In 2022, Ukraine bought a huge amount of fuels from Bulgaria made from Russian oil, according to data by the Bulgarian National Statistical Institute, provided exclusively to EURACTIV Bulgaria.
From January to November 2022, Bulgaria exported €700 million worth of fuels to Ukraine, and if the trend continues in December, the total value for the year will exceed €825 million. Compared to the period before the war, this is a 1,000-fold increase, as Bulgaria’s 2021 fuel exports to Ukraine totalled only €750,000.
The current scale of Bulgarian oil exports to Ukraine is so large that it corresponds to about 1% of the size of the entire Bulgarian economy.
The main fuel export from Bulgaria to Ukraine is gas oil (also known as red diesel), which makes up more than 90% of deliveries.
Gasoline supplies have also increased rapidly over the past six months, which is explained by Russian attacks on Ukrainian critical infrastructure. Diesel fuel is used in heavy industry to power machinery, generators, and off-road vehicles, as well as in agriculture and marine shipping.
The producer of gas oil in Bulgaria is the country’s only refinery, located in the port city of Burgas, owned by the Russian oil company Lukoil, which still operates mainly with Russian oil imported by tankers via the Black Sea, thanks to a derogation from EU sanctions.
The refinery in Burgas can afford to export fuel at significantly lower prices because it works with its own raw material. Last year, because of Western sanctions, Russian oil prices on world markets were on average $20-30 per barrel lower than stock market prices.
Bulgarian statistics show that Ukraine is now the Balkan country’s third-largest trading partner thanks to the export of fuels, having replaced the USA. In 2021, Ukraine ranked eighth among the countries outside the ЕU as a destination for Bulgarian exports.
Fuel exports from Bulgaria to Ukraine peaked in November 2022, when €130 million worth of petroleum products were exported.
The avalanche of oil exports то Ukraine began in May, when €40 million worth of products were exported, and reached €105 million in June. From June until the end of the year, levels were consistently high.
The period of the highest fuel sales to Ukraine coincides with the administration of the caretaker government of President Rumen Radev, who is accused by his opponents of being pro-Russian.
Radev is a staunch opponent of sending Bulgarian weapons to Ukraine but although divided, the parliament did not listen to him and a majority decided to send weapons at the end of last year.
Bulgaria protects its business
On 13 January, the Bulgarian parliament passed a law that allows fuels produced from Russian oil to be exported only to Ukraine. However, there is a loophole in the law that allows trade with other countries outside the EU for the fuels produced by Lukoil in Bulgaria, for which there is no market in Bulgaria.
This raises the question of the possible re-export of fuels from Russian oil to the EU, but only after they have been sold by Bulgaria to a country outside the EU.
If the oil originates from another country, for example, Kazakhstan, but has passed through Russia in transit, the new Bulgarian law says it can be imported into Bulgaria and the products can be sold on the European market.
At the end of last year, Lukoil announced its intention to make Bulgaria its main base in the EU. The Russian company promised to pay hundreds of millions of euros in taxes in Bulgaria if it is allowed to export its oil production in the country. Lukoil’s refinery in the Bulgarian city of Burgas is the largest in the Balkans.
A temporary derogation under the EU’s sixth sanctions package against Russia was foreseen for imports of crude oil by pipeline into those EU member states that, because of their geographic situation, suffer from a specific dependence on Russian supplies and have no viable alternative options.
Bulgaria has such a derogation until the end of 2024.
In 2022, Bulgaria also sold more than €1 billion worth of arms to Ukraine, although not directly but through intermediaries, a EURACTIV investigation showed last year.
The Balkan country is the main supplier of ammunition for the Soviet armament to the Ukrainian army, although the official authorities in Sofia still deny that such exports took place.
‘It’s logical’
“It’s logical that Bulgaria exports more fuels to Ukraine and this will continue this year as well,” Martin Vladimirov, director of the Energy and Climate programme at the influential Bulgarian think tank Center for the Study of Democracy (CID), told EURACTV Bulgaria.
Vladimirov, one of Bulgaria’s leading energy experts, also confirmed that fuels produced by Lukoil or by other importers of Russian fuels, such as the Bulgarian company Insta Oil, which directly imports fuels from Russia, are being exported to Ukraine.
“These are not importers of crude oil but of finished products, which are then exported through Romania, and according to my calculations, approximately 32,000 barrels of such fuels reach Ukraine per day. It is about gas oil, which is used for heavy machinery and agricultural machinery,” said Vladimirov.
He disagreed with recent stories published by Die Welt and Politico, where it was claimed that Bulgaria provided 40% of the fuel for the Ukrainian army, saying this percentage is greatly exaggerated.
Former Finance Minister Assen Vassilev told Die Welt that Bulgaria has become one of the largest exporters of diesel fuel to Ukraine and at times covered as much as 40% of its needs. Statistics show, however, that the main export from Bulgaria is gas oil.
“It is important to emphasise that all products exported to Ukraine are either fuels directly produced in Russia or produced in Lukoil Neftohim,” said Vladimirov, who expects this to continue this year as well.
“This will continue because the European Commission gave in December an explicit derogation for Bulgaria to be able to export products produced from Russian oil to Ukraine in the amount of the average values of the last five years,” Vladimirov said.
(euractiv.com, January 18, 2023)
