U.S. sanctions on Russian oil companies trigger a chain reaction, severely challenging Bulgaria's energy security.

The United States has imposed a new round of sanctions on Russia, specifically targeting two major Russian oil giants—Lukoil and Rosneft. Both companies, along with 34 of their subsidiaries, have been added to the sanctions list, affecting their operations in oil and gas exploration, extraction, and development. In response, Lukoil has announced the initiation of procedures to sell its overseas assets. This series of events has not only triggered a chain reaction in the international energy market but has also created significant uncertainty for Bulgaria, which heavily relies on Lukoil.

Russian company Lukoil directly or indirectly owns multiple enterprises in Bulgaria, including the Balkan Peninsula's largest refinery, the Neftochim Burgas Refinery (hereinafter referred to as the "Burgas Refinery"). With a daily crude oil processing capacity of 190,000 barrels, this refinery is one of the largest and most modern refining facilities in Bulgaria, accounting for nearly two-thirds of the country's fuel supply, covering critical categories ranging from vehicle fuel to industrial fuel. For a long time, the refinery has also been the source of nearly all aviation fuel in Bulgaria, playing a crucial role in ensuring the normal operation of both domestic and international flights in the country.

Given that Bulgaria currently lacks other facilities with equivalent production capacity and technical capabilities, a shutdown of the Burgas Refinery would pose unprecedented challenges to the country's fuel supply structure.

Some have suggested that Bulgaria could rely on neighboring countries such as Greece or Romania for fuel supplies. In response, Svetoslav Benchev, Chairman of the Bulgarian Petroleum and Gas Association, has firmly refuted this idea. Benchev stated that if the Burgas Refinery were to shut down, meeting Bulgaria’s daily fuel (gasoline and diesel) consumption of 8,000 to 9,000 tons would require between 360 and 370 tanker trucks to cross the border each day—a scenario he described as practically impossible.

Beyond energy supply, the Burgas Refinery plays a pivotal role in Bulgaria's economy. As one of the largest private enterprises in the country's industrial sector, the refinery makes significant contributions to Bulgaria's Gross Domestic Product (GDP) and generates substantial employment opportunities. If its operations were disrupted, not only would energy supply become a critical issue, but the labor market and local economy would also suffer severe impacts.

Regarding public concerns about a significant increase in fuel prices, Bulgaria's Energy Minister Stanchev stated that the country's current fuel reserves remain relatively sufficient and are expected to last until the end of this year. The government will also take strict measures to curb price speculation. However, experts generally believe that relying solely on inventory management is insufficient to address potential risks, especially amid ongoing uncertainties surrounding sanctions and geopolitical factors. They emphasize the necessity of developing robust contingency plans in advance to ensure uninterrupted supply chains.

Faced with practical pressures, Bulgarian Prime Minister Rosen Zhelyazkov stated that the government will explore various feasible solutions, including the appointment of a "special administrator." Analysts point out that once a "special administrator" is in place, they would take over all operations of the refinery, including crude oil procurement, refining, product sales, and revenue management, to ensure stable supply. However, Bulgaria's energy expert and former Deputy Minister of Energy, Yavor Kuyumdzhiev, has raised doubts about the feasibility of this mechanism. He questions how to clearly define its functions under the law, how to take over management authority, and who would be qualified to serve in such a role. Furthermore, since asset ownership would still belong to the original company, the "special administrator" would need to establish a new operational framework, such as setting up another company to purchase crude oil for processing at the refinery and selling the products under the new company's name, in order to circumvent the current sanctions.

Another option on the table is the sale of Lukoil's assets in Bulgaria. Some argue that, from the perspective of national interests and long-term development goals, if Bulgaria can attract well-known large investors from Western countries, it would hold advantages in terms of corporate governance, capital strength, and technological investment. Such a move would also help reduce vulnerability to geopolitical risks.

To safeguard energy security and national security, Bulgaria's Parliamentary Energy Committee recently urgently passed an amendment to the Investment Promotion Act. The amendment stipulates that any sale or transfer of Lukoil's assets in Bulgaria must receive approval from both the Council of Ministers and the State Agency for National Security.

At the same time, some experts have advised the Bulgarian government to seek an extension of the sanctions. Benchev cited precedents from Germany and Serbia. In Germany, a similar refinery was granted an exemption after being placed under a "special state supervision" system, while Serbia previously obtained an eight-month extension from the United States. Benchev believes that Bulgaria has every reason to submit a similar application, aiming to secure a time window that would provide more operational space for the implementation of asset sales and management mechanisms.

Some experts have also analyzed the scope of the related sanctions from a legal perspective. Although U.S. sanctions primarily restrict dealings with U.S. entities and companies operating in the United States, they do not, in theory, directly impose legal constraints on operations within the European Union. However, given the heavy reliance of the global trade system and banking networks on U.S. dollar settlements, large international banks often adopt cautious strategies when facing risks, which could still impede the actual operations of companies. Nevertheless, Kuyumdzhiev believes that the sanctions only become effective when Lukoil uses U.S. dollars for payments. If transactions are conducted in non-U.S. dollar currencies and entirely bypass the U.S. financial system, the impact of the sanctions could largely be circumvented.