Unless Lukoil pays BGN 1,500 Mln-plus in delinquent taxes, charges, exemption for import of russian oil will be removed

Bulgarian Prime Minister Nikolay Denkov has assured the parliamentary groups of the ruling majority that Lukoil told his office on Sunday that they will pay over BGN 500 million in taxes. Unless this happens, Bulgaria will lift the exemption enabling the Russian-controlled oil refinery to use crude imported from Russia despite a ban imposed by the EU in connection with the war against Ukraine.

This transpired from a statement made by Movement for Rights and Freedoms (MRF) Co-Floor Delyan Peevski after a meeting of representatives of the GERB-UDF, Continue the Change - Democratic Bulgaria (CC-DB) and MRF parliamentary groups at the National Assembly on Monday morning. 

Apart from the PM, the meeting also involved Finance Minister Assen Vassilev (online) and CC-DB Co-Floor Leaders Kiril Petkov and Atanas Atanasov.

"In addition to these BGN 500 million, Lukoil will also pay BGN 1 billion in outstanding back payments due to the Exchequer for the period since January [2023]," Peevski said, adding that the delinquent amount will be claimed by an amendment to the law. He was referring to the monthly fee that Lukoil is supposed to remit to the Energy Security Fund, representing the difference between the higher commodity market price of Brent crude and the lower price of the Urals oil originating from Russia that the refinery processes. 

On Friday, GERB announced it would move a draft resolution in Parliament next week, giving the Government one week to withdraw the exemption for the Lukoil Neftochim refinery in Burgas (on the Black Sea). GERB leader Boyko Borissov He criticized the Government for doing nothing to address rising fuel prices at a time when the oil price remains unchanged. MRF said it would second the motion to lift the derogation "because this is a matter of strategic importance to Bulgaria and its citizens". CC-DB opposed the move, arguing that it would result in a fuel price spike on the local market.

"Let Lukoil clearly hear us about that, let them not assume that they won't be paying their taxes in Bulgaria," Peevski told a news briefing after Monday's meeting. He claimed credit for GERB and his party for making this possible. 

The MRF Co-Floor Leader said that draft legislation will be moved to put Lukoil's fuel storage depot under the control of the State Reserve and Wartime Stocks State Agency. "We want to free Bulgaria from the monopoly on the Lukoil storage depots," Peevski commented.

"Right now, ending the derogation in seven days' time is pointless because this may jolt the market. It is far more sensible to focus on the State collecting its taxes," Kiril Petkov said after the meeting.

Asked whether GERB-UDF and the MRF should have threatened to lift the ban so that the taxes would be collected, the CC-DB Co-Floor Leader said that the Finance Minister had already told Lukoil that they should pay their taxes by the rules. "Lukoil should realize that if they do not pay their taxes, the State has many other ways to react," he pointed out.

Petkov called on the company "to remit their taxes the way they should and not play tricks," referring Lukoil's attempt to offset some old losses against the amounts they owe the Exchequer which, according to CC-DB and Finance Minister Vassilev, is not possible.

"Under threat that the derogation will be lifted, the Cabinet committed to apply the law adopted by the previous National Assembly," GERB MP Delyan Dobrev explained after the meeting. "Under that law, 70% of the difference between Urals and Brent must be contributed to the Energy Security Fund and be paid back to fuel consumers in the form of compensations. In early August we calculated the amount that Lukoil had failed to pay because the law was not enforced by two successive cabinet and found that by August Lukoil should have paid BGN 622 million," Dobrev specified. 

"The Russian oil price is capped at USD 60 per barrel, whereas Brent costs USD 100 per barrel. Lukoil is pocketing this difference and is generating an excess profit thanks to the derogation that Bulgaria obtained for them. We have been assured that they will start to comply with the law and will immediate start to give compensations to consumers," the GERB MP said.

The MRF Co-Floor Leader said that draft legislation will be moved to put Lukoil's fuel storage depots under the control of the State Reserve and Wartime Stocks State Agency. "We want to free Bulgaria from the monopoly on the Lukoil storage depots," Peevski commented.

President's Veto to Be Overridden

Peevski announced that Parliament will hold an extraordinary plenary sitting on Friday so as to override a veto imposed by President Rumen Radev on the latest amendments to the Energy Act.

The participants in Monday's meeting agreed with Finance Minister Vassilev that the law would be revised so that the National Customs Agency will collect the fees, but if Bulgartransgaz does not get the money from Gazprom, the Finance Ministry would claim payments directly from Gazprom and Russia through the Customs Agency, which will avert the risk of Bulgartransgaz going bankrupt, Peevski explained.

Petkov pointed to the importance of overriding the veto as soon as possible because the second payment under the Recovery and Resilience Plan is contingent on that law. "As long as the veto stands, the whole process is delayed and there is a risk of the second payment not being remitted until the end of the year," he explained. "That is why we will present ourselves together on Friday to override the veto as soon as possible, to try to reduce the delay, so that the money would reach the Bulgarian budget promptly," Petkov said.