Eyeing Schengen, Bulgaria looks to close "Russian port"

Bulgaria’s ruling coalition parties have proposed ending a concession controlling the Black Sea oil port of Burgas, through which Lukoil brings Russian oil via tankers to be processed, hoping this will help Bulgaria secure Schengen membership as early as autumn.

Rosenets Port is the only specialised oil port on the Bulgarian Black Sea coast and has been under the full control of the Russian company since 2011, when the first government of Boyko Borissov agreed on a 35-year concession contract with Lukoil. Moreover, Bulgaria’s only refinery, Neftochim Burgas, is owned by Lukoil, EURACTIV.bg reports.

But on Wednesday, the parties behind the government We Continue the Change- Democratic Bulgaria and GERB announced plans to bring it to an end.

Co-leader of the coalition government parties Kiril Petkov, said that all key infrastructure should be controlled by the Bulgarian state, particularly those at the borders.

”Our strategic goal is to enter Schengen, and this is a big step towards it. This step is also in line with the European Union regulation on the sanctions for the war. Thus, we clearly state that Schengen is our national goal, that no Bulgarian key sites will be handed over without motives,” Petkov said.

Over the years, many political figures and economic analysts have expressed concerns that Russia has gained so much control over the port that it can be described as a Russian enclave on Bulgarian territory.

Moreover, journalistic investigations have offered proof that Bulgaria doesn’t control the amounts of Russian oil imported, thus losing huge income in terms of taxes.

“This is a step that will return the state’s control over key infrastructure and is a step towards the country’s acceptance into Schengen,” states the coalition’s position.

The proposal was also signed by Borissov, in his capacity of leader of the largest Bulgarian party GERB (EPP), and the leader of the Turkish minority party DPS Mustafa Karadayi (Renew) – meaning there is a sufficient parliamentary majority for the decision to pass.

While GERB governments ruled from 2009 to 2021, Borissov has been heavily criticised for surrendering state control over Lukoil’s activities in the country.

The initiative to end the port concession was expectedly opposed by pro-Russian President Rumen Radev, who reacted by denouncing “corporate appetites” behind the initiative.

Known for his supportive stance towards the Kremlin, he added that the proposal is “yet another rushed and wrong idea of political leaders”, adding it could be just a crisis PR move.

“I hope that they did a risk assessment of what is behind the port because there is a large logistics base which belongs to Lukoil. How will the port operate with this logistics base, without which the transportation of oil to the refinery is impossible and most importantly how will this affect the prices of fuels“, said Radev.

After the EU imposed oil sanctions on Russia at the end of last year, the caretaker government appointed by Radev adopted a special decision confirming the continuation of the concession contract with the Russian company until 2046.

In February,  the Bulgarian parliament adopted several measures related to the Burgas refinery owned by Lukoil. Even then, parliament declared that the state should take back the Rosenets oil port, but there was no set deadline.

From June 2023, Bulgaria has a new pro-EU government that has taken a hard line against Russia in support of Ukraine.

After the termination of the concession contract, Lukoil will continue to operate at the port but will pay fees, while the state will regain complete control of the key maritime infrastructure. This would allows the government to open the port to cargo imports other than those ordered by the Russian company.

“We have been saying for years that the country should regain control over this port. At a time when Russia declared Bulgaria an enemy because of the war it is waging in Ukraine, we are taking action to limit the opportunities for Moscow to use Bulgarian infrastructure with financial goals, ” commented Atanas Atanasov from the PP-DB coalition.

At the same time, Hristo Alexiev, the former transport minister in the former Radev-appointed caretaker government, expressed fears about the hasty decision, explaining that the state owns only part of the port’s infrastructure, of which Lukoil owns key elements.

According to him, the termination of the concession will prevent Lukoil from operating in the country, which could cause an oil crisis.

“This will have a bad effect on the economy and inflation,” the former minister said.

At the end of 2022, the caretaker government began negotiations with Lukoil to make Bulgaria the main base of the Russian company’s European operations in return for a promise to pay more than €300 million a year in taxes.

This idea did not materialise because Bulgaria failed to negotiate a derogation from the European embargo on exporting fuels produced from Russian oil.

Alexiev continues to defend this initiative of the Radev-appointed caretaker government at the time, as Lukoil paid €90 million in taxes for the last five months of last year – double the amount the Russian company paid in taxes to Bulgaria for the last 15 years.

At the same time, Lukoil, for a long time the largest company in terms of revenues on the Bulgarian market with an annual turnover of over €3 billion, despite revelations that it conducted illegal trade practices last year and, as pointed out by Bulgaria’s anti-monopoly commission, has a dominant position on the market.