Hidden away from the holiday resorts and quietly rundown villages on Bulgaria’s Black Sea coast lies what locals refer to as “The Russian Complex.”

The 200 million-euro ($217 million) development was the pet project of former Moscow Mayor Yury Luzhkov for kids and athletes. Called Kamchia after the river nearby, it has a hotel, theaters, a cinema and a TV studio. It caters to 35 sports and includes an Olympic-sized swimming pool. There’s a school with a planetarium and a tribute to the Russian space program, replete with a giant mural of astronaut Yuri Gagarin.

What the complex can’t do, however, is “host a spy headquarters,” managing director Nikolai Nedyalkov joked on a visit this month.

Kamchia has fallen on hard times since Western sanctions hit Moscow’s finances. One man, though, has his eye on it—Russian Foreign Minister Sergei Lavrov. His interest says more about geopolitics than wellness as Russian influence endures in Bulgaria, a country torn between loyalty toward its historical ally and its more recent status as a member of NATO and the European Union.

Lavrov said in December that Kamchia is “unique,” the “ideal model of soft power,” and proposed taking it under Kremlin control. The government in Sofia said there was no official request to change its status, yet that didn’t stop some Bulgarians from jumping on the idea that it could be used for training operatives.

Whatever happens next, Kamchia shows that Bulgaria remains a critical outpost at a time of heightened tension over espionage, energy security and corruption. That historical role has become more precarious in recent months as Russian President Vladimir Putin and his Turkish counterpart, Recep Tayyip Erdogan, flex their muscles in Europe’s most volatile region.

The problem for the U.S. and Western Europe is that Bulgaria chooses to remain Russia’s biggest foothold in Putin’s orbit because that serves the interests of the people who run the country, said Ilian Vassilev, former ambassador to Russia from 2000 to 2006.

“The main channels of Russian influence are a legacy of a Soviet-style power structure and corruption, which is the glue that holds Russian society together and Bulgaria’s too,” said Vassilev, 63, who was barred by Russia in response to sanctions over Moscow’s involvement in Ukraine and the annexation of Crimea. “Bulgaria has never had more geopolitical importance than today.”

Bonded by the Cyrillic alphabet, a similar spoken language and the Orthodox religion, Bulgaria has long been Russophile.

The nation was freed from Ottoman rule in 1878 in the Russo-Turkish war, an event marked by a national holiday every March 3. It was the closest ally of the Soviet Union during communism, nicknamed the 16th republic under former dictator Todor Zhivkov. Russia’s ambassador to the EU in 2006, the year before Bulgaria joined the bloc, notoriously said that it would be useful to have a “Trojan horse” inside the alliance.

Indeed, Russia’s tentacles are everywhere. Bulgaria imports just about all of its gas through a contract with Gazprom that runs until 2022. About one-third of Bulgaria’s gross power demand is met by a nuclear plant fed by Russian fuel, and the country wants to build a second plant with Russian reactors it already owns. 

Prime Minister Boyko Borissov, the former firefighter who has run Bulgaria on and off for the past 11 years, joined Putin and Erdogan at a ceremony on Jan. 8 to turn on the TurkStream pipeline that brings Russian gas under the Black Sea to Turkey and then connects with Bulgaria and Serbia.

The Kremlin’s Foreign Intelligence Service blames the U.S. for actively trying to discredit public figures in eastern Europe who want good relations with Russia, Sergey Ivanov, head of its press office, told state-owned TASS news agency in an article published on Friday. “Bulgaria became the epicenter of this campaign in the Balkans,” he said. 

Borissov has tried to juggle Bulgaria’s interests in both energy security and foreign policy. The government last May started building a pipeline to link its gas grid with Greece in the hope of gaining American liquefied gas and supplies from Azerbaijan. 

Borissov, who worked as former communist kingpin Zhivkov’s private bodyguard in the 1990s, has been keen to portray himself as the man who can unite the Balkans behind the EU. He also reached a deal to buy $1.3 billion of U.S. F-16 fighter jets and agreed to host a NATO maritime coordination center on the Black Sea near Varna, less than 40 kilometers (25 miles) from Kamchia.

The country declined to join most EU states in expelling Russian diplomats after the poisoning of spy Sergei Skripal in the U.K. Then, less than two weeks after the TurkStream ceremony, prosecutors charged three Russians with the attempted murder of an arms dealer as part of a probe linked to the Skripal case. A day later, Bulgaria also kicked out two Russian envoys accused of espionage (though former envoy Vassilev said that was just for show). 

On Thursday, Borissov was asked by Bulgarian reporters in Brussels whether the Russians were building a military base at Kamchia. He replied that he remembered when it was a camp for children and veterans and wasn’t aware of anything changing. Bulgaria, though, would continue to balance its interests with Russia and Turkey and the west, he said.

“Look, one thing is the ‘pragmatic policy’ and we’ve been applying it,” he said. “Another thing is Euro-Atlanticism, toward which we’ve oriented, swore, signed agreements, contracts and everything else.”

Borissov has effectively played the “good European,” said Ruslan Stefanov, director of the economic program at the Center for the Study of Democracy, a research group in Sofia. The concern is that oligarchs control critical assets and that leaves the country at the whim of a narrow group of people—what he and his colleagues call a “captured state.”

“If they change their allegiance, it changes the whole orientation of the country,” said Stefanov, who co-authored a study entitled “The Kremlin Playbook in Southeast Europe” published this year.

That, as ever, depends on money. Germany overtook Russia as Bulgaria’s biggest trading partner in the 1990s, but Russian oil giant Lukoil’s refinery in Burgas remains the biggest company in Bulgaria.

The most pressing issue is that Bulgaria’s system of power can be easily manipulated, said Kalin Slavov, head of Transparency International in Bulgaria since 2011. That was the year the country overtook Greece as the most corrupt member of the EU in the organization’s annual Corruption Perceptions Index.

In short, Bulgaria is effectively run by people who can do what they want, he said: The legal framework isn’t strong enough to maintain rule of law, while membership of the EU and NATO hasn’t done enough to move the country closer to western norms.

Borissov says Bulgaria is a loyal member of the EU and NATO that has won praise for integrating while fighting corruption. The powerful chief prosecutor is currently pursuing gambling tycoon Vasil Bozhkov, among Bulgaria’s richest men, on charges including attempted bribery and leading an organized crime group involved in money laundering. 

The Foreign Ministry said the country’s geopolitical orientation was “clear and decisive, and it was made years ago.” As a NATO member, Bulgaria is a “strongly committed and responsible ally” that also supports the organization’s policy of dialog with Russia, it said on Friday in response to Bloomberg questions.

Elsewhere, the focus is on doing business, the ministry said. “Our priorities in our relations with the Russian Federation are concentrated mainly in the commercial and economic sphere,” it said by e-mail.

The country has received more than 20 billion euros in EU aid since 2007 and all major political parties express support for deeper alignment, including joining the euro. The local currency, the lev, has been pegged to the deutschemark or the euro since 1997, after a financial crisis wiped out savings. Popular support for the EU is among the highest of any member state, above 60%.

You can’t change your past, though. A report published by Pew Research, which tracks global trends in national attitudes, this month found 73% of Bulgarians see Russia favorably, more than any of the other 32 countries surveyed. Putin had the support of 62% of Bulgarians, also the highest.

Reconciling interests in east and west is in Bulgaria’s veins, according to  Mihail Gruev, a history professor and head of Bulgaria’s national archive.

“The risk is a loss of the balance,” Gruev said at his office on Moscow Street in Sofia. “Bulgaria needs to just accept the reality,” he said as he brought out a box of Red October Russian chocolates with a laugh. “It would have been easier if Russia wasn’t there, but it’s the reality of history and geography.”

Back at Kamchia, with its fluttering Bulgarian and Russian flags, it’s that delicate balance that management is now trying to strike.

The school is running at about a quarter of its 1,000-student capacity and the complex is losing money across its facilities. Those financial difficulties affect the district of 16 villages and 9,000 people because it accounts for more than 90% of tax revenue, local mayor Emanuil Manolov said. The trouble is that “it wasn’t built to make a profit,” said Manolov, 41, a member of Borissov’s party.

Nedyalkov, the managing director at Kamchia, aims to change that. A former investment banker who lived in Russia for almost two decades, he was hired in July 2018 with the goal to make the complex commercially viable after Moscow stopped subsidizing it four years ago.

The strategy, he said, is to use it as “a platform for building bridges between east and west.” He has been expanding beyond Russian-speaking countries to include Turkey, Greece and other parts of Europe.

His task was made harder by Lavrov’s comment on Kamchia before the Russian Senate on Dec. 23. Nedyalkov started getting calls from tour operators asking if they would still be in business. It could cost “millions of euros” in cancellations, he said. The Russian Foreign Ministry said there’s been no progress since Lavrov spoke.

“History has shown that this role is not the easiest,” Nedyalkov said over coffee in an office at the school overlooking the sports complex.

Emphasizing that he was speaking in an unofficial capacity, he added: “The Bulgarian prime minister is handling his job very well to demonstrate that there’s no question Bulgaria is part of the EU, but still it’s not an obstacle to doing business and interacting with countries outside the union.”

–With assistance from Andrea Dudik, Ilya Arkhipov and Samuel Dodge.

To contact the authors of this story: Rodney Jefferson in Edinburgh at r.jefferson@bloomberg.netSlav Okov in Sofia at sokov@bloomberg.net

To contact the editor responsible for this story: Paul Sillitoe at psillitoe@bloomberg.net

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