Bulgaria Seizes Control of Lukoil Refinery Amid U.S. Sanctions

On Friday, Bulgaria’s parliament enacted legal reforms aimed at bringing a key Lukoil refinery in the eastern part of the nation under state supervision in response to U.S. sanctions imposed on the Russian oil corporation.

Last month, the United States imposed sanctions on Russia’s two largest oil firms, Rosneft and Lukoil, as a consequence of the ongoing conflict in Ukraine.

Lukoil has been operating the Neftochim facility, the biggest oil refinery in the Balkans, located in Burgas by the Black Sea, since 1999. It is also the largest company in Bulgaria.

The sanctions, which are set to take effect on November 21, are expected to effectively halt the refinery’s operations, as the draft legislation stated that they would result in all business partners refusing to conduct transactions with Lukoil-affiliated entities.

As per the new legislation, a special administrator can be appointed to oversee the voting rights of the shareholders. This administrator may have the authority to sell shares to a new owner, subject to government approval.

The bill was expedited through parliament, receiving support from a majority of lawmakers.

During discussions on the bill, opposition members accused the sponsors of pushing the legislation through too quickly.

They also criticized the provision granting the special administrator the authority to sell shares of the refinery, arguing it could provoke legal action against Bulgaria.

Ruslan Stefanov, an energy governance and security expert at the Center for the Study of Democracy, described the government’s approach as a positive move, albeit «risky.»

«Keeping the door open for nationalization — while the intent to assert control is understandable — is quite perilous and could undermine the impact of the sanctions, allowing Lukoil to take legal action against Bulgaria and potentially secure significantly higher compensation,» Stefanov commented to AFP.

Last week, Bulgarian lawmakers introduced temporary restrictions on the export of petroleum products, including to other EU countries, to safeguard supply levels following the U.S. sanctions on Russian energy.

The restrictions include exports of petroleum products such as diesel and aviation fuel.

However, exceptions are made for the refueling and resupply of domestic and foreign vessels and aircraft, as well as shipments within the EU to NATO forces or the military of any EU member state in relation to the bloc’s common security and defense policy.

The Lukoil-Neftochim refinery plays a crucial role in Bulgaria’s economy, reporting revenues of approximately €4.7 billion ($5.4 billion) in 2024.

Its distribution division holds a near-monopoly in the Bulgarian market, comprising a network of oil depots, gas stations, and companies that supply ships and aircraft.