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Back-door Russian gas for Bulgaria?

Bulgarian president Rumen Radev’s caretaker government is secretly restoring Russian gas imports through the back-door device of LNG deliveries. Exposing this is vital – and might even stop the installation of a pro-Gazprom and pro-Putin government in Sofia after recent parliamentary elections.

It’s amazing what tricks our politicians get up to. Europe and its transatlantic friends are straining to help gallant Ukraine in a titanic struggle against Russian aggression that, one way and another, is convulsing the world. And what is Bulgaria’s caretaker government doing? Answer: it has recently decided to extend until end-2024 the permit for direct public procurements of refined petroleum products from Russia’s Lukoil bypassing mandatory tender procedures. That’s right, of refined petroleum products – petrol, diesel fuel, and the like – produced and imported by Lukoil to be used by government-sector vehicle fleets.

Now, the government is doing so by taking advantage of a derogation that Bulgaria received in June from the European Council (EC) – meaning an exemption from the obligation to observe certain sanctions imposed by the EU on the regime of Russian president Vladimir Putin. All other EU member states with ports and access to the sea are already banned from importing Russian crude oil. And a ban on imports of refined petroleum products from Russia will come into force on February 5 2023. But it will not apply to Bulgaria.

It should be explained that the derogation in question is not a symptom of unusual soft-heartedness towards Bulgaria or blanket absent-mindedness on Brussels’ part. Bulgaria’s main oil refinery is the Russian-owned Lukoil Neftochim, situated in the Black Sea port of Bourgas, and there are two reasons for special treatment. The first explanation granted back then in June, by PM Petkov, was that the Lukoil Neftochim refinery in Burgas is designed to process Russian Urals grade oil (which is not true) and that the exception will make it possible to adjust the facility for use of inputs from other sources. The second, in current circumstances rather more compelling, reason is that the refinery has been exporting most of the refined products it makes to Ukraine – supplying the needs of the Ukrainian army! Which seems to have a certain poetic justice to it, as well as being conducive to what the EC is trying to achieve.

However, it seems just plain weird that our caretaker government has chosen to parlay this derogation into a decision to spare Lukoil mandatory public procurement tender procedures and import refined products from Russia. Weird – or suspicious.

Weird logic on refined product imports

After all, Bulgaria has access to the world’s oceans and has both sea-ports and oil refineries, so we must assume that it’s physically possible to get non-Russian fuel from abroad or produce it here on the basis of non-Russian oil. Not only possible, indeed, but actually done: look at the statistics and you’ll find that Russian Urals grade normally accounts for no more than 60-70% of the crude oil tonnage imported by Bulgaria.

And yet, the government is justifying its decision by talking what would appear to be borderline nonsense. The “national interest” demands the import of Russian fuel. So, apparently, does the need to provide fuel for state institutions (for instance, the Bulgarian Army, the Ministry of Interior, all the ministries, the secret services, in fact the entire state apparatus). All of these, it seems, must rely entirely on Russian fuel refined products and imports. Without them, the “special regime” fleet that ferries around the president, the prime minister, ministers, and other high officials – plus their attendant security guards – will somehow cease to function.

Against the backdrop of constant assurances from the top that there is no change in Bulgaria’s geopolitical orientation, such steps can only be described as demagoguery – not to mention a stab in the back for EU and NATO countries’ solidarity with Ukraine.

It should be recalled that, under the reformist, pro-Western government of Kiril Petkov, which was toppled in June, Lukoil Neftochim oil-refinery on Bulgaria’s Black Sea coast was exporting fuel to the Ukrainian army via intermediaries. Under the caretaker government that succeeded it – appointed by Russophile president Rumen Radev and graced by Rossen Hristov as energy minister – we are actually importing refined products from Russia.

These articles analyses and comments are made possible thanks to your empathy and contributions, which are the only guarantors of independence and objectivity in our work. The Alternatives and Analysis team.

Now, there is no transparency and everything is veiled in secrecy and hearsay. But one thing’s for sure: Lukoil has been able to earn windfall profits worth hundreds of millions of dollars a month from importing and exporting fuels produced on the basis of Russian crude oil, and its ability to earn these one way or another has not been impaired at any point during the Ukraine crisis. The Bulgarian government is formally shielding Lukoil, a Russian company, from European sanctions, using its EU Member’s Club Card.

But if you think this is all there is to our state energy bosses’ double games, you are dead wrong. Here is a little story about imports of Russian gas that you won’t read anywhere else – probably because no-one except Alternatives & Analyses (A&A) thinks you should.

The Curious Case of the Good Ship Pskov

On September 9 this year, the Russian media alerted the world to the news that, after Gazprom stopped gas deliveries via the Nord Stream-1 pipeline to Germany, it had started loading liquefied natural gas (LNG) onto the Pskov, an LNG tanker with a liquid carrying capacity of 170,000 cubic metres. The terminal at which the loading was carried out is called Portovaya, and it is close to the point where Nord Stream-1 enters the sea, near St Petersburg.

According to these media, the stated route of this tanker included as its final destination the Greek LNG regasification terminal at Revithoussa. After it set sail, the Pskov made one stop at Egypt’s Port Said, at the entry to the Suez Canal, with the implication that it might be heading for the Asian market. According to Russian and other sources, however, the tanker was finally unloaded in Greece. And those sources note that “the buyers are Greek or Romanian companies, which might be reselling it in Bulgaria”!

The call at Port Said was probably a manoeuvre meant to blur the Russian origin of the natural gas in question by making it look as if it had been sourced in the Gulf. It is hardly a coincidence there was talk in industry circles of an Omani origin for the load delivered to Revithoussa – conveniently overlooking the fact that the Pskov hadn’t passed through the Suez Canal.

In the words of Vitaly Markelov, deputy chairman of Gazprom’s Executive Board, the sale of LNG from the Nord Stream terminal, “given the conjuncture of the natural gas market, makes sense because there is demand for our gas.”

A&A turns sleuth

Now, at A&A we believe in checking things rather than mere speculation. And the checks proved quite enlightening. Looking at data on the website of Bulgarian transmission system operator (TSO), Bulgartransgaz, on the gas entering Bulgaria via the Sidirokastron-Kulata cross-border link after October 1, I noted that the volumes had remained constant. Here is a screenshot

This seemed odd, given that that Azeri gas transmission had just been relocated from here to a point further east – namely the Interconnector Greece-Bulgaria (IGB), whose inauguration ceremony took place (in some style) in Sofia on October 1. Which suggested that the Azeri gas flows via Sidirokastron-Kulata had been replaced by new, non-Azeri gas, the most likely source being the LNG terminal at Revithoussa, with routing from there via the Greek TSO’s system and entry to the Bulgarian system by backhaul use of the Sidirokastron-Kulata link that used to carry Russian gas via Ukraine, Romania and Bulgaria and southwards to Greece.  

That, indeed, might be the case. For a bit more searching showed that the highest volumes transmitted via Sidirokastron-Kulata had coincided with the unloading on October 3 and 4 of LNG from the Pskov at the Revithoussa terminal. The quantity of LNG declared in the terminal’s register was 147,000 cubic metres (in liquefied form), the equivalent of 920,000 MWh. And on October 3 and 4, 102,000 MWh per day, or nearly 10 million cubic metres of regasified LNG, entered Bulgaria. The numbers for imported gas from Greece, seen in the screenshot above, remain high after the Pskov LNG tanker’s unloading.

Another detail fits. According to Revithoussa’s latest revised Annual Plan, the importer was the Greek company Mytilineos.

  The Greek company had been the intermediary in the first deals involving LNG deliveries to Bulgaria, which were brokered by Kolmar, a firm close to former prime minister Boyko Borissov. State-owned national gas-trading company Bulgargaz had earlier made identical deals for regasified (non-Gazprom) LNG using the Greek company as intermediary. Mytilineos has a long-term contract with Gazprom, which allows backhaul gas transportation deals, and also has annual unloading slots booked at the Revithoussa terminal and LNG import contracts, so it is the “usual suspect” when an intermediary is needed.

Russian media quoted Gazprom’s subsidiary Wintershall and OMV Romania as agents in the possible resale of the Pskov LNG to Bulgargaz.

That makes sense too. It is hard to believe that all or even most of the Russian gas unloaded at Revithoussa has ended up with Bulgargaz. LNG coming through that terminal hardly ever does end up with just one end-buyer, in fact, because Greece does not have enough long-term storage capacity to discharge a tanker at this time of the year, when gas demand levels are low before the start of the heating season. Some of the regasified Russian LNG would have remained in Greece or Romania. However, in the period concerned, there was a remarkable drop in gas shipments to Romania through the Giurgiu-Ruse interconnector

and only moderate additional volumes via reverse flows in the Kardam-Negru Voda 1 pipeline.

Answers please, gentlemen!

The following questions arise, given the secrecy around the Russian LNG, that need to be answered.

“Intermediary” had supposedly been a dirty word for both for Mr Radev’s caretaker government and for the energy spokesmen of GERB, Mr Borissov’s party. Yet now – again according to Russian sources – regasified Russian LNG imports are using the same Greek and Romanian intermediaries. The delivery chain involves the original seller (Gazprom), then Greek and/or Romanian intermediaries, and only then the Bulgarian importer.

Pretty much as soon as it took over at the beginning of August, the caretaker government had lambasted the greedy owners of unloading slots at Revithoussa, due to whom (it was said) Bulgargaz cancelled the six LNG cargoes from the US firm Cheniere that had been arranged in the dying days of the Petkov government. But now it turns out that caretaker energy minister Rossen Hristov’s narrative was simply untrue, that Russian gas is enjoying red-carpet treatment – and that slots just aren’t an issue any more.

All very strange…

Everyone has to compete. That what the three tenders announced by Bulgargaz are for.

But it seems that “everyone” doesn’t include Gazprom. Instead of straightforward competition, there has been what might – to put things in Putinesque terms – be called a “Special Commercial Operation”, executed by Gazprom and (most likely) Bulgargaz. And, ironically, executed against the background of a glamorous and star-studded gab-fest of Euro-Atlantic rhetoric about diversification at the opening ceremony for the IGB, with the participation of EC President Ursula von der Leyen, no less.

In this context, emergency- or crisis-motivated deliveries of Russian gas to Bulgaria were just the thing to raise the spirits of those parties and politicians who had bet on Gazprom and on Mr Putin, following the frustrating news from the frontline in Ukraine. These actions of President Radev and his government will have been coordinated with GERB, which emerged as winner of the elections held earlier this month. And this tasty fare has been liberally garnished with disinformation provided by pro-Russian politicians and media on the ‘dysfunctional’ and ‘illegal’ interconnector with Greece.

All these politicians – from Mr Radev and Mr Borissov right down to the politically appointed top management of Bulgargaz – owe us answers. In most cases they are answers that we’ve known for a depressingly long time. Like the fact that those at the top of Bulgarian politics tend to prefer Russian gas because it comes with some very tangible material benefits for them.

But the Bulgarian public really deserves more detailed answers. And more insight into what lies ahead. For many consider this Russian gas delivery a dress rehearsal for a longer-term LNG deal with Gazprom after the present gas supply contract expires at the end of 2022. If that’s so, we need to know so we can plan to be depressed some more.

Or else, plan to do something about it. Which might not be impossible. If Mr Radev, Mr Borissov and their pals in the “Gazprom coalition” are caught red-handed, they will find it hard to build on resumed Russian gas deliveries and form a pro-Putin government.

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