Bulgaria’s parliament has enacted new legislation to place the nation’s largest oil refinery, Lukoil Neftochim Burgas, under state control, a direct response to recent U.S. sanctions targeting the Russian energy giant over its war in Ukraine. The move aims to avert a potential shutdown of the crucial Balkan facility.
The law, fast-tracked through parliament, allows for the appointment of a special administrator to manage shareholder voting rights and potentially sell shares, subject to government approval. This drastic measure comes after the U.S. Treasury Department sanctioned Lukoil and Rosneft last month, with those restrictions set to take effect on November 21, threatening to halt the refinery’s operations due to anticipated payment processing issues with counterparties.
Lukoil, which has owned the Neftochim plant in the Black Sea city of Burgas since 1999, operates what is considered the largest oil refinery in the Balkans and is Bulgaria’s largest company, reporting a turnover of approximately 4.7 billion euros ($5.4 billion) in 2024. According to the draft legislation proposed by Bulgaria’s ruling coalition, the impending U.S. sanctions “will effectively lead to the shutdown of the refinery’s operations… due to the refusal of all counterparties to make payments to companies belonging to Lukoil,” necessitating state intervention.
The legislation, however, has not been without its critics. Opposition lawmakers voiced concerns during parliamentary debate, labeling the swift passage as rushed and warning that the special administrator’s power to sell shares could expose Bulgaria to legal challenges. Ruslan Stefanov, an expert in energy governance and security at the Center for the Study of Democracy, characterized the government’s approach as a “risky” step, despite acknowledging the understandable desire for greater authority. Stefanov noted that “leaving the possibility of nationalization open — even if the desire to assert more authority is understandable — it is very risky and could weaken the effect of the sanctions, allowing Lukoil to sue the Bulgarian state and obtain much higher compensation.”
This legislative action follows earlier measures by Bulgarian lawmakers last week, who imposed temporary restrictions on exports of petroleum products, including to other European Union members. These restrictions, which apply to diesel and aviation fuel but include exceptions for refueling vessels and aircraft, as well as supplies to NATO or EU member state armed forces for common security purposes, were enacted to ensure sufficient domestic supplies in the wake of U.S. sanctions on Russian energy. The refinery’s distribution unit holds a near-monopoly on the Bulgarian market, encompassing a network of oil depots, petrol stations, and suppliers for ships and aircraft, underscoring its pivotal role in the national economy.
The future operation of Lukoil Neftochim Burgas under state oversight will be a critical test for Bulgaria’s energy security and its navigation of complex international sanctions, balancing economic stability with geopolitical alignments.