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Three Seas Talks – Svetoslav Malinov, Analyst at Center for the Study of Democracy

Stefan: I’m Stefan Tompson and we are here in a series of discussions with experts from all twelve Three Seas Initiative countries. Today we are speaking with Svetoslav Malinov from Bulgaria. Svetloslav, maybe we could start with a little bit of introduction about who you are, what you specialize in. Just to give us a context for the discussion.

Svetoslav: Of course. My name is Svetoslav Malinov and I’m an expert in the economic program at the CSD, Center for the Study of Democracy in Sofia, Bulgaria. My main point of focus at the moment is the disinformation, especially the one coming from Russia due to the specific political atmosphere in Central-Eastern Europe, particularly in Bulgaria. I am also involved in other geopolitical research, such as the topic of the Three Seas Initiative.

Stefan: Excellent. Wonderful. Disinformation is such a crucial topic at the moment, given what’s happening with the energy prices. We see it certainly in Poland that there is a lot of pressure related to that. This might be a bit off topic, but one of the subtleties of Russian disinformation is that it bases itself on truth and then extenuates it, adds pressure and an angle. It is so subtle. That disinformation is very powerful, very well done, which makes it so dangerous. I hope that we will be able to bounce back from the Russian disinformation and pressure, because I think that some of it is involved in the aspects of the Three Seas Initiative.

But let’s take a step back. Bulgaria, that’s your perspective. I will be asking questions to get that Bulgarian perspective. My questions will be coming from the Polish point of reference. But we will try to make it about the region as a whole. My first question is around the current economic cooperation in the region, as seen from the Bulgarian perspective. If you could give a background of what’s the state of current economic cooperation for Bulgaria. Where those close economic and business ties are? With what countries those relationships already exist? And what are the Bulgarian hopes and aspirations in term of economic cooperation with other Three Seas countries in the coming years?

Svetoslav: Absolutely. Is it ok to start with a brief introduction of the Three Seas Initiative? It is important to note that the 3SI was born in 2015 and launched in 2016. The whole thing happened out of shared interest in transport, energy and digital connections on the European Union’s North-South axis. Which lies mainly between Baltic, Adriatic and the Black seas. Within the European Union, the 3SI countries have stood out for many years due to above average rates of economic growth. And as such, they offer investors potentially higher return rates. By working together and pursuing similar policies, these countries should make the region more attractive on the global financial market. Which I will cover later in a bit more depth.

The Initiative’s projects are currently funded with money coming from the participating states, partner nations and the European Union as a whole, but through the 3SI Investment Fund the Initiative also hopes to attract large private sector funding for commercially viable projects. The 3SIIF transparency and professional managerial services are particularly important for Bulgaria.

Regarding the current state of economic cooperation in the region… You probably heard the big announcement regarding the transatlantic cooperation between the 3SI and the US that was made at the Riga Summit this year. At the meeting, the US Secretary Anthony Blinken, confirmed the US investment in the Three Seas Initiative Investment Fund (3SIIF) and emphasized that the Putin’s war against Ukraine made the 3SI even more important. And that the US is committed to investing in the 3SIIF. Later on during the event, it was announced that US IDFC and the 3SIIF agreed on the term sheet that will form the basis for IDFC investment into the Fund, worth up to USD 300 mln. Such financing will help support the three main goals of the 3SI: energy, transport and IT infrastructural investment. It will facilitate energy diversification and improve the connectivity within the region, which is a huge issue that needs to be resolved in the future. Furthermore, it will help eliminate the socio-economic gap between the 3SI countries and other EU member states.

Just to conclude… The substantial investment that is coming from the US, from IDFC, will bring the 3SIIF capital to approx. EUR 1.3 bln. In my opinion, having the backing of the IDFC will certainly strengthen the transatlantic business relations and general European cohesion, especially here in Bulgaria. Energy and geopolitical ties with the US are crucial in the times of difficult relationship with Russia. This will promote energy security and help counter Russian aggression’s consequences on Europe, which are less physical and more in the sphere of media and disinformation.

Stefan: Sure. Thank you. That’s a really useful context for the rest of the discussion. Taking it down a level… We have twelve countries and one of the thing that transpired in other conversations is that we are all part of the same region and we share similar history – in most cases having the communism imposed on us. There is a broad kind of rallying element, a sense of similar experiences, but actually despite that we don’t really know each other that well. With some exceptions, like the Baltic three. They appear very involved in each other’s affairs, business and politics; there is a little block of friendship going on there. But the rest of us…

When I think of Bulgaria, I think of you joining the EU together with Romania. So I think of you together as being quite close; two countries that do know each other quite well. If you could give me an idea where the main economic links are of Bulgaria with other Three Seas countries. It will be useful to get a sense where those personal relations are, because business and political ties are built on that… close relations usually start with people knowing each other.

Svetoslav: Definitely, yeah. I have actually some recent examples from the research that I did. Normally between Romania and Bulgaria the most important projects are specifically about the infrastructure. I have read about this interesting example, that is connect to the Three Seas Initiative. The largest Polish locomotive leasing company – Cargounit – is expanding its activity to the Romanian market, after delivering state-of-the-art new class locomotive model. They are a leasing company, so they don’t sell the rolling stock, but lease it to the country for the specific time period. This move was part of Cargounit’s extensive expansion process, which includes Romania and Bulgaria and which is a step towards further developing its activities throughout the Central Europe. I am talking about the Cargounit, because it is owned by the Three Seas Initiative Investment Fund, which is the investment arm of the 3SI. Of course Cargounit aims to fulfill some of the aims of the 3SI, but through its projects it also helps create new business ties between Bulgaria and Romania. Which is very important. Although we’ve come together to the EU we are not that really [close]. I think that the 3SI could serve as a great catalyst for our business relations and help create more space for great projects. This is one of these projects that I think link Bulgaria and Romania even more within the 3SI and help develop common infrastructure.

Another example that I have is connected to Austrian company – Enery. It is present in Czech Republic, Slovakia and Bulgaria. And they recently signed an agreement to purchase renewable energy portfolio owned by the Canadian stakeholders in Romania. Since 2021 Energy’s main investor is the 3SIIF. Enery’s strategy is aimed at expanding renewable energy production in CEE.

So here you have two examples of infrastructural project, one in transport a sector and another in the energy field, that were made possible by the 3SI and which helped develop closer relations between Bulgaria and Romania.

Stefan: Sure. Expanding from relations between Bulgaria and Romania. Generally, with what countries within the 3SI does Bulgaria have the closest relations with? In Poland, Bulgaria is mostly associated with summer holidays, there is Złote Piaski, a very popular destination. In the mainstream culture that is the main association we have of Bulgaria. This interview is not on the expert level. We try to popularize the Three Seas Initiative in a way that is accessible to the lay people. Where do you think these Bulgarian ties are? What countries in the 3SI you have the closest relations with, aside from Romania? Are there specific countries within the 3SI that Bulgaria has closer ties with or not really?

Svetoslav: This is not really my field of expertise. But I would say that there are no specific 3SI countries that we have traditionally cooperated with. So the 3SI is for us an opportunity to develop new relationship, which is important in the light of what is happening around the world. From my personal perspective, I would say that we are closest with Austria, due to shared trade history. In the tourism you can see Polish people, which you mentioned, as well as Slovakians and Czechs. We don’t have specific business or trade relations, but of course we are all part of the EU. Again that is not my field of expertise, but I don’t think we have a specific, strong business relations developed with other 3SI countries. Again, I am really eager to emphasize that the 3SI will be a really great opportunity for this to change.

Stefan: It really takes us to the next question that I have. What can be done, especially from the Bulgarian perspective, to increase and speed up this integration. Instinctively, I get from what you said, that Bulgaria and Romania are sort of these countries that are obviously quite closely connected and interconnected, and in many ways integrated with EU and NATO, with the 3SI. But I do have this sense that Romania and Bulgaria are these two players on the side, similar to the Visegrad Block (Slovakia, Czechia, Poland and Hungary). Then you have the Baltic block, and you have Slovenia and Croatia, and then Austria that is a slight outlier. What can be done to speed up the economic integration within the region? What needs to be done, from the Bulgarian point of view, by other states to bring the region closer together?

Svetoslav: Absolutely. That is a really important question. I will speak about Bulgaria, but I think it overlaps with my opinion about what the whole 3SI should do collectively to progress even further and for all the members to benefit. In my opinion the 3SI really needs to take a collective, collaborative approach that recognizes each member’s individual strengths. Together the 12 countries of the 3SI account for almost 30% of the EU territory, around 22% of population, but only about 14% of the GDP. And one of the reasons for this low percentage is the current state of infrastructure that connects the twelve countries. Due to our history most of the infrastructure in the region runs East to West, which makes regional cooperation difficult. There is an urgent need to align policies among the 12 countries, to create better joint investment environment, and to align our regional politics with policies of the EU.

Instead of competing with each other for foreign investment, we really need to work together so that everybody has something to gain. As I said, it is key to recognize each country’s strengths. I truly believe that each of the members could find its niche. For example Latvia is leading in the field of engineering, Lithuania is innovating the biomedicine domain and Estonia is well ahead other members in the IT sphere. It is really vital for each country of the Initiative to understand that [need for specialization]. The tricky part is to successfully spread this message across the region, despite internal challenges of each countries. For example, Bulgaria is facing yet other election in a few months. It is really important for members of the Initiative to understand that we gave this collective mission and a higher goal of “staying unified”, which we need to fulfill to be able to attract more investors to the region.

I find the 3SI to be extremely beneficial because thanks to this year’s gathering in Riga our region’s was placed on the international agenda. Not only because we offered Ukraine a partnership status within the 3SI, but also because our region plays crucial role when connecting Ukraine with the rest of Europe. When Ukraine’s president Zelensky addressed the Riga Summit via video, he states that the Initiative  was his country’s connection with the free world. I don’t think this wasn’t just a pleasantry on his far. Three Seas countries supply Ukraine with weapons and fuel, and opened solidarity corridors for Ukrainian produce and people. I think that Bulgaria’s and 3SI aims should overlap, to enable it to gain from other 3SI countries as well as contribute to the region.

Stefan: Yeah, I really agree on that. Bouncing back on that. We have this geopolitical situation of Ukraine being invaded by Russia. On one hand this is a terrible tragedy for Ukraine, which is being invaded, suffering, having its territory taken over and people dying. On the other, as an unintended consequence, this attack catalyzed and sped up integration of our countries, of Central Eastern Europe. Obviously us, Bulgaria and Poland, as well the Baltic three, Romania, Czechia and Slovakia are the eastern flank of NATO and the EU’s eastern border. We had to adapt to the situation and it has turned out for us to be a very important shift. The tragedy of Ukraine reminds us that if we don’t do something now we could be next.

Just to reiterate something that you said and to reinforce it – our countries have been at the forefront of the humanitarian aid and fuel and weapons supplies… That is something that is really interesting, I think. And takes me to my next question, which we already started talking about… What are the opportunities that the region currently has in terms of economic potential for integration? Aside from obviously already mentioned conflict in Ukraine being the catalyst. Are there any other things that you see, some other opportunities for us at the moment?

Svetoslav: Absolutely. Again, a great question and also an interesting topic. As we actually mentioned, from the beginning of the Initiative there were different perspectives and regional politics that hindered the rapid adoption of this project throughout the region. Although collectively the nations of Central Europe represent significant market and workforce, the countries differ greatly when it comes to their size, needs, priorities and culture.

Stefan: Definitely. This is actually something that is very important. We have a similar anchor in terms of historical experiences and a sense of historical injustices that made our region underdeveloped in comparison with the West. But ultimately, we are actually quite different from each other. Sorry, just to bounce in there…

Svetoslav: Unfortunately, these differences do not help with the smooth adoption of the Initiative. That’s also the beauty of it, of course. There is one interesting take one the Initiative’s potential that I haven’t come across as often as I would want. The Three Seas Initiative offers an alternative engagement model to the Chinese Belt and Road in Central Europe and 17+1 cooperation framework. That’s the whole other topic. It could be connected with a situation in Russia, how even Russia-Chinese relations changed especially in the last months. In my opinion, the recent geopolitical developments have placed renewed focus on the 3SI.

One reason is the growing concern about Chinese investment in the region. Beijing has heavily promoted cooperation through its massive scale economic projects and the development programs especially in Central Europe. At the same time there were only few alternatives from other sources, including the EU. Europeans are increasingly worried about the security issues related to the Chinese infrastructure such as the deployment of the 5G network. There are some serious worries throughout the region. Many Central Europeans had negative reaction to Beijing not condemning the Russian invasion of Ukraine and not cooperating in effort to restrain Putin and the Kremlin. It is safe to say that China is no longer, at least in my opinion, that welcome in the region. Their huge investments aren’t seen as the only possible source of significant funding for the region. Supporting this claim is the fact that in 2021 Lithuania withdrew from the 17+1 framework, and Latvia and Estonia followed in 2022. Other Central European nations also consider withdrawing and several already downgraded the level of their representation. I think that the Chinese initiative is at death’s door now, which should encourage the US and Western Europe to propose a counter offer to Chinese investment. Their funds could be invested via the 3SI. Collapsing of the Chinese project could result in new and immediate opportunities for the 3SI. As you said, what is happening in Ukraine is an awful humanitarian crisis, but in a way it could be “blessing in a disguise”, although that might be not the best term to use.

Stefan: One has to be very delicate with words here, but I do understand the sentiment…

Svetoslav: Yeah, the current political situation in Europe and potential involvement in the Ukraine’s reconstruction, could help 3SI to actually tackle Russia’s threat and further develop energy, IT and infrastructure sector. Of course the EU is going to take the leading role in the reconstruction, but I think that the 3SI could be one of the tools at its disposal. It is important to actually use this tool as best as we can and to develop further its mechanisms. I think it is a great opportunity to further align the EU and the 3SI policies. The opportunities are definitely there.

Stefan: Sure. Continuing on this. What role could Bulgaria play in all of this? You hinted that each country should have its specialization. What could Bulgaria’s edge be here? What sphere could Bulgaria lead in?

Svetoslav: Well, I am not sure in which area we could led per se. In my opinion we could use some sort of “multi-speed approach” in the 3SI. I mean that it makes sense that for example Poland and Austria, the countries with highest GDP in the region, should make hefty investments in other member states. I think it would be beneficial.

This is not exactly my field of expertise, but I think that there might be a chance for cooperation between IT sectors of Bulgaria and Estonia, for example. Estonia is very renowned for its IT developments, but Bulgaria also has a lot of new companies and foreign investment in this sector. I think such a cooperation could bolster Bulgaria’s knowhow into this sphere. I’m sure that it can also be beneficial for Estonia. So this is this kind of a model of “multi-speed approach” that could be applied in the Three Seas Initiative.

To answer your question it one sentence: I think that the IT sector is something that Bulgaria can hopefully take lead within a few years when things normalize within the country, because there are many possibilities coupled with huge foreign investment.

Stefan: To sort of come back to where we started. Have you seen any examples of disinformation, of Russian disinformation aimed specifically at the Initiative? Is that something that you observed in your professional life?

Svetoslav: Well, to be fair I haven’t seen a lot of disinformation narratives specifically about the Initiative. But this might me due to the fact that I monitor mainly the Bulgarian media. When I started a few months ago in the Center for the Study of Democracy, all the pro-Kremlin media were talking about was the war in Ukraine and other types of conspiracy theories aimed at discrediting the EU, NATO and Bulgarian politics. Especially since the last few months were quite turbulent when it comes to Bulgarian politics. So I haven’t actually come across any concrete disinformation narratives discrediting the 3SI. But that’s a really good question and I will definitely keep an eye open for it.

Of course as we talked in the last half an hour or so, fighting disinformation is really important, because disinformation is not limited to Bulgaria. These destructive narratives can spread throughout the whole region. This is a topic for another time, but Bulgaria is really susceptible to the Russian disinformation. However, other countries of the region are not exactly immune to it, probably with exception of Austria. So this is really a good question and I will definitely follow up on that.

Stefan: My final questions is a more personal question. From the Polish perspective, I think there is great sense, especially in our generation, of enthusiasm, hope, “going somewhere”. Our generation is going to be better off than our parents’ generation. This is something that is deeply contrary to what is currently happening in the West, where we have a period of economic stagnation, of a plateau. Essentially our generation in the West is probably going to be worse off than their parents. This is such a profound shift in mindset between East and West. Suddenly Central-Eastern European youth is finding itself in a very different situation and mind frame from our Western friends and allies.

So from my perspective I am really very optimistic, despite obviously the geopolitical turmoil and all that is going on. I was wondering what the general mood is in Bulgaria. When I say that I am optimistic I am speaking not just behalf on myself, but also my generation. In Poland, there is this sense of hope, because we are going somewhere. The geopolitical turmoil is hopefully a temporary event. What’s the mood like in Bulgaria? From your personal point of view, do you also share that optimism? Is that’s something that is shared across the young people in Bulgaria?

Svetoslav: Well, definitely from my point of view, and the point of view of my profession, I am optimistic. But I have to say that things, especially due to the geopolitical situation and relations with Russia in Bulgaria, will need a lot of time to really get better. Because currently we are really affected by the disinformation narrative and the whole pro-Kremlin propaganda that is spread throughout Bulgaria. It is really ingrained in our culture. For example, a lot of older people really still do not the European Union as a something beneficial for Bulgaria. So while I am optimistic and think that this generation will bring the change, this change will be slow. Sadly, not every young man and woman in Bulgaria is really optimistic and thinks that things will go better. They don’t have faith in Bulgarian institutions here in Bulgaria, which is a huge issue that we don’t have the time to discuss here. Young Bulgarians also don’t trust the media. I am optimistic because thank to my research, I am able to see facts and data that show that Bulgaria’s is prospering. But the general mood is fairly optimistic at best. And I am talking about young people here.

Stefan: I see. Well, Svetoslav hopefully the data you seeing is correct and indeed Bulgaria is on the path to prosperity. Thank you so much for your time. Thank you for the Bulgarian perspective. Hopefully the cooperation between the Three Seas will keep increasing. All the best

Svetoslav: Hopefully. All the best. Thank you for your time.