The state takeover of Bulgaria’s Lukoil refinery: a solution or a curse?

Two weeks before the US sanctions on the two leading Russian oil companies will come into force, the Bulgarian authorities decided to lay their hands on Lukoil Neftochim Burgas.

Under the pretext of protecting energy security, the authorities in Sofia imposed unprecedented control over the largest refinery in the Balkans. 32 seconds – that’s how long it took for the legislative change to pass through the parliamentary energy committee, and after a few hours to be finally voted on by the National Assembly.

The coalition government headed by the centre-right GERB urgently introduced the bill that allows a special representative elected by the state not only to operationally manage the refinery, but also to dispose of its assets, sell them or hypothecate them, without judicial and administrative control over his acts.

However, not a single Lukoil filling station can be sold without the permission of the US Treasury Department’s Office of Foreign Assets Control (OFAC).

On 21 November, OFAC sanctions over state-owned Rosneft and private Lukoil and 34 of their subsidiaries will come into effect, affecting refineries in Bulgaria and Romania. The Bulgarian company has a capacity to process about 7-9 million tons of crude oil per year, it owns over 220 filling stations in the country and is a monopolist in the aviation fuel market.

OFAC sanctions often have an extraterritorial effect, as companies from third countries avoid working with individuals on their Specially Designated Nationals and Blocked Persons List list, because they risk secondary sanctions or loss of access to the US financial system.

The ruling majority introduced the bill to amend the Law on Administrative Regulation of Economic Activities Related to Oil and Oil Products on the day it became clear that energy trader Gunvor would not buy Lukoil’s foreign assets.

OFAC called the prospective buyer a “Kremlin’s puppet.” Until 2014, the company’s partner was Gennady Timchenko, the sixth richest man in Russia and known to be close to President Putin. Timchenko sold his stake in Gunvor in 2014, just before a package of sanctions was launched against him.

GERB leader Boyko Borissov argued that the legislative changes “copy and build on the German model” and are being adopted “to make sure that there is fuel.” They were adopted in a record 32 seconds by the parliamentary energy committee and submitted for discussion in plenary. In fact, the bill hugely expands the powers of the special manager, compared to a law drafted two years ago.

Under the German model of trusteeship, the state does not formally take ownership, but only temporarily manages the company. In Germany, the refinery in Schwedt, where Rosneft has a 50% stake, has been under state trusteeship since 2022, shortly after the start of the war in Ukraine. The Federal Network Agency of Germany (BNetzA), which is responsible for strategic infrastructure such as energy, telecommunications and rail transport, manages it on behalf of the state. The agency manages the refinery’s revenues through a special account under its control, which is used for salaries, logistics and other ongoing activities. If Rosneft’s stake is sold in the next 6 months, the funds will remain in Germany and the government, together with the European Commission, will decide if and how the owner will receive them.

The Bulgarian mechanism is significantly more radical, as it includes wide-ranging powers for the special manager, including the sale of assets and the deprivation of shareholders from voting rights. The imposition of a practically uncontrolled manager could discourage a potential buyer or strategic partner. In addition, the 6-month period during which this figure would act was cancelled, as well as the right to extend this period once. From the moment of the appointment of the special manager, shareholders cannot exercise their voting rights or their rights as sole owners of capital, as well as dispose of their shares or stakes in the capital.

So far, there has been no official announcement that Bulgaria is negotiating with the US for a postponement of sanctions. Despite assurances that the state has the legally required 90-day fuel reserves, many analysts express doubt that such reserves exist in full.

In an interview with the national TV channel BNT, Minister of Justice Georgi Georgiev announced that the solutions being sought are coordinated with European partners. “Alongside them, we are having intensive discussions with our American partners. I personally am leading the discussions with the office in the U.S. government that imposes these sanctions, so that we can coordinate our actions and behaviour as a partner country.”

It is in the hands of President Rumen Radev to block the 32-second law by vetoing it and returning it for new consideration by parliament. “It is extremely important that the Lukoil refinery has a reliable owner who has the capacity to develop it,” the president commented, without clarifying what he would do.

Energy expert Ilian Vassilev warned of the danger of Bulgaria finding itself in a legal vacuum: “President Radev, who consistently defends the property rights of Lukoil, will almost certainly veto it and refer it to the Constitutional Court. If this happens, the country could find itself in a legal vacuum, with Lukoil formally retaining ownership, while the state takes de facto control – blocking operations and paralyzing the fuel market.”

“Anyone who tries to delay this bill is working to stop the refinery in Burgas from operating,” said Stanislav Atanastasov (DPS-New Beginning, the political force of Delyan Peevski). His colleagues, along with the members of parliament from GERB, the socialist party BSP and the party “There is such a people” ITN, opposed giving the floor to the prime minister and the ministers of economy and energy from in the plenary hall.

The opposition accused the ruling majority of serving the interests of Delyan Peevski, the oligarch sanctioned for corruption by the US and UK.

“Two weeks are not enough to go around this refinery, less so to find a buyer. The real question is how you will regulate the fuel market, but instead you decide who will acquire Lukoil. And you will bring us some new Gunvor to Bulgaria,” said Radoslav Ribarski from the opposition “We continue the change – Democratic Bulgaria”. Iskra Mihaylova, from the opposition Vazrazhdane party, accused the authorities of participating in an action organized by Peevski, who in her words single-handedly wants to privatize the Lukoil refinery.

A special administrator is yet to be elected, and speculation has already begun about who will call the shots in the refinery. The opposition is considering whether to refer the law to the Constitutional Court. But the question remains open as to what will happen to the fuel market in Bulgaria after 21 November. Without security for supplies, the risks of deficit, high inflation, and social tension are very real. The Burgas refinery covers most of Bulgaria’s domestic fuel consumption with a share of over 50% on the wholesale market and exports significant quantities to neighboring countries (Serbia, North Macedonia, Greece, etc.).

The special manager will not be able to guarantee the fuel market, but he can surely take care of someone’s interests.

For Ilian Vassilev, the timing of state intervention is critical. “The difference is huge between Sofia intervening after Lukoil can no longer operate under sanctions, and doing so in advance, while the company is still functioning normally”, he said.

In his words, in the second hypothesis, Lukoil could present itself as a victim of arbitrary expropriation – a story that would easily find a response in courts and among sceptical European partners. “Domestic political, pro-Russian formations can use the dissatisfaction with a possible increase in fuel prices to fuel anti-Western sentiment and destabilize the government,” Vassilev warns.

It will soon become clear whether the state has truly addressed the risks to national security – or has simply opened another page in the long history of dependencies in the Bulgarian energy sector.

Caption: A person walks near a truck at a gas station of Russian multinational energy corporation Lukoil in Moscow, Russia, 27 October 2025. EPA/MAXIM SHIPENKOV