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

(Patria) - Head of the European Union Delegation to Bosnia and Herzegovina Luigi Soreca warned the authorities of Bosnia and Herzegovina that regulations related to the Southern Interconnection must be harmonized 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 by Soreca 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 a Law on 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 continues to be in the early stages of preparation in the energy sector, as limited progress has been made in adopting gas and electricity laws and bylaws at the level of Bosnia and Herzegovina and the entities, in accordance with the EU acquis communautaire.

I particularly emphasize regulatory independence, unbundling, and effective third-party access, as key requirements that must be respected with any legislative amendment, as stated in the applicable acquis of the Energy Community 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 to emphasize the continuous non-fulfillment of BiH's obligations under the Energy Community Treaty, which is a long-standing problem with risks of disrupting the country's energy sector reform and its broader European integration aspirations," Soreca wrote.

The letter was sent two days before the House of Peoples of FBiH adopted 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 meeting 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," it was stated in the letter of April 13 this year.

This effectively means that the EU Ambassador warned the 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 has no adopted state law on gas, no gas regulator, nor have the obligations from the Third Energy Package been transferred. A 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 holder for the Southern Gas Interconnection. This company is designated as the investor in the law, while BH Gas was removed from the construction provision.

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

a) construction of the interconnection transport gas pipeline in Bosnia and Herzegovina on 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 a branch to Čapljina;
c) construction of an additional route Kladanj – Tuzla," it is stated in the Law.

The rights and obligations of the contracting parties regarding the realization of the project will be regulated by an Agreement that the Investor and the Government of the Federation of Bosnia and Herzegovina will conclude within 30 days from the date the amendments to the law come 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 during 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 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 holders referred to in Article 6 of this Agreement," it is stated in the draft Agreement.

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 construction and commissioning of the gas pipeline. (...) Inspection supervision during the construction of the interconnection will be carried out in accordance with 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 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 in its own 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 realization of the project in Bosnia and Herzegovina.

"The Government of the Federation of Bosnia and Herzegovina has the authority to realize the project according to the model it chooses, including through the concession award in accordance with the legislation of the Federation of Bosnia and Herzegovina. The investment holder 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 realization of the project on the territory of the Republic of Croatia in accordance with the legislation of the Republic of Croatia. The investment holder is the company Plinacro d.o.o. based in Zagreb," it is stated in the "updated" draft.

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

(Istraga.ba)