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A New Scandal in Bulgarian Politics: Burgas Oil Refinery to Stop Functioning?

The political elites in Bulgaria for many years have been unable to reach any agreement. International studies note several main characteristics of Bulgarian politics. First, there is the growing trend towards self-isolation: Sofia has often been out of step with Western partners. A number of European directives are not implemented in Bulgarian legislation or not carried out effectively, which lead to penal procedures on many occasions. Second, insufficient action on European integration has led to Bulgaria being relegated to the status of an outsider in the Eurozone and the Schengen area.

Fuel ignites crisis

The entry into the Schengen area has become a subject of speculation for the Bulgarian elites. This argument is currently used to justify the termination of Lukoil concession to operate the Rosenets oil terminal near the Black Sea port of Burgas, which is valid until the mid-2040s. The initiative is being pushed forward by representatives of the largest party in the Bulgarian parliament, GERB, and the Turkish minority party DPS. Although the voting in the National Assembly went smoothly, many Bulgarian experts and politicians do not agree with the opportunistic decision on the planned termination of the concession. Even the Bulgarian President Rumen Radev pointed out that this whole story is “the result of corporate appetites or crisis PR.”

Commenting on the actions of the deputies, the President of Bulgaria not only transparently hinted at their personal interest, but also expressed doubts that they are aware of the consequences of such a decision.

“I hope they did a risk assessment of what is behind the port, because there is a large logistics base that belongs to Lukoil. How will the port operate with this logistics base, the lack of which will render oil transportation to refineries impossible,” Radev said.

The Bulgarian parliament is going through difficult times. The National Assembly does not have a set ruling coalition with a majority vote. A situational alliance is now formed from the parties We Continue the Change, Democratic Bulgaria, GERB and DPS, but with local elections looming in October, the situation may change. And the dispute over the concession demonstrates the general atmosphere of nervousness and division in the Bulgarian elite.

The extraordinary haste accompanied the effort to pass the law. Violating the regulations, they held consecutive first and second readings. Moreover, objections to the document from one of the parties were not considered, contradicting the set voting procedure.

Interest of lobbyists

Such haste with law adoption indicates the business interests of the lobbying MPs, believes Martin Vladimirov, an expert at the Center for the Study of Democracy in Bulgaria.

“There is an option in which the refinery will stop working, and this is beneficial for those who have the opportunity to import a large amount of fuel through Varna instead of Burgas,” Vladimirov said.

According to him, this activity “has nothing to do with the Russian invasion of Ukraine.” “This situation is just an excuse. The Russian invasion is being used by the MPs for their own benefit”, the expert noted.

The version is confirmed by the inadvertent confession of Delyan Dobrev, the MP of the ruling GERB party – the other day he mentioned in an interview that the termination of the concession of the Rosenets terminal was discussed back in January. Then the MPs probably believed that the chance to push the law forward is slim, but now they’ve decided that the time is right.

In case the refinery is shut down, the MPs may try to shift the blame for the negative consequences to the executive branch and the President. Considering that there are no other oil refineries in Bulgaria, even a temporary interruption in production in Burgas will result in a fuel crisis, which, obviously, will further inflame the political crisis.

Threat to jobs

The refinery workers in Burgas are far from political intrigues, but they are very afraid of losing their jobs due to the concession’ termination. An open letter from the trade union organization of the Bulgarian petrochemists says that the termination of the contract could stop the work of the refinery.

“Today, due to the actions of the MPs of the National Assembly, we are forced to worry about our future again. There are no other similar facilities in Bulgaria where we, petrochemical engineers and skilled workers, could find a job if the decision to terminate the concession for the Rosenets terminal will make it impossible for Lukoil to manage the enterprise,” the letter says.

In addition, the Syndicate of Bulgarian Petrochemists expressed deep indignation at the statements of individual MPs who justified the revocation of the concession by accusing the refinery of smuggling.

An important point is that the concessionaire owns the entire rear part of the port. As a result of the concession’s withdrawal, the state will be left with several berths, while all existing facilities, tanks, pipes, taps, devices and other equipment which belongs to Lukoil Neftohim Burgas and are not a part of the concession. At the same time, port connections for loading and unloading are also organically linked to the refinery, and oil delivered by tankers is transported to the Burgas refinery via pipes. From there, export-ready products are sent through a pipe to the port.

There is no rail link to the port and unloading a large tanker with fuel, gasoline or diesel would be a major problem which will be difficult to solve without going through the infrastructure owned by the current concessionaire and refinery owner.

In fact, the termination of this concession may lead to complete inability for the refinery to operate. Bulgarian petrochemists are sounding the alarm and wondering what was the major guideline for the MPs to make them put forward their “destructive proposals”.

Dangerous precedent

Rumen Gechev, an MP from the Bulgarian Socialist Party, pointed out not only technological, but also possible legal consequences of the concession’s termination. The dangerous precedent is a violation of international law, which goes against the argument of the law lobbyists on accelerating movement towards the Schengen:

“This will have huge consequences for Bulgaria: it can lead to a serious reduction or cessation of fuel production. When we encroach on a 35-year concession, there will be lawsuits for hundreds of millions. And how then will foreign investors want to enter into concession contracts with Bulgaria?”

Krasen Stanchev, an economic expert, also points to the negative legal consequences of this decision:

“The contract was not violated by the concessionaire and there are no grounds for its termination. The embargo imposed by Brussels on Russia affects products and activities, trade transactions, etc. Regarding the refinery in Burgas and the pipeline to Hungary, there is an exception until the end of next year. Thus, the activities of Lukoil in importing crude oil from Russia are exempt from prohibitions. Sanctions are generally applied to companies and individuals. There are no global sanctions against Lukoil, and I don’t see on what legal basis a law can be adopted to cancel the signed contract.”

For Bulgaria, a rash decision leading to a loss in court will be nothing new – in 2012, the state unilaterally decided to abandon the construction of the Belene nuclear power plant, a project of the Rosatom company. The Russian enterprise has already manufactured the first set of equipment for Belene, and a reactor has been assembled for the Bulgarian NPP. Rosatom filed a lawsuit for 1 billion euros. In June 2016, the Court of Arbitration at the International Chamber of Commerce in Geneva ruled in favor of the Russian company, ruling Bulgaria to compensate for damages in the amount of more than 600 million euros.

The situation with the concession of the terminal looks very similar.

Disagreeing with the actions of colleagues in the Bulgarian parliament, the political party “Vazrazhdane” (Revival) even intends to appeal to the Constitutional Court regarding the suspension of the Lukoil concession in Rosenets port. This was announced by party leader Kostadin Kostadinov at a briefing in the National Assembly. Kostadinov called the hasty vote a violation of the law.

The President of Bulgaria, Rumen Radev, also has the right to veto the law, in which case the law can go back to the parliament for reconsideration, but its adoption will require the votes of half of all deputies, and not from those present in the hall at the time of voting, which may not give lobbyists the required number of votes.

Source : Eureporter