Analysis of Amendments to the South Interconnection Law: Provisions Inconsistent with EU Directives Will Jeopardize the Entire Project

With the adopted amendments to the South Interconnection Law, BH-Gas has been removed from the law. The company AAFS Infrastructure and Energy LLC, backed by Joseph Flyn, brother of Dodik's lobbyist Michael Flyn, has been introduced into the law as the investor. These amendments replace the state-owned company with a private one, raising questions about whether anyone has read the Dayton Agreement and the chapter on public corporations, according to an analysis by Almir Bečarević, an energy expert for the portal Istraga.

"The Dayton Agreement, through Annex 9, provides for the establishment of public corporations in Bosnia and Herzegovina to organize and operate infrastructure projects and services of common interest to both entities. Based on this annex, corporations have been established in the areas of electricity, railways, public broadcasters…

The amendments to the South Interconnection Law directly undermine the foundations of the Dayton Agreement and Annex 9, and create a basis for dismantling established public corporations. It is difficult to determine if the Government of the Federation of Bosnia and Herzegovina has considered this, but it is realistic to assume that this legal practice will eventually be applied to already formed public corporations.

In addition, it would be beneficial for the Government of the Federation of Bosnia and Herzegovina to explain how it abandoned the concession award, or rather, how it became an optional variant. This means foregoing revenue from concession fees, and the construction work has been gifted to the investor. Furthermore, according to the text of the law, managing the gas pipeline is not the responsibility of the investor. Now we come to the core of the proposed amendments.

The Government of the Federation of Bosnia and Herzegovina is not aware, nor does it know, that investment in interconnection gas pipelines does not begin with an intergovernmental agreement, as such an agreement is an expression of political will. The prerequisite for everything in the EU is the signing of a CROSS-BORDER AGREEMENT that defines the connection point of the two gas pipelines, capacities (leases), pressures and technical standards, system balancing, division of responsibilities, guarantees, etc. Any investment in the EU is initiated by a CALL FOR CAPACITY LEASE which guarantees the return of investment both domestically and in the country through which gas is transported. If there is no company to manage it, who guarantees the return of investment both domestically and in Croatia. If the Government of the Federation of Bosnia and Herzegovina signs a contract with the investor, it means that the Government of the Federation of Bosnia and Herzegovina will be the one issuing guarantees for the investment, thus burdening the budget with the issued guarantee. At the same time, if there is no signed CROSS-BORDER AGREEMENT, who will guarantee the gas pipeline leases through the Croatian system, i.e., to the company Plinacro.

Furthermore, if there are no gas leases at the LNG terminal in Krk, as someone envisioned, how will Plinacro's capacity be leased, and there is no gas anywhere. The construction investor is not the operator, because to be an operator, one must have a dispatch center, technical maintenance and capacity distribution services, legal and economic departments. Gas transport on the interconnection begins with capacity leases before the construction of connecting gas pipelines, and this is done by neighboring SYSTEM OPERATORS, not construction investors or builders themselves.

This is only a small part of what constitutes a gas pipeline interconnection, and there is no mention of it in the deal that the Government of the Federation of Bosnia and Herzegovina has awarded to the investor. BiH is not an EU member and can afford not to apply certain directives, but Croatia is an EU member and is strictly obliged to comply with directives. The fact that gas pipelines are no longer being built in the EU, but pipes ready for hydrogen are being laid, is of no interest to anyone. The entire process of awarding the project to a private investor has been viewed through the prism of construction, and construction is the easiest part. Management, maintenance, capacity distribution, leases, investment return guarantees, balancing, gas procurement, etc., are left as the "easier" part of the job, and the entire interconnection project begins with a CROSS-BORDER AGREEMENT. By the time someone understands this, it may be too late. The gas system operator manages the project, not the construction holder.