How did Bulgaria manage to circumvent sanctions on Russian oil by controlling Lukoil’s facilities in the country?

By taking over the largest refinery in the Balkans from Russia’s Lukoil, Bulgaria has now managed to avoid US sanctions that come into effect on Friday against the Russian oil giant.

But the future of the refinery, located near the Black Sea city of Burgas, remains uncertain.

On October 22, Washington announced sanctions on Rosneft and Lukoil to dry up sources of funding for Russia’s ongoing war in Ukraine since February 2022.

Bulgaria is the most affected within the European Union, as it hosts Lukoil’s largest refinery in the Balkans, the Neftukhim refinery, which the company has owned since 1999.

Bulgarian authorities explained that the sanctions would have effectively led to the closure of the refinery after all business partners refused to pay Lukoil’s subsidiaries.

To avoid this, the Bulgarian parliament on November 7 passed legal amendments that place all of Lukoil’s assets within the country under state administration.

Last week, the government appointed Roman Spitsov, a senior government official, former director of the National Revenue Agency and a former bodybuilding champion, as director of the refinery.

Immediately after this action, the US Treasury Department issued a license to conduct transactions with certain Lukoil entities in Bulgaria, including the refinery, until April 29.

The Burgas refinery plays a pivotal economic role in Bulgaria, as it is the largest company in the poorest member state of the European Union, with revenues of €4.68 billion in 2024.

Lukoil dominates Bulgaria’s wholesale and retail fuel market thanks to its extensive network of stations.

Martin Vladimirov, an expert from the CDS Center for Studies in Sofia, says Lukoil’s presence has made it an essential part of Russian influence in the country.

Its importance, he adds, goes beyond Bulgaria, as its effectively a market maker for the whole of Southeast Europe.

“The rise in fuel prices in Romania isn’t a coincidence, because the refinery in Bulgaria plays a key role in supplying the Romanian market,” Vladimierov points out.

Romania is also a major distribution center towards Ukraine, Moldova, Hungary and Austria, according to Vladimierov.

The Bulgarian government granted supervisor Spitsov the authority to sell the refinery with its approval.

The United States has set a deadline of December 13 to find a buyer, subject to Washington’s approval.

Vladimierov says the situation is stable at the moment in terms of supplies.

But Lukoil on Wednesday called on Bulgarian authorities not to interfere in its efforts to sell its assets, warning that it “reserves the right to resort to justice to protect its legitimate rights and interests”.

A Bulgarian government source said that if the Vienna-based parent company decides to sell the entity that houses its overseas units, Sofia could lose control of the refinery.

At the end of October, Lukoil announced it had accepted an offer from the Swiss Gunvor energy company, which Washington described as a “puppet of the Kremlin,” before quickly withdrawing the offer.