Comment by Emilia Milcheva:
The saga with the sanctioned “Lukoil“ has become an arena of political clashes and geopolitical interests, and its resolution in Bulgaria will not come with the appointment of a special manager, but with finding a new owner for the refinery in Burgas. The goal is also to ensure that the financial flows from the activities of the largest Russian private oil corporation do not support the war that Moscow is waging against Ukraine.
When GERB leader Boyko Borisov says that decisions on the buyer will be made “geostrategically together with partners from Europe and the USA”, is he being honest? “Peevski will not take this refinery, nor will Kiril Petkov and Assen Vassilev will not take it,” he said. No, they will not take it. But this does not mean that someone is not preparing for the role of an intermediary through whom a future deal can be negotiated.
By the will of…
Under pressure from Delyan Peevski, leader of the DPS-New Beginning party, who has been sanctioned for corruption by the US and UK, the parliament adopted a law that placed the Bulgarian counterintelligence - SANS, as a filter for any potential buyer. And the State Agency for ”National Security” is now headed by his favorite Denyo Denev - as an interim leader, whom the Council of Ministers has already proposed as the head.
Although Bulgarian law leaves the final decision on whose refinery it will be in the hands of the services and the government, disposal transactions with Russian assets under sanctions are coordinated with the American Agency for Asset Management foreign assets (OFAC) and the European Commission. If the GERB leader is to be believed - even the figure of the special manager is subject to such coordination. But his words could also be … justification for the already made choice of “Bulgarian citizen(s)”, whose name is a secret.
The challenge is whether there will be a derogation from the sanctions imposed on “Lukoil” by OFAC on October 23 - and whether there will be a deal during the months in which it is in effect. The rulers assure that Bulgaria will receive a temporary exemption from the sanctions, which Germany (6 months) and Hungary have for importing Russian oil (12 months). It is understandable that they have to talk like that. The opposition accuses them of lies and lack of a plan - that is exactly how they should behave.
Beyond these definitive roles, however, Bulgaria has no clear signal whether it will receive the so-called. general license for asset management and for how long, if you don't count the encouraging letter from ΟFAC that the election of a special governor is a step in the right direction, learned the DV. This is the same “confidential”, in the words of the GERB leader, letter that he sent to President Rumen Radev and he “got irritated”.
A game of nerves
While the government is waiting for a “green light” from the US, the president has put a temporary stop to the process. Radev vetoed the law on the expanded powers of the special governor, which are not subject to administrative and judicial control. His motives are that they lead “to undermining the legal order in the country, contradict basic European legal norms and pose a high risk to public finances”.
The parliamentary energy committee has already overcome the veto, and after it will the parliament did it too. So the next unknown is how long the president will delay the decree on the promulgation of the law in the State Gazette, and with it the appointment of the special manager. Until the date on which the sanctions come into force - November 21 (Friday), there are only a few days. (And Friday, as well as Tuesday, are the days on which the State Gazette is published.) This game of nerves between the institutions is not an ordinary procedural delay, but a demonstration of power over who controls the decision on the future of “Lukoil“. Control is held by the one who has the say in the appointment of the special manager.
Whose “special manager” will be?
After it became clear that the special manager will be an individual - one or two, the name of Ivo Petrov, a former manager at ΟΜV for nearly nine years and a partner of the owner of “Insa Oil“ Georgi Samuilov. According to data for 2021, “Insa Oil” holds about 37.6% of the turnover in the oil products sector in Bulgaria, the leader is “Lukoil”, whose share is approaching 60%. Samuilov has been linked to Peevski, which strengthens suspicions of a controlled election. “Insa Oil”, as well as “Lukoil” are among the companies obliged to provide mandatory fuel stocks, but, as it turned out, did not do so.
The danger is that a strategic asset like the refinery can change the top management, but not the influence model. In addition to the refinery, “Lukoil” owns tax warehouses, a product pipeline, and a chain of over 220 gas stations. Is there a conflict of interest if it turns out that the special manager, for example, was a manager in a company that is a candidate for a “Lukoil” asset?
The special manager is a key figure, as he will negotiate with potential candidate buyers. Martin Vladimirov from the Center for the Study of Democracy (CSD) commented to Deutsche Welle that there should be an open competition for his selection. ”It would be best for Bulgaria to find a strategic Western investor who would qualitatively change the way the oil sector is managed and reduce the possibility of political influence on key decisions made by the state”, he says.
According to the chairman of “Continuing the Change” Assen Vassilev “it would be best for the special manager to be a legal entity from a large company operating on global markets”. If that cannot happen, the second best thing is for him to be a former employee of such an international company, he commented in parliament. For Vice President Iliana Yotova, the signals from the ruling majority show what is most important to them: “The emphasis for them is whose person will be the special commercial manager and who will acquire the refinery”.
The special manager will hold the key to the deal with the Bulgarian assets of “Lukoil” - together with the head of the National Security Agency and, of course, OFAC. And not Prime Minister Rosen Zhelyazkov, nor Energy Minister Zhecho Stankov. If the information is true that the Turkish Cengiz Holding and the Azerbaijani state company SOCAR are not giving up on their plans to buy the refinery in Burgas, the special manager can complete this deal or terminate it for others. In front of a Turkish publication, the owner of the Turkish holding Mexmet Cengiz says that the sanctions came just before the signing of the deal. “They didn't give up. "We are considering what we can do legally," he says.
Prices and (geo)political games
Russia's influence on Bulgarian politics through energy dependencies shows how fragile the country's energy autonomy remains and why the choice of a strategic investor for "Lukoil" has significance far beyond purely economic effects. "Vazrazhdane" is trying to extract political dividends from the crisis situation, once again resorting to pro-Russian rhetoric and claims that the government is seeking to turn Bulgaria into a "second Ukraine". “In order to present the point of view of the majority of the Bulgarian people“, announced leader Kostadin Kostadinov, a party delegation will travel to Russia for talks with Dmitry Medvedev, former president and deputy chairman of the Russian Security Council. “Vazrazhdane“ is also planning a petition to refer the law on the special governor to the Constitutional Court.
Russian Ambassador Eleonora Mitrofanova described Bulgaria's actions as “hasty and legally dubious“ and added that “the Bulgarians are acting very risky“ and “creating a dangerous precedent“. Additional tension is also brought by the divergent data on fuel reserves. According to the chairman of the “State Reserve and Wartime Stocks“ Agency Assen Assenov Bulgaria has 35 days of gasoline and more than 50 days of diesel. At the same time, the Minister of Energy stated in parliament that in the worst-case scenario, there is gasoline for 6 months and diesel for four. The market is starting to heat up - wholesale prices are rising, and hence retail prices. Mass gasoline A-95 has risen in price from 2.37 leva to 2.41 leva, and diesel - from 2.36 leva to 2.48 leva.
How dependent is Bulgaria
At the same time, other countries in the region are trying to secure derogations from the American authorities - Moldova will negotiate for one, and Romania, which also has a “Lukoil” refinery, is considering a similar step. It is most complicated for Bulgaria, as it is a market heavily dependent on the Russian company's fuels, and it must also find a buyer for its assets. This will be the test of whose special manager is, who will control the fuel market and their prices, and therefore the social seismicity.