Lukoil seeks €3bn in compensations from Bulgaria over the state control of its business

Russian oil giant Lukoil is seeking €3 billion in compensation from Bulgaria after the state assumed control over the company’s local operations, according to Rumen Spetsov, the special administrator overseeing the group’s Bulgarian assets. The claim, filed through Lukoil’s Swiss-based trading arm Litasco, is not yet final, he added.

The Russian company claims reportedly tem from the Bulgarian state’s intervention in the business following the appointment of a special administrator. Earlier this year, Lukoil threatened to launch arbitration proceedings against Bulgaria before the International Centre for Settlement of Investment Disputes (ICSID), accusing Sofia of unlawfully expropriating its assets.

The move came in response to the appointment of Spetsov as special administrator of the company’s Bulgarian operations. Lukoil had previously warned that state intervention in its privately owned business would lead to substantial financial losses and missed profits.

“Claims in the arbitration case could be based on financial indicators, but at the moment the four Lukoil companies are in very good financial condition,” Spetsov said in an interview for bTV.

Legislative amendments expanding the powers of the special administrator were adopted in early November, and on 14 November the then head of the national revenue agency, Rumen Spetsov, was formally appointed to the position.

Balkan oil giant

In Bulgaria, Lukoil owns the largest oil refinery in the Balkans, located in Burgas, as well as a network of 217 petrol stations. Lukoil Bulgaria is also the region’s largest producer of aviation fuel. The group’s annual turnover in Bulgaria exceeds €8 billion, accounting for a significant share of the national economy, whose GDP is roughly €110 billion.

The decision to appoint a state administrator to the company’s assets was taken in November after the United States imposed sanctions affecting Lukoil’s business. Washington later granted a six-month waiver for the company’s Bulgarian operations.

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Following the parliamentary decision, Lukoil said it expected the administrator not to interfere either with the company’s commercial activities or with the planned sale of its Bulgarian assets.

Lukoil’s Moscow headquarters has repeatedly described its Bulgarian subsidiary as “the largest investor and fuel supplier in the country, a major employer and taxpayer”, adding that the company maintains “constructive dialogue with the local community and high industrial and environmental safety standards”.

According to the Russian group, its total investments in Bulgaria over the past 25 years exceed $4.5 billion.

In his interview with bTV, Spetsov insisted that his role is solely to ensure compliance with the sanctions imposed by the United States on Lukoil’s business activities. “The only possible claims from Russia against Bulgaria would be on a financial basis, but in that respect we have no problem — the companies are in excellent condition,” he said.

At the same time, Spetsov argued that the current situation presents a rare opportunity for the Bulgarian state to acquire a stake in Lukoil’s strategically important refinery in Burgas. “At the moment there is such a historic opportunity. This is a matter for parliament to decide,” he said.

No Russian crude

The state-appointed administrator also said that the refinery is no longer processing Russian crude oil. According to him, supplies are now secured exclusively through “globally recognised traders and producers” from Libya, Iran, Kazakhstan and Azerbaijan under transparent contractual arrangements.

“The Russian parent company has not been deprived of information about what is happening at the refinery. They have full documentation and everything is transparent,” Spetsov said.
Fuel exports by Lukoil Bulgaria are currently subject to a complex approval mechanism involving the customs agency, the finance ministry and parliament.

“This is a complicated administrative process, and every delay in documentation costs us money because of tanker waiting times at the port,” Spetsov said.

In recent days, speculation has intensified in Sofia over the possible dismissal of Spetsov, who was appointed by Bulgaria’s previous government. Bulgaria is now governed by a cabinet led by Prime Minister Rumen Radev, the country’s former president, who has frequently faced criticism from political opponents over allegedly pro-Russian positions.

The government’s handling of Lukoil’s business operations is expected to become an important test of Sofia’s position between the EU and Russia.

“I have not spoken with the new authorities, but whatever they decide, I am ready to present every report, explain what has been done and what still needs to be done,” Spetsov said.

“I prefer to be judged by what I have done.”, Spetsov added, but insisted that Lukoil’s Bulgarian business remains in “excellent financial condition”.

Sources: bTV, BGNES

Caption: Lukoil gas station in the capital Sofia, BGNES/ANTON STANKOV