Energy (in)dependence of Bosnia and Herzegovina and strategic partnership with the Republic of Croatia
- analytic view
1 SUMMARY
In the period from March 2023 to the beginning of February 2024, data were collected and surveys and interviews with relevant interlocutors were conducted with the aim of making this analysis. The authors talked to employees of companies responsible for the production, transmission and distribution of energy, employees of regulatory bodies of BiH and the Republic of Croatia. The relevant data necessary for the preparation of this analysis have been collected.
The snapshot covers the following categories for the markets and companies analysed:
1. Geopolitical relations at local and regional level with a focus on energy policies
2. The energy potential of BiH.
Based on the made snapshot, the processes affecting countries and companies as well as the operations of companies related to energy policies in the observed markets were analysed. Due to the complexity of the political system and resource management in BiH, only the possibilities of establishing new companies have been analysed (in the context of building a sustainable energy policy necessary for the energy, social and economic stability of Bosnia and Herzegovina). Those companies would invest and operate an interconnection in BiH for each of the energy products (electricity and gas) for which the need for the construction of a new, or renewal of the existing supply system has been established. Although theoretically the structure of ownership and management of the new company from the economic position as well as from the position of management of the incurred infrastructure seems irrelevant, in a society such as Bosnia and Herzegovina and given the numerous challenges it faces, this issue is also of considerable importance.
Bearing in mind the geopolitical context in which BiH is located, especially the potential blackmail capital possessed by undemocratic and imperial entities in the field of energy, it is clear that BiH must rely on democratic states and political alliances of which it intends to become a member, in all its strategic reflections. This practically means reducing the possibility of political influence of authoritarian regimes that, thanks to the achieved state of monopoly, will exploit the underdeveloped and dispersed energy system of BiH and thus jeopardize its own long-term strategic goals, both nationally and internationally.
This specifically means that NATO and European Union member states must engage more and help BiH in further development of the energy sector and existing supply and consumer capacities. Otherwise, any passivity of NATO and the EU can produce negative results according to which BiH would remain in a permanent state of frozen conflict that would be exploited by Russia, Serbia and Turkey. This would slow BiH's Euro-Atlantic path, if not even stop it, and turn BiH into their Balkan branch which would project instability and insecurity into its neighbourhood.
A step towards energy independence of BiH would undoubtedly be helped by activities aimed at increasing energy production from renewable energy sources. This is shown by the extremely high support of citizens expressed in the public opinion survey throughout BiH. Increasing the share of renewable energy sources would not only increase domestic capacity and relieve the state of the need for imports, but in the long run it would turn BiH into a green energy exporting country.
Furthermore, a particularly important project that should contribute to the diversification and reduction of devastating geopolitical influences is the plan to build the Southern Gas Interconnection. It opens up a completely new energy perspective for BiH and minimizes Russian influence in the long run: energy, political, security, economic, social or media influence. Also, it opens the premise of further development of an industry that would use a much more acceptable and less environmentally harmful energy source. BiH can thus launch an exit strategy to abandon "dirty energy sources" and follow the EU energy policy it aspires to follow, without any difficulty.
From a geopolitical perspective, the operator of the entire pipeline must necessarily be a public company in the co-ownership of the Federation of BiH or the counties whose territory it passes through. Also, taught by the example of the new Moldovan gas pipeline, such a project is extremely suitable for co-financing by EU institutions, as well as American and Croatian partners. The risk of handing over the construction and operational management to the existing company BH Gas, given the proven mismanagement of the current gas business, their business connection with Russian and Serbian business interests related to the activity of the existing gas pipeline, the great reputational and financial damage it caused to the state itself, and the violation of the Dayton principles really poses an unnecessary risk that puts the whole project in question. The experience of living so far in the sui generis political system, especially the corona virus pandemic, has proven that decentralized resources and management capacities are essential when it comes to functionality, which eliminates problems in challenging times. Therefore, the model of decentralization of the operator would enable greater functionality of the system, its quick adaptation to new conditions, reduce dependence on the influences and blackmail of the autocratic regimes of Russia, Serbia and Turkey, and increase the harmonization of the energy network and environmental standards of BiH with EU partners.
1.1 Indirect effects
Investment in a company that needs to manage energy supply would, in addition to financial ones, provide great social benefits, the usefulness of which is expressed not only through direct material values. The project would have an effect on a slight increase in employment and an increase in BiH's economic potential. The investment would also contribute to the development of tourism, and it would increase the offer and opportunities offered to all visitors.
Social benefits can be briefly defined as:
- increase in employment,
- positive impact on the tourism sector,
- increase in added value in local self-government units (LGU),
- increase in taxes and contributions,
- increase in security of energy supply,
- reduction of CO2/GHG emissions
1.2 Quantification of social benefits
In addition to real income, it is also necessary to list other effects essential for the assessment of the economic advantages for society. This group of advantages include cultural, material and other benefits, that are more difficult to measure. However, it is necessary to assess these advantages in monetary terms, to assess the socio-economic benefits of the investment. If an investment does not have positive economic results from a social perspective, it is unjustified.
Generally, the society and the state in which such investments take place sees the following benefits:
- Increase in security of energy supply,
- Benefits of taxes and contributions on wages,
- Creating new jobs in crafts/companies in businesses that will benefit from the quality and availability of energy products,
- Creating added value through the number of new employees,
- Additional economic activity in counties/cantons through which a new/renewed energy supply route passes (West Herzegovina, Herzegovina-Neretva, Central Bosnia, City of Sarajevo),
- Access to better quality and cheaper energy for citizens,
- Positive impact on the tourism sector,
- Reducing health problems related to air pollution,
- Savings on energy costs used in households and industry.
These are all applicable to Bosnia and Herzegovina.
Ordering party:
Ministry of Foreign and European Affairs ofthe Republic of Croatia
Trg N.Š. Zrinskog 7-8
10 000 Zagreb
Hrvatska
Authors:
Hybrid Warfare Research Institute
Teslina 10
10 000 Zagreb
Croatia
and
Institute for Social and Political Research
Kralja Petra Krešimira IV b.b,
88000 Mostar,
Bosnia and Herzegovina
Analysis written by:
- Doc.dr.sc. Gordan Akrap, mag.ing.el
- Assoc. Prof. Dr. Dražen Barbarić
- Pero Munivrana, mag.ing.
- Milan Sitarski
- Stipan Zovko
Zagreb/Mostar, March 2023 - February 2024