Bank turmoil adds to Bulgaria gas crisis
"There is not a crisis in the banking sector. There is a crisis of confidence and a criminal attack," Bulgarian President Rosen Plevneliev declared in response to a run on two major Bulgarian banks in the space of a single week.
The jitters in the banking sector came on the heels of an announcement by Prime Minister Plamen Oresharski that he had called a halt to construction on the controversial South Stream gas pipeline. The pipeline is being built by the giant Russian company Gazprom, in which Bulgarian and Russian business interests are closely intertwined.
The crises were the final straw for a government which has clung on to a tenuous legitimacy since it came to power 15 months ago. The president has called a parliamentary elections for 5 October.
The rumours that hit First Investment Bank (FIB) on Friday spread like wildfire through the internet. Just as happened with Corporate Commercial Bank (CCB) a week earlier.
Several arrests were made in connection with what both the National Bank and the interior minister have called a deliberate attempt to destabilise the state.
But who would want to destabilise Bulgaria, and why? And could the banking problems have been provoked in response to the go-slow on the new gas pipeline?
An earlier and far more serious banking collapse in 1997, when no fewer than 14 banks closed down, is still a painful memory for many people.
A so-called Currency Board was established at that time, which pegged the Bulgarian currency, the lev, to the Deutsche mark. This was later changed to the euro when Germany switched to the common currency.
This time around, two-thirds of Bulgaria's banks are foreign-owned, and high banking liquidity and low debt make the country one of Europe's most stable. But the population's trust in their political system has been shaken by high-level corruption blamed on "oligarchs" - businessmen with close ties to political parties.
Since the 2008 global economic crisis, most investment projects come from state tenders, often backed by EU funds. There is fierce competition between Bulgaria's richest, and toughest men, for their own slice of the cake.
Bulgaria's high-speed internet network - one of Europe's fastest - proved a perfect means for whomever tried to undermine confidence in the banks in the past days.
Little has been made public about those arrested for spreading the rumours. One of those detained, from the Danubian city of Ruse, allegedly called for the Currency Board to be scrapped.
The situation with South Stream is even more complex.
South Stream is a set of four parallel pipelines designed to bring Russian gas from Siberia under the Black Sea to make landfall in Bulgaria.
From there, several pipelines will branch westwards to Italy and the Balkans, and north-west towards Hungary and Austria. Latest projections suggest that South Stream will come online in 2016.
All the main political parties in Bulgaria are in favour, as is the government of Serbia. Major western European gas suppliers like Italy's ENI and Austria's OMV are equally keen.
The pipelines will have a capacity of 63bn cubic metres of gas per year - very similar to the North Stream pipelines under the Baltic Sea, taking Russian gas to Germany, which opened in 2011.
Together, they will make Russian gas supplies to Europe through Ukraine almost redundant.
The Russian annexation of Crimea earlier this year will also make it possible to lay South Stream through the northern Black Sea, instead of through Turkish territorial waters along the southern shore.
Some energy experts challenge the need for the pipeline at all, on the basis that the North Stream pipeline is only running at 40% capacity, and that Bulgaria would do better to waste less energy and invest more in renewables.
Others argue that South Stream will be useful, but only if it can be established and run in a transparent way. Only 3% of households in Bulgaria actually use gas, and the country only consumes 2.9bn cubic metres per year.
Existing gas arrives through the Trans-Balkan pipeline, which crosses Ukraine, Moldova, Romania and Bulgaria, on its way to Turkey, Greece and Macedonia. Most of the gas that Gazprom hopes to sell through South Stream will be in countries downstream - Italy, Serbia, Bosnia, Macedonia, Hungary and Austria.
"In the short term, South Stream will increase energy security as it circumvents Ukraine," says Martin Vladimirov, energy analyst at the Centre for the Study of Democracy in Sofia. "But in the long term it undermines security because it increases dependence on one supplier, Gazprom."
Despite government claims that all work in Bulgaria has been frozen, he suggests that work continues on approach roads to the main compressor station inland from the port of Varna.
That 24km (15-mile) section of the pipeline is important, because it has been the focus of attempts by deputies of the present Socialist-led government to change Bulgaria's energy laws to ensure a Gazprom monopoly for the gas flowing through South Stream.
This has got Bulgaria into trouble with the European Commission, which insists that overland pipelines be open for use by other companies.
According to Bulgarian media reports, the financial and political battle lines for the banks and the pipeline also overlap in a high-profile rivalry between Delyan Peevski, a deputy of one of the current governing parties, the Movement for Rights and Freedoms, and another allegedly pro-Russian businessman.
While Mr Peevski's companies have won Russian tenders to construct South Stream in Bulgaria, Tsvetan Vassilev owns Corporate Commercial Bank.