Russian oil imports to EU via Bulgaria surge

The amount of Russian oil imported into the EU through the Lukoil refinery in Bulgaria has increased significantly in the past few months, Martin Vladimirov, the leading energy analyst of the Center for the Study of Democracy (CSD), told Euractiv Bulgaria in an exclusive interview.

“This means additional profit in the amount of hundreds of millions for the Russian company for the last quarter of the year,” Vladimirov noted.

The Bulgarian think-tank actively monitors the import of Russian crude oil via Bulgaria to the EU, and last month, together with two other European organisations, raised the alarm about the transhipment of fuels from Russian crude oil to Bulgaria for export to Western Europe.

Lukoil responded that it was not violating sanctions because it was exporting low-octane petrol to the EU, which is not covered by EU sanctions against Russia.

At the same time, the Russian company threatened to shut down the Bulgarian refinery if the ban on Russian crude oil imports was imposed too quickly.

Bulgaria plans to end its derogation from the EU embargo on 1 March 2024. The dispute over Lukoil’s Bulgarian refinery can potentially cause problems in the regional fuel market, as it is the largest in the region and the only jet fuel producer in the Balkans.

According to CSD’s analysis, Lukoil has no economic reason to undermine its dominant position in Bulgaria’s fuel market, even with the withdrawal of the exemption for importing Russian crude.

Vladimirov commented that the political power in the Kremlin also has no reason to create problems. However, he warned that Bulgaria could be used to “launder” Russian oil, which would still enter the EU but under a different label.

“It would be much easier for Lukoil to try to launder Russian oil through Kazakh and Azeri oil in Bulgaria. I would not be surprised if, on 1 March 2024 (when Russian oil imports are scheduled to be banned), the blend processed by the refinery would contain 100% Kazakh oil. In this way, the money for the Kremlin’s budget will flow smoothly. Every month the exemption is extended is a huge windfall for Russia,” Vladimirov added.

Selling the business

The energy expert predicts that the window for the sale of the Lukoil refinery in Bourgas will open after the suspension of Russian oil imports to the country.

Vladimirov explained that Lukoil is not interested in staying in the Bulgarian market if it does not maintain its preferential position with the derogation for importing Russian crude.

“When the derogation falls, the company will be interested in selling because it has made a huge profit in the last year and a half. This is part of a larger Lukoil strategy to sell assets in the oil refining and fuel distribution sectors,” he said.

According to CSD analysis, the Kremlin regime has made more than $3 billion from its operations in Bulgaria alone since the beginning of the Russian invasion of Ukraine. Martin Vladimirov predicts that the Russians will likely agree to sell their Bulgarian business next year.

“The most logical thing to do is to sell the Burgas refinery because the pressure from the Bulgarian authorities and the geopolitical situation will make the business quite difficult to manoeuvre,” he added.

Interest from Azerbaijan

According to unofficial information obtained by Euractiv, the most serious interest in buying the refinery is Azerbaijan’s state-owned company SOCAR, which already holds around 30% of gas sales in the country.

Asked if there was a risk of replacing the Russian company with another big player representing an authoritarian regime, Vladimirov said: “There is such a risk. If we are honest, this infrastructure, which is on the Black Sea coast, is practically an enclave used in the past for all kinds of operations. There have been suspicions of arms trafficking, tax evasion and sanctions. Such an asset should fall into the hands of a strategic Western investor.”

According to him, one of the major risks is related to Bulgaria’s intention to build the Alexandroupolis-Burgas oil pipeline, which is “completely pointless from an economic point of view”.

“This project can be used as a pretext by the Bulgarian authorities to create a situation similar to that in Slovakia, the Czech Republic and Hungary, namely the desire to continue derogating Russian oil beyond 2024. Pro-Russian circles are pushing for the construction of the Alexandroupolis-Burgas pipeline. This will be used as an argument for maintaining the status quo at Lukoil Neftochim,” he explained.

According to the analyst, the claim that oil tankers can hardly pass through the Bosphorus is a false argument in front of Brussels.

“All kinds of crude oil can pass through the Bosphorus, and even now, the Lukoil refinery buys Norwegian and Saudi oil, which passes through the Bosphorus without any problems. Claims that there will be problems with the Bosphorus are complete nonsense. This is an attempt to lock the Bulgarian state into a long-term project that will lead, on the one hand, to the strengthening of Russian influence networks and, on the other, to the preservation of the status quo in the oil sector,” Vladimirov said.

The analyst said that there was interest from Western investors in the Bulgarian refinery, but it was not strategic.

(Krassen Nikolov | Euractiv.bg)

Read more with EURACTIV