Bulgaria, a former Soviet ally and one of the largest buyers of Russian oil in Europe, has decided to diversify its oil imports and reduce its dependence on Moscow amid rising tensions in the region.
 The country possesses an exemption from a European Union embargo, enabling it to sustain maritime imports of Russian oil throughout the year 2024. However, the government has limited exports of all refined goods made from Russian crude and levied a 60% tax on the earnings of the nation’s only refinery, run by Lukoil of Russia.
As a result, Lukoil is unable to provide its own Urals oil, a sour grade that the facility is meant to handle, to the Burgas refinery. The company has to look for alternative feedstock, which is more expensive and scarce in the EU market.
In January, traders and LSEG data indicate that Bulgaria is switching from importing Russian oil to importing crude from Kazakhstan, Iraq, and Tunisia. Two cargoes of Kazakhstan’s KEBCO crude, one cargo each of Basrah Light, CPC Blend, and oil from Tunisia are scheduled to arrive in the nation. The most likely substitute for Russian oil in Bulgaria is KEBCO, a Kazakh grade transported from Russian ports that is of comparable quality to Urals, although it is more expensive and has a smaller supply than Urals.
Bulgaria’s decision to stop all Russian crude imports from March is a blow to Moscow, which has been trying to maintain its influence in the Balkans and the Black Sea region. Russia has also faced resistance from other EU members, such as Poland and Lithuania, which have reduced their oil purchases from Russia in recent years.
Bulgaria’s move is also a sign of the growing interest in alternative energy sources, such as natural gas and renewables, in the EU, which aims to achieve carbon neutrality by 2050. Bulgaria has been developing its gas infrastructure and has received its first liquefied natural gas (LNG) cargo from the United States in 2023.
Lukoil has stated it’s far reviewing its approach almost about belongings in Bulgaria and could remember promoting them. Regarding this story, inquiries for comments from Lukoil and the Bulgarian Ministry of Economy and Industry were not answered.
Bulgaria’s Exemption from the EU Oil Embargo:
- Bulgaria was originally granted an exemption from the EU’s sixth package of sanctions, which included a ban on seaborne Russian oil imports, due to its heavy reliance on Russian oil and limited alternative supply options.
- The exemption initially allowed Bulgaria to import Russian oil via pipeline and process it at the Lukoil refinery in Burgas until December 31, 2024.
- However, as of January 1, 2024, Bulgaria prohibited the export of fuels produced from Russian oil. This effectively restricts the Lukoil refinery to producing for domestic consumption until March 1, 2024.
- On March 1, 2024, Bulgaria will completely ban the processing of Russian oil at the Lukoil refinery. After that date, Bulgaria will need to rely on alternative sources of oil.
Conditions of the exemption:
- The exemption was not universally welcomed within the EU, with some member states questioning its justification and potential loopholes.
- To address these concerns, the Bulgarian parliament subsequently passed legislation introducing additional conditions:
- Ending export of fuels produced from Russian oil as of January 1, 2024.
- Prohibiting the processing of Russian oil at the Lukoil refinery as of March 1, 2024.
- Scrapping the transit fee on Russian gas imports and transit via Bulgaria.
Potential implications beyond 2024:
- Finding alternative oil sources: After March 1, 2024, Bulgaria will need to find alternative sources of oil to meet its domestic demand. This could involve diversifying its import sources, increasing domestic production, or improving energy efficiency.
- Economic impact: The transition to alternative oil sources could have economic implications for Bulgaria, potentially leading to higher fuel prices or disruptions in the energy sector.
- Geopolitical considerations: The dependence on alternative oil sources may also have geopolitical implications, as Bulgaria will need to establish new relationships with oil-producing countries.
- EU cohesion:Â The initial exemption and its subsequent modification highlight the challenge of balancing individual member states’ needs with EU-wide sanctions and energy security goals.
