Bulgarian President Rumen Radev on August 4 appealed to the constitutional court (CC) of the country with a request about the legality of the decision of the parliament adopted in July 2023, which canceled the concession agreement of the Russian company ahead of schedule “Lukoil” to the port oil terminal “Rosenets”. Contacting the CC published August 4 on the website of the head of state.
By a decision of the Parliament, the concession agreement was terminated 23 years before the expiration of the contract (the total term was 35 years, expiring in 2046). Lukoil, which owns the largest refinery in Bulgaria and Southeast Europe in Burgas, will be able to use the terminal, but only as an agent. The company may lose this status at any time, which means losing the opportunity to supply oil to its plant, Nikita Gusev, senior researcher at the Institute of Slavic Studies of the Russian Academy of Sciences, explained earlier.
Radev, in his appeal to the Constitutional Court, called the parliament’s decision hasty and thoughtless. “With such a radical approach, neither the interests of consumers, nor the risks of rising prices for fuel and goods, nor the potential threats to thousands of employees of the petrochemical plant, nor possible lawsuits against Bulgaria were taken into account,” Radev said in a statement. The head of state stressed that the “risks and constitutional flaws” of the decision prompted him to apply to the Constitutional Court with a request to establish the unconstitutionality of these legislative amendments.
The refinery in Burgas has been owned by the Russian company Lukoil since 1999. It supplies the domestic market of Bulgaria with petroleum products, and also exports fuel to other European countries, the USA, North Africa and Asia. By the beginning of December 2022, the refinery processed 6.6 million tons of oil per year and exported 50–55% of its products, Ilshat Sharafutdinov, head of the plant, said.
On July 21, 2023, the Bulgarian Parliament voted in the third reading for the early termination of the 35-year lease by Lukoil of the Rosenets terminal serving the Burgas Oil Refinery (amendments were adopted to the law “On control over the implementation of restrictive measures in connection with Russia’s actions that destabilize the situation in Ukraine”).
Earlier, a Vedomosti source familiar with industry statistics said that before the European Union (EU) embargo on offshore oil supplies, Russia was the largest supplier of raw materials to Bulgaria. For example, in 2021, Bulgaria imported about 4.2 million tons of oil, of which 2.5 million tons, or 62%, came from Russia. According to the results of 10 months of 2022, the total import of oil into the country amounted to 6 million tons, of which 4.9 million tons, or 82%, came from the Russian Federation.
President Radev used the mechanism of recognizing the adopted law as unconstitutional before it came into force, explains Sergei Glandin, expert in international law, partner at BGP Litigation. According to him, in this case, the Bulgarian Constitutional Court may suspend its entry into force until a decision is made on the claim, but is not obliged to do so.
According to the lawyer, the request to the Constitutional Court was caused by a conflict between the country’s obligations under EU legislation and Bulgarian laws, which do not contain the institution of concession withdrawal. The EU normative act pursuant to which the amendments were adopted is Article 5k, introduced by the seventh EU sanctions package into the 833 “sectoral” regulation on July 21, 2022, Glandin specified.
If the Constitutional Court finds no contradictions in the Bulgarian constitution, then the amendments adopted by the Bulgarian parliament, according to Glandin, will come into force. Then the Council of Ministers within a week will make a decision to terminate the concession for the refinery, and the Ministry of Transport of Bulgaria within 2 weeks after that will have to take over the operational management of the terminal facilities.
It is not clear why Radev appealed to the Constitutional Court rather than vetoed it, because without the signature (ratification) of the head of state, the law adopted by the Bulgarian parliament cannot enter into force, says Yury Fedyukin, managing partner at Enterprise Legal Solutions. He also recalls that today the legislation of Bulgaria “is brought into line with EU standards”, and it recognizes the unacceptable revision of the terms of previously concluded agreements unilaterally.
If the termination of the port terminal’s concession cannot be challenged, this will increase the risk of a forced sale or nationalization of the Bulgarian refinery, says Sergei Kaufman, an analyst at FG Finam. He notes that even if the Russian company, after the entry into force of the law, can continue to supply oil to its refinery, its operating costs may increase – after all, it will have to pay for the terminal’s services. Kaufman also recalls that the capacity of the refinery in Burgas is about 14% of all the processing capacities of Lukoil, and the efficiency of processing at it is higher than that of Russian refineries.
In November 2022, the Bulgarian government and Lukoil Neftekhim Bulgaria (a subsidiary of Lukoil) agreed to continue operations in the country and export petroleum products to the EU until the end of 2024. Thus, the terminal in Burgas, according to an analyst with the National Energy Fund the security of Igor Yushkov, the Russian company needs exactly until the end of 2024, while there is an opportunity to take advantage of vertical integration by supplying Russian raw materials to it.
Glandin added that on the one hand, Lukoil has “the status of a foreign investor and a whole array of various rights under investment protection agreements” concluded between Russia and Bulgaria, as well as Russia and the EU. On the other hand, it is not clear whether the company will use this right (taking into account the current international situation – Vedomosti).
In general, the conflict, according to Gusev, was provoked by the confrontation between the President of Bulgaria and the Brussels-oriented parliament and government of the country, which are ready to comply with EU decisions even “if they have a high social price for the Bulgarians.” Disruptions in the work of refineries will inevitably cause an increase in fuel prices in the country, the expert emphasizes. At the same time, political scientist Oleg Bondarenko believes that the political decision to oust Lukoil from the Balkans has already been made and Radev’s actions, at best, will ensure a delay in the withdrawal of the Russian company from Bulgaria.
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2023-08-04 18:15:45
