider relevance for other countries as well. While state monopoly is a fruitful environment for state capture and corruption, it only one side of the problem. The other is that centralized and long-term policies are the opposite of what the energy sector as a whole is undergoing globally. Committing to such policies ultimately excludes the possibility of any alternative, especially given that they are by design aimed at the long term. The Bulgarian energy sector as-is, is structured and managed in this redundant way that will only lead to its decline in the future.
The paper has tried to imagine this sector without the mainstream myths that politicians use to justify large projects, centralization and monopolies in the sector, not only from local point of view. Instead it has taken into account numerous local, regional, European and global realities in the world of energy and has tried to develop a vision of the Bulgarian energy sector as being part of the tendencies and shifts that constitute it.
The paper paints this vast picture in the effort to make policymakers and all stakeholders look at the many different aspects of current policy approaches that have led it to be inefficient at best. This includes ways to counter state capture in the context of a centralized sector but simultaneously provides a vision of the sector freeing itself from those burdens by decentralization, market liberalization, alternative energy sources, and achieving overall flexibility.
The underlying thesis of the research and the results from it are that flexibility of supply and demand is the only way to achieve energy security and efficiency.

You can dowload the report from here

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