Vladislav Panev to FACTI: Spetsov was put in charge of Lukoil to control the money so that it does not reach Russia

"Lukoil“ is the largest refinery in Bulgaria and a key player in the energy market in the country and the region. In recent months, the refinery has been in the spotlight due to the geopolitical situation, sanctions against Russia and the need to guarantee the continuity of fuel production for Bulgarian citizens and companies. The appointment of a special manager and the issues of derogation, asset sale and control over cash flows put the refinery in a complex and critical position, which has the potential to affect not only the energy sector in Bulgaria, but also the entire region. What to expect… Economist Vladislav Panev, initiator of the “Uskorenie“ club, speaks to FACT.

- Mr. Panev, will we save “Lukoil“?
- The refinery has been modernized in general in recent years. If you mean whether the uninterrupted operation mode will continue in the coming months - probably yes. The derogation seems to guarantee it, but the technological process in a refinery is not like in a vegetable garden, right? Things are much more complicated.

- That's why I asked such a more general question - will we save it? Because we are faced with a very serious situation in which very specific and clear measures must be taken? Is Spetsov's choice like that?
- Yes, serious measures are needed. Spetsov's choice - we will see in a few months what it is. Apparently Spetsov was put in “Lukoil“ in order to control the cash flows so that they do not reach the Russian Federation and help Russia's war against Ukraine, which is actually the goal of the sanctions. So Spetsov should be a guarantor for this. The other direction in which he should be a guarantor is that the work of “Lukoil“ continues? So that both Bulgarian citizens and companies are provided with fuel, but also that “Lukoil“ exports to the region continue. Since this is not a very easy job and will require cooperation with the current management team. Would the management team's negative attitude towards the particular manager mean torpedoing the working regime?

- The team itself that currently manages it - is it Bulgarian, Russian, Swiss, like the company that owns it?
- I assume it is mixed. There are probably both Russian managers, whether they have Swiss or other citizenship, it doesn't matter. And Bulgarian specialists. This team will probably continue working, at least those are the indications for now.

- Did Spetsov's appointment surprise you? How did you accept it - is it surprising?
- It is somewhat surprising, since other names were mentioned. However, we cannot believe speculation before a decision has been made. Ultimately, it is logical, since his job will be exactly that - to control the cash flows and whether they reach Russia.

- We have received a derogation now, but will it be enough time to organize everything? The Russian company wants to sell the assets of “Lukoil“…
- Well, will it be enough time - that depends on several factors. One is how long the war will last, because we hope it will be short, but we have no guarantees for that. The second is when and whether “Lukoil“ will manage to sell the overseas assets of other companies. There is enough media speculation, including that talks have begun with new buyers after the failure of the deal with “Gunvor“, due to the negative attitude of the Americans. I do not want to speculate on names – who exactly is the best candidate or the most possible. This is probably a high-level deal, including between Putin and Trump, regarding the overseas assets of “Lukoil“. And the buyer, if there is one, will be a company that enjoys the trust of both parties. If there is no deal after 6 months, the role of the Bulgarian state also comes into play to some extent. This is probably why these legal amendments to the Energy Act were adopted in 36 seconds – so that the state has options to put pressure on “Lukoil“, so that the special manager can also sell assets. This is a rather undesirable scenario and could cost us billions in the form of compensation and possibly lawsuits. But as of “Lukoil“ released a statement, they will closely monitor the actions of the particular manager and will hold him accountable for the actions of the company in general.

- If the company suffers damages, but can we and will we understand why “Lukoil“ has been operating at a loss for so many years, if we go back years?
- In my opinion, this is another effect of Spetsov's appointment - insofar as now, with an insider, it is possible to track the relationships and transfer pricing between the individual companies in the conglomerate, including the four of which Spetsov became a special manager, but also their transactions with foreign counterparties, including with the parent company "Lukoil". Including whether Russian or non-Russian oil has really been purchased in recent months since the derogation ended. And eventually, if there has been a violation of tax legislation, it is entirely possible that fines will be imposed on "Lukoil". I do not rule this out as a scenario, although extreme. These fines could help and encourage the Russian company to sell the refinery.

- In principle, how does a refinery operate at a loss?
- A refinery can operate at a loss. There are other such cases in the world. If the margins between the purchase price of oil and the selling price of fuels have thinned as a result of market competition…

- Are we still talking about a monopolist in Bulgaria?
- The company is a monopolist if it maintains low prices. If it raises prices by 10-20 or more stotinki - competition will probably appear. Isn't Bulgaria the only market for the refinery? The refinery also sells abroad. If it weren't competitive, it wouldn't sell.

- “Lukoil“ is a key enterprise for the Balkans in general…
- This is the largest enterprise in Bulgaria, certainly perhaps not only in Bulgaria.

- Many of our neighboring countries depend on fuels from “Lukoil“…
- Yes, even more so in the context that the derogation for the Serbian refinery in Pancevo is expiring. And there is no renewal expected. We see that fuel prices in Serbia are growing – gasoline is 3.40 leva, which is a little more than in Bulgaria. So obviously, if “Lukoil“ fails to work, the crisis will spread throughout the Balkans, not only in Bulgaria.

- Is the state taking the right steps in our country. Are we moving in the right direction, because we received approval from the UK and the US and this postponement?
- These are steps that we cannot help but take – so it cannot be said that they are wrong. Anyone who asks for it receives an initial derogation from the EU. We see that Hungary also received one. The other question is whether we will use the derogation time correctly. Whether, if the international situation does not develop well, or if “Lukoil“ does not choose a buyer for the overseas assets that is convenient for the US – the state can properly play its cards. The law provides opportunities, but also carries risks. The change in the law provides opportunities for the state and the special manager to sell assets, but it hides high risks – lawsuits against Bulgaria. There is the possibility that the special manager may sell assets unprofitably, including to related Bulgarian persons. I do not believe that the refinery will be sold to a Bulgarian investor, but as for gas stations or part of the oil depots - I do not rule this out at all as a scenario for the additional control of the state in Bulgaria.
- The budget is currently the main topic. We hear from the government that this is the only possible budget. How do you view this?
- This is the only possible budget within the framework of the "eagle-crab-pike" coalition. The Socialist Party is trying to prove itself to the voters by spending a lot of money. Another party talks about how it is for the people and also spends money. For them, this may be the only budget, but not the best. The budget is extremely left-wing and extremely large with expenses of 46%. Revenues that do not cover a deficit of even 3%, because VAT revenues are overestimated.

- As they are this year?
- Part of the capital expenditures will be made through the Development Bank and the energy holding, and so we are going to a deficit of 20 billion leva, as much as the loans drawn, and we are going to a real deficit of 8-9%. So Bulgaria will sooner or later find itself in a debt crisis or will have to raise taxes. We are spending foreign money, which we will then have to pay back.

- Apparently, in the last few budgets, we have become comfortable spending more and incurring debts…
- The problem started with the pandemic and it is no secret. As an MP, I was the most conservative voter for the budget. And the budgets of that time were not exemplary. I voted against compensations, electricity and subsidies. Now it is difficult to return the budget to a normal basis. Next year, higher military spending begins, which will be reflected in the 2026 budget.