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Bulgaria Moves to End Russia Sanctions Opt-Out as Pressure Mounts

Bulgarian lawmakers on Wednesday took the first step toward ending a sanctions exemption that has raised millions of euros for Russia, bowing to growing calls for action.

The move, while previously planned, came shortly after POLITICO reported that Bulgaria had imported Russian oil above a G7 and EU price cap from August to October, netting €430 million in direct taxes to the Kremlin.

The trade was legal because of Bulgaria’s one-of-a-kind exemption to the EU’s ban on Russian seaborne oil sanctions imports. The EU granted Bulgaria the opt-out to insulate the country from dramatic fuel price spikes. But the loophole has also allowed Moscow to profit handsomely.

In total, the exemption has led to €2 billion in export revenues for Russia since the sanctions kicked in, resulting in an estimated €1 billion in taxes for Moscow, POLITICO reported last month.

Following that report, Bulgaria’s government announced plans to end its sanctions opt-out on March 1 instead of a previous, self-imposed October 31 deadline. And on Wednesday, Bulgarian lawmakers began the process of turning that plan into law, with the parliament’s economic committee voting in favor of the proposal. The draft law made no mention of the price cap issue, however.

The vote comes as pressure mounts on Bulgaria to close these sanctions backdoors. Attention has focused in particular on the price cap workaround, given the recent revelations.

“If there’s a loophole, it’s something to address,” said a senior European Commission official, who like others was granted anonymity to speak freely on sensitive matters. And if Bulgaria wants to fix the problem, “we will help them,” the official added.

It was a sentiment expressed by several EU diplomats.

“All [such] loopholes should be closed as soon as possible,” said one, adding that any energy-related dependencies on Russia “are not only a threat to the EU’s security but also add additional funds to fuel Russia’s war of aggression against Ukraine.”

A second diplomat agreed: “If it’s not resulting in any benefits to customers then it defeats the purpose.”

In all, diplomats from four EU countries echoed the call for Bulgaria to end the exemption allowing it to buy oil above the allies’ price limit.

Kiril Petkov, the former Bulgarian prime minister who leads one of two parties controlling the current governing coalition, previously told POLITICO the loophole should “absolutely” be closed and vowed to push the government on the issue.

Martin Vladimirov, a senior analyst at the Sofia-based Center for the Study of Democracy think tank, argued the move would have an economic impact on Russia.

“The closing of the price cap loophole will reduce significantly the tax revenue for the Kremlin,” he said.

Source : Politico