The entities that will form part of the International Project Company (IPC), the consortium set to build the trans-Balkan oil pipeline from the Bulgarian port of Bourgas to the Greek port of Alexandroupolis, held marathon negotiations to agree on the procedure for IPC incorporation and the location of the companies' headquarters on August 27 and 28.

The talks took part in Athens in the presence of representatives from Paul Hastings, the company hired to broker the negotiations.

On March 15 2007, Bulgaria, Greece and Russia signed a trilateral memorandum on the construction of the pipeline. The political agreement came after more than a decade-long stalemate in talks on discrepancies in stake distribution requests and environmental concerns.

The March memorandum saw Russia become the owner of 51 per cent of the shares, while Bulgaria and Greece had 24.5 per cent stakes each.

On August 27, Russia appeared to have placed a new condition that might prove impossible for the minority shareholders, Bulgarian media reported later the same day. The Russian side, comprising of state-run oil companies Rosneft, Transneft and Gazpromneft, demanded that all parties buy oil supplies equal to their share in the consortium. On failure to deliver sufficient capacities for a pipeline running at full capacity, the defaulters would face penalties, the Russian proposal said.

The move has been interpreted as a retreat by Russia from an original commitment, made by presumption. By granting Transneft the right to run the pipeline, the company was, in return, expected to procure all necessary oil supplies.

In an interview with Dnevnik business daily on August 27, Kalin Rogachev, Bulgaria's Deputy Regional Development Minister and the governmental official leading the talks preceding the signing of the memorandum, confirmed Russia had at the time taken on the obligation to fill the pipeline to full capacity.

To Bulgaria and Greece, this new condition would mean the procurement of at least 8.5 million tons of crude oil for a pipeline whose projected capacity at start-up is 35 million tons and has a potential of 50 million tons.

According to reports on mediapool.bg, sources from the Bulgarian and Greek side have interpreted Russia's latest request as a attempt to squeeze out the minority shareholders and sell their stakes to big international oil players. And even before the completion of the pipeline.

Experts, quoted by mediapool.bg, were also said to have advised Bulgaria not to pull out of the deal until after the pipeline's construction, as by that time, the price of the shares would have increased significantly because of interest from a number of oil giants.

For the time being, Bulgaria is still unclear which source to use if the oil supply clause, proposed by Russia, is entered into the memorandum. Neither has it decided whether it would agree to Russia's new demands.

Participants in the negotiations were quoted by mediapool.bg as saying that at present none of the parties had the quantities of oil needed in stock, Russia included. However, two months ago Russian President Vladimir Putin requested that Kazakhstan sell Russia 17 million tons of crude oil to be moved via the Bourgas-Alexandroupolis oil pipeline.

While Kazakhstan was yet to give Russia an answer, it had expressed official interest in joining the pipeline's construction both as a shareholder and an oil supplier in June this year.

Russia's support for the Kazakh bid came at a June 13 summit between the heads of state of Kazakhstan and Russia, Nursultan Nazarbaev and Vladimir Putin, held in Astana, the capital of Kazakhstan.

The trilateral talks on August 27-28 also focused on the place for IPC's incorporation. The parties are said to have narrowed the pool of potential locations to three, namely Cyprus, Luxembourg and the Netherlands.

In a different vein, the Bulgarian side announced plans to put up for discussion the country's demand for a preliminary assessment of the implications of the pipeline's construction on the Bourgas bay area. The assessment should be completed before and be a complement to the mandatory environmental impact assessment study that should precede the project's construction.

In addition, the Bulgarian side will be looking to propose the formation of an environmental fund. It should cover all potential damages in case of a pipeline breakdown.

The request came on the eve of a referendum on September 2, the sole question of which was to ask citizens of Bourgas and the adjoining region whether they approved of the forthcoming construction of the pipeline.

The referendum would, though, have no impact on Bulgaria's position on the project. The country's legislation regards local referenda as having no influence on issues of national significance, Rogachev said in early July.

A number of environmental organisations have already said they are unhappy with the project, saying it is unprofitable both in economic and environmental terms.

In July, similar environmental concerns hit the headlines in neighbouring Greece. Evros' regional governor Nikolaos Zabounidis was quoted by the Rossiyskaya Gazeta as saying the pipeline's construction would have a detrimental impact on the region's environment and wouldharm the activities of both farmers and citizens involved in tourism activities.

The environmental impact aside, there are also financial issues to be taken into account. Experts from the network monitoring investments of international financial institutions said Bulgaria would incur 100 million euro in losses due to the VAT exemption on services and other activities related to the construction of the pipeline.