EU warns BiH over Southern Interconnection: Harmonize energy regulations or no money and no progress towards EU

(Patria) - Head of the European Union Delegation to Bosnia and Herzegovina, Luigi Soreca, has warned the authorities of Bosnia and Herzegovina that they must harmonize regulations related to the Southern Interconnection with EU regulations and obligations arising from the Stabilization and Association Agreement and the European integration process, Istraga.ba has learned. In a letter sent on April 13 this year to the Chairperson of the Council of Ministers of BiH, Borjana Krišto, and the Prime Minister of FBiH, Nermin Nikšić, Soreca "called on all competent authorities in Bosnia and Herzegovina to, when drafting and adopting legislative acts in the energy sector, carefully consider the obligations arising from the Stabilization and Association Agreement and the European integration process".

"I am aware of the existing legislative activities regarding the Proposal for Amendments to the Law on the Southern Interconnection Gas Pipeline Bosnia and Herzegovina and the Republic of Croatia, currently under consideration for adoption in the Parliament of the Federation of Bosnia and Herzegovina. I call on all competent authorities in Bosnia and Herzegovina to, when drafting and adopting legislative acts in the energy sector, carefully consider the obligations arising from the Stabilization and Association Agreement and the European integration process. As stated in the European Commission's 2025 Report, according to the current situation, BiH remains in the early stages of preparation in the energy sector, with limited progress made in adopting gas and electricity laws and regulations at the Bosnia and Herzegovina and entity levels, in line with the EU acquis communautaire.

I particularly emphasize regulatory independence, unbundling, and effective third-party access as key requirements that must be respected in any legislative amendment, as stated in the current Energy Community acquis in the field of gas (Directive 2009/73/EC and Regulation (EC) No 715/2009). Both instruments are legally binding within the Energy Community, and accordingly, there is an obligation to ensure full harmonization of entity laws on electricity and gas. I also remind that the full implementation of the Third Energy Package is among the key priorities listed in the Reform Agenda, and I emphasize the continuous failure of BiH to meet its obligations under the Energy Community Treaty, which is a long-standing problem with risks to the reform of the country's energy sector and its broader European integration aspirations," Soreca wrote.

The letter was sent two days before the House of Peoples of FBiH adopted the amendments to the Law on the Southern Gas Interconnection, and five days after the same amendments were adopted in the House of Representatives of the Parliament of FBiH.

"To maintain momentum in the accession process, it is essential that all legislative amendments in the energy sector, including gas, contribute to fulfilling BiH's accession obligations. To achieve this, it is crucial that draft laws are thoroughly coordinated internally within the country, as well as with the relevant services of the European Commission, which involves sharing draft legislation for assessment at an early stage of the drafting process, thereby ensuring compliance with EU standards. In this way, Bosnia and Herzegovina can continue to progress on its European path and avoid missing opportunities for further integration, as well as financial opportunities, including those under the Reform Agenda," the letter of April 13 this year stated.

This effectively means that the EU Ambassador has warned BiH authorities that, due to their failure to align the law with the European Union, Bosnia and Herzegovina could halt its European path, as it is violating obligations undertaken by the Stabilization and Association Agreement.

Namely, Bosnia and Herzegovina still does not have an adopted state law on gas, nor a gas regulator, nor have the obligations from the Third Energy Package been transferred. The state law on gas should establish a body for regulating the gas market.

We remind that the Parliament of the Federation amended the Law on the Southern Gas Interconnection last week. With these amendments, the American company AAFS, backed by Joseph Flynn, brother of Michael Flynn, Milorad Dodik's lobbyist, was designated as the project implementer for the Southern Gas Interconnection. This company is designated as the investor in the law, while BH Gas was excluded from the construction provisions.

"The investor will implement the construction project of the 'Southern Interconnection BiH and the Republic of Croatia' gas pipeline through:

a) construction of the interconnection transport pipeline in Bosnia and Herzegovina along the route Posušje – Tomislavgrad – Šuica – Kupres – Bugojno – Novi Travnik/Travnik and the route Posušje – Grude – Široki Brijeg – Mostar;
b) construction of a branch for Livno, Gornji Vakuf – Uskoplje, Donji Vakuf, Jajce, and the Čapljina branch;
c) construction of an additional route Kladanj – Tuzla," the Law states.

The rights and obligations of the contracting parties regarding the project implementation will be regulated by an Agreement that the Investor and the Government of the Federation of Bosnia and Herzegovina will conclude within 30 days of the amendments to the law entering into force.

It is further stated that BH Gas, or as stated in the amendments to the law, "the operator of the existing transport system in FBiH, as the previous holder of investment and technical documentation and valid acts, will hand over the documentation to the investor within 15 days of the investor's request, with the investor obliged to cover the actual costs incurred by BH Gas for the preparation of the documentation.

For this work to be realized, it is necessary for BiH to sign an Agreement with the Republic of Croatia. The Presidency of BiH made a decision on Wednesday evening to conduct negotiations with the Republic of Croatia on Thursday, and for the Council of Ministers of BiH to give consent to the agreement on Friday, so that the Presidency of BiH would finally approve it on Monday. The signing of the Agreement should take place on Tuesday in Dubrovnik, in the presence of the US Secretary of Energy Chris Wright.

You can read the full text of the proposed Agreement by clicking here.

"Issues related to decision-making on joint realization and related investments will be regulated by a separate Agreement on Joint Project Development between the investment implementers referred to in Article 6 of this Agreement," the draft Agreement states.

It further states that "the contracting parties will ensure the harmonization of all details regarding the design, preparation, and execution of all works on the construction of the interconnection, and will also agree on the harmonization of the dynamics of all procedures for obtaining the necessary approvals and permits from the competent authorities of Bosnia and Herzegovina and the Republic of Croatia, as well as procedures in the processes of construction and commissioning of the gas pipeline. (...) Inspection supervision during the construction of the interconnection will be carried out in accordance with the positive legal regulations in this area applicable in Bosnia and Herzegovina and the Republic of Croatia. The contracting parties have agreed that the construction of the interconnection and expert supervision/supervision of construction will be carried out in all respects in accordance with national or international procurement rules and/or the rules of financial institutions, depending on the financing method that will be defined in a timely manner. Each contracting party will ensure the preparation, financing, and construction of the gas pipeline section on its own state territory in accordance with its laws and other regulations".

The competent authorities for the implementation of this agreement will be the Ministry of Foreign Trade and Economic Relations of BiH and the Ministry of Economy of the Republic of Croatia. The Government of the Federation of BiH will be responsible for all aspects related to the project implementation in Bosnia and Herzegovina.

"The Government of the Federation of Bosnia and Herzegovina is authorized to implement the project according to the model it chooses, including through the granting of a concession in accordance with the legislation of the Federation of Bosnia and Herzegovina. The investment implementer is the company AAFS Infrastructure and Energy d.o.o. based in Sarajevo. The Government of the Republic of Croatia will be responsible for the implementation of the project on the territory of the Republic of Croatia in accordance with the legislation of the Republic of Croatia. The investment implementer is the company Plinacro d.o.o. based in Zagreb," the "updated" draft states.

We remind that the European Union has previously rejected the request of the Republic of Croatia to finance the Southern Interconnection project.

(Istraga.ba