Bulgaria is Ending the Derogation for Russian Oil?

The Parliamentary Economic Committee adopted the first reading of the Bill for Amendments and Supplements to the Law on Control of Implementation of Restrictive Measures in View of Russia's Actions Destabilizing the Situation in Ukraine, submitted by Boyko Borissov, Kiril Petkov, Hristo Ivanov, Delyan Peevski, Delyan Dobrev, Desislava Atanasova, Mustafa Karadayi and Ivaylo Mirchev on July 28, 2023.

The bill was supported by 12 votes in favor and 5 against, with no abstentions.

It stipulates that within 30 days of its entry into force, the Council of Ministers will cancel the derogation for Bulgaria for Russian oil. In the event that the Security Council of the Council of Ministers considers that the term is insufficient, it proposes to the National Assembly to determine another term with a deliberate decision, which will become mandatory for the Council of Ministers. The Prime Minister leads the actions of the process and is responsible to the National Assembly for their implementation, the bill also states.

The reasons for the draft law state that ending the derogation from the oil embargo would be the second step in depriving Lukoil, and thus the Kremlin, of additional profits to finance its military efforts in Ukraine. If the Russian company does not meet the condition of full diversification of crude oil supplies, the government must place the refinery and all other assets owned by Lukoil under state control through a special commercial manager.

The first step was the termination of the concession contract with Lukoil for the operation of the Rosenets oil terminal, it is recalled in the reasons, noting that this will help Bulgaria ensure that the terminal is not used to evade sanctions by smuggling oil and would ensure the correct accounting of VAT and excise revenues, which are vital for fiscal security.

With proposals for changes to the Law on the Administrative Regulation of Economic Activities Related to Oil and Petroleum Products, the draft law provides that upon establishing circumstances that threaten national security, public order, the supply of critical resources, disruption of competition in case of a monopoly or dominant position, when this threatens national security, or violation of international restrictive measures or those of the European Union, which are mandatory for Bulgaria, the Security Council to the Council of Ministers proposes the initiation of a procedure for the appointment of a special commercial manager.

The draft law provides that the special commercial manager shall be appointed on the proposal of the Council of Ministers by the National Assembly no later than 2 weeks after the proposal. The special manager is entered under the person's account in the commercial register and the register of non-profit legal entities. The special commercial manager is appointed for a period of 6 months, and this period can be extended once for the same period, BTA reported.

In mid-2022, the European Commission granted Bulgaria an exemption from the European oil embargo on Russia, which is valid until the end of 2024. Before the summer vacation of the parliament, GERB-SDS, "We Continue the Change-Democratic Bulgaria" and DPS submitted a proposal for its early termination. The derogation came into effect on December 5 last year during the caretaker government and will expire on December 31 next year.

During the discussion of the second reading of the draft budget for 2023, two proposals on the subject of the derogation were introduced in the competent parliamentary committee. The Budget Committee did not accept any of the proposals then. The proposal of Venko Sabrutev from "We Continue the Change-Democratic Bulgaria" stipulated that within 30 days from the promulgation of the law in the "State Gazette" the Council of Ministers would take action to analyze the risks in connection with the early cancellation of the derogation, and Delyan Dobrev from GERB said – this should be done within 7 days. "We express our will to end the derogation", said Delyan Dobrev, who commented on the GERB's proposal. WCC-DB indicated that, in principle, they have a position in the direction of dropping the derogation, but not without prior assurances that the price of gasoline for consumers will not increase during this period and that there will be no problems with deliveries to the Bulgarian market due to technical reasons. The two proposals then caused a discussion among the members of the commission about the benefits and harms for Bulgaria's economy and fuel prices in the country, the geopolitical orientation of the country in the context of the war in Ukraine, the possible environmental risk and about when to end the derogation and how prepared should the country be. The Minister of Finance, Asen Vassilev, pointed out at the time that this is a serious issue in view of the work of the refinery in Burgas and the state of its installations, the possibilities to supply oil due to the state of the Bosphorus Strait and the risk in the Black Sea, as well as the need to analyze the economic and tax effects.

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