Comment by Emilia Milcheva:
If the Bulgarian rulers choose a special manager for the "Lukoil" refinery, as the regulators filled with their favorites, the result is a foregone conclusion - the collapse of the largest company with an annual turnover of over 4.4 billion euros for 2023 and an explosion in the fuel market.
The optimistic scenario is that the actions of the coalition government, led by GERB and DPS-New Beginning, are part of some energy security strategy known only to a narrow circle of people. In Bulgaria, however, optimism is reserved for the therapeutic talks with journalists of the chairmen of the aforementioned parties, Boyko Borisov and Delyan Peevski.
The circumstances are force majeure. By November 21, when the American sanctions come into force, Bulgaria must find a way for the operational activities of “Neftochim” to continue. But if the US does not allow a temporary exemption from the sanctions regime imposed by them, which Germany and Hungary have received so far, the government will have to reshape both this and the next budget, especially in the deficit section. Then they will be removed from power not by the opposition, but because of the economic consequences.
The challenge now is whether they are able to offer a sustainable solution for fuel supply, which also includes oil deliveries via routes other than Russian ones - if they put a person of their choice in the refinery.
Raiding or strategy?
The institution of the “special manager”, legislatively regulated back in 2022, when Russia started the war in Ukraine, was expanded 3 days ago with new powers for managing and selling assets. The change adopted at a rapid pace rivals only the speed with which in 2013, in about fifteen minutes, the MP from the MRF Delyan Peevski was elected chairman of the State Agency for National Security (DANS). Today, Peevski is one of the rocket launchers of the bill, and also the one whose interests the entire opposition sees behind the “corporate raiding”, as Krasimir Manov (MECH) called it.
The accusations were caused by the new powers provided by law to the “special manager” to sell assets, without detailed protection of the rights of “Lukoil” shareholders and, mainly, their consent. All that is needed is “the prior approval of the Council of Ministers”. That is, if Rosen Zhelyazkov's cabinet makes a decision, the special manager will sell the refinery, the 220 gas stations, the product pipeline, the tax warehouses. The law stipulates that this will happen after a market valuation, but who will do it is not specified. The funds from the sale will go to a special account in the government's coffers - the state-owned Bulgarian Development Bank, whose opacity and lack of accountability in how it operates with public funds has been a trademark for two decades.
The government will appoint the special manager at the proposal of the Minister of Economy - in this case Petar Dilov from the quota of ”Ima takvi narod” (ITN), and after an analysis by the Security Council to the government. The appointment of up to three managers is allowed, but they will have to make their decisions by consensus.
Analysts and politicians fear that the sale of assets will lead to international arbitration. President Rosen Plevneliev (2012-2017) commented on bTV that nationalizing “Lukoil“ would be “a very serious mistake“ and could lead to billions in sanctions. According to him, a sale can only be carried out with the refinery's consent, and he described the appointment of a special manager as a “good solution” - if it works transparently. Energy expert Iliyan Vassilev predicted that the law would be sent to the Constitutional Court.
The German experience
The managers assure that the law was “copied” from the German one, but also “upgraded”. This is how Borisov explained it. The upgrade turned out to be the option for disposing of the assets. According to BNR, Ruslan Stefanov from the Center for the Study of Democracy (CSD) explained that German legislation offers “greater legal certainty” in the custody of assets under sanctions.
However, Germany does not confiscate private assets. Berlin's position is that the Russian owner must find a buyer within 6 months who will work with non-Russian oil, or lose the property. This argument gained weight and the US Office of Foreign Assets Control (OFAC) granted a derogation until March next year. And "Rosneft" has been unsuccessfully looking for a buyer for 18 months.
In Germany, the “special manager” was introduced back in 2022 in a company that operates three refineries with the participation of “Rosneft”. The main goal is to prevent financial resources from their activities from being allowed to Russia. The Russian state-owned company challenged the measure in court, but the court confirmed it. However, the Bulgarian authorities placed the decisions of the “special manager” above the law - they are not subject to judicial and administrative control.
However, in Bulgaria, a different provision is made
Unlike in Germany, where the interim management is carried out by the Federal Network Agency, in Bulgaria the Minister of Economy will propose the new state head of the refinery. In some media, the name of “British Petroleum” (ΒP) has been circulated - first as a special manager, and subsequently to buy “Neftochim”. The British company had been operating in Russia for more than 30 years, and until 2022 it also owned a 19.65% stake in “Rosneft”, which it sold due to the Russian invasion of Ukraine and pressure from “Downing Street” 10. However, an international company with a reputation and experience in the production and sale of fuels is a much better option than some party loyalist.
The law has not yet been published in the State Gazette, and deputies from GERB and BSP have publicly admitted the possibility that the state-owned BEH (Bulgarian Energy Holding) could purchase the “Lukoil” refinery. On bTV, the Minister of Economy also confirmed that the hypothesis of BEH buying the Bulgarian assets of “Lukoil” is welcome.
It is hard to believe that BEH's financial situation will allow a deal that, according to estimates from a year ago, would be for over 1 billion euros. This year, the managers poured 1.5 billion leva, withdrawn as a loan, into the “hat” of the state energy sector - so that the energy companies united in the holding could fulfill their investment programs. We are talking about the hydropower units of the “Chaira” power plant, part of NEK, as well as the new two units at the “Kozloduy” nuclear power plant, which in turn caused Moody’s to lower BEH's credit rating.
But from “Democratic Bulgaria” Last week they discovered some 5 billion leva in the draft budget for 2026 that are not visible, and they demanded to understand their purpose.
Who will negotiate the oil tankers
The most serious concerns are how a manager appointed by the authorities will manage a huge complex like “Neftochim” and most importantly - how he will negotiate oil supplies, their rhythm and payment. If BEH takes it, instead of a private one, we will get a state monopoly on the fuel market.
In its analysis on the topic, the CID pays special attention to this and recommends that an interdepartmental action plan be prepared, which would include a team of experts with legal, financial and energy experience. This team should prepare preliminary contracts for the supply of crude oil. According to the CID, it is also necessary to "activate the three preliminary (standby) agreements with the British company "British Petroleum", the Spanish "REPSOL" and the Canadian "Hatch" and a logistical plan for rhythmic deliveries of crude oil to the Rosenets terminal from November 21". Unless the government has a plan to assign some intermediary they know to provide the crude oil.
The question that cannot be answered before November 21 is how the new situation will affect fuel prices in a region where "Lukoil Neftochim" supplies almost everywhere, and in Bulgaria provides nearly 80% of the fuel. In the meantime, the government has strengthened security on land, water and air, including with a drone protection system, at "Lukoil" sites on Bulgarian territory. The reason is US sanctions and incidents with the Russian company's facilities in European countries.
Before the US sanctions, the Europeans banned the processing of Russian oil and the export of products made from it. The result was that from a profit of 104.1 million euros in 2023, the Burgas refinery dropped to a loss of 108.7 million euros in 2024, as the derogation for Bulgaria, requested by Kiril Petkov's cabinet, ended at the beginning of last year.
Can Bulgaria offer something to get a reprieve?
Hungarian Prime Minister Orban received a 12-month reprieve for sanctions on the import of Russian oil and gas - after Budapest agreed to purchase American liquefied natural gas (LNG) for nearly 600 million euros, the agencies reported. Some relief for Orban, who faces a tough battle in the parliamentary elections in the spring.
What can Bulgaria offer in return for its request to receive a temporary exemption from OFAC? The answer will come in the next 11 days. The Minister of Economy is “fully confident” that we will receive it.
If the “special manager” turns out to be another party commissioner, the finale is a foregone conclusion. The state of “D” is once again in the role of a raider under the banner of “national security”, and the price… is known, as with the Corporate Commercial Bank and the “Belene” NPP - the citizens will pay it.