Time to Capitalize on Bulgaria’s Role as the EU’s Only Gateway for Russian Pipeline Gas
The Logic Behind a €10/MWh Entry Excise Tax on Russian Gas
Bulgarians must be exhausted from hearing about their country’s “exceptional” geostrategic location and how successive governments have leveraged it as a transit hub for energy—mainly Soviet and Russian gas. The Turk Stream deal was meant to solidify this role, ensuring Russian gas would not bypass Bulgaria. Long on political rhetoric, short on economic proof.
The latest gas transmission system operator (TSO) data shows that Russian gas transiting Bulgaria is on the rise. A record 63.2 million cubic meters per day now flows through Turk Stream and the Botaş system, nearing technical entry capacity. This translates to over 23 billion cubic meters annually, compared to domestic consumption of just 2.6 billion cubic meters—suggesting Bulgaria should be “swimming” in gas.
Beyond traditional destinations like Greece, Serbia, North Macedonia, and Hungary, Bulgartransgaz now transits Russian gas to Ukraine, Moldova, and Slovakia via the so-called “Vertical Gas Corridor”, ironically designed to reduce dependence on Russian supplies.
Turk Stream—more accurately Balkan Stream—was marketed as a guarantee of “cheap” Russian gas. Yet, while neighboring countries secure better prices, Gazprom had no hesitation in cutting Bulgaria’s supply in April 2022. Despite this, Bulgaria continues to facilitate Russian gas transit, earning revenue but assuming disproportionate risks and adding vulnerabilities.
If Bulgaria halts transit, Bulgartransgaz faces immediate bankruptcy, leaving the country with mounting debt.
The Gas Hub ‘Drama’
Remember the grand Turk Stream selling points by the GERB government that Bulgaria will turn a “hub of hubs” for Russian gas trade and most of it will end being traded on the Balkan Gas Hub Exchange? In reality, Turkey, Greece, Romania, and Hungary have all claimed hub status instead. True hubs are defined by market liquidity and competitive pricing, not just transit infrastructure.
- Turkey has developed its entire natural gas value chain—owning exploration fleets, boosting domestic production, securing LNG contracts, diversifying imports, and expanding infrastructure. It balances domestic consumption while exporting surpluses via Bulgaria into Central Europe.
- Romania has a long history of gas exploration, production, imports, storage, and trading, actively participating in regional markets.
- Hungary follows a similar model, with a mix of domestic and foreign gas assets.
- And Bulgaria? It has virtually zero domestic production, a critical foundation for any real gas hub. While local production buffers against market fluctuations, Bulgaria actively discourages gas exploration, leaving the country 100% dependent on imports.
Bulgarian gas companies lack an international footprint—they neither produce nor trade gas abroad, limiting their influence in regional markets. Meanwhile, Chiren gas storage expansion has stalled for over two decades, and Russian gas dominance stifles competition.
“Best Supporting Role”
Despite controlling the EU’s only remaining entry point for Russian gas, Bulgaria is not the real beneficiary of Turk Stream. That title belongs to Turkey, Hungary, and Serbia. In an Oscar-worthy geopolitical drama, Bulgaria deserves the award for “best supporting actor.”
Unlike Hungary, Turkey, and Serbia, where Gazprom funds its own infrastructure, Bulgaria financed the Turk-Balkan Stream project through state-owned Bulgartransgaz, indebting both the company and the state while relying on a single client—Gazprom. Meanwhile, Russia has labeled Bulgaria—the investing country in the Turk Stream, that ships exclusively Russian gas and helps —an “enemy state.”
Germany, Poland, and Ukraine have completely halted Russian pipeline gas. Yet, Bulgartransgaz remains addicted to transit revenues, ensuring Bulgarian governments align with Turk Stream’s operational needs and consistently vote “no” on any EU sanctions against Gazprom.
What Does Bulgaria Get in Return?
Bulgartransgaz’s transit tariffs on Russian gas are significantly lower than those charged by TSOs in Greece, Romania, and Moldova. Even Serbia and Hungary secure better terms, rendering the Vertical Gas Corridor uncompetitive compared to Turk Stream. EU- and U.S.-backed projects aimed at diversifying gas supply through Bulgaria have facilitated more Russian gas transit instead. That is no sudden revelation but an expected result given Gazexport gas price dumping.
The GERB governments and President Radev have consistently prioritized the interests of transit nations over Bulgarian citizens and the economy. Despite transiting six times more gas than it consumes, Bulgaria’s fiscal and consumer benefits remain negligible. Furthermore, Bulgarian consumers pays 4 times more for Russian gas that its receives in transit services fees, yet Russian transit gas defines its foreign policy and energy security priorities.
Bulgaria: A Sponsor of Putin’s War?
The surge in Russian gas transit through Bulgaria directly bolsters Russia’s war chest. According to Russian Ministry of Finance data in January 2025, Russia’s oil and gas revenues rose 16.9% year-over-year, reaching 789.1 billion rubles (€8.6 billion), with gas export duties alone generating $757 million—with Bulgaria taking the lead as entry gate of Gazprom piped gas exports to the EU, while Bulgarian lawmakers hesitate to impose an additional excise tax on transit.
It should come as no surprise that Bulgaria tops the EU’s negative list in the ratio between the official Bulgarian military aid to Ukraine and the revenues that the Kremlin receives from Russian energy sales—a shocking 0.1%.
The Bulgartransgaz Debacle
In 2019, before Balkan Stream, Bulgartransgaz’s pre-tax profit stood at BGN 210.4 million. By 2023, after a BGN 3 billion investment, profits had risen by a mere BGN 25 million. Would you make such an investment with your own money?
The EU directed “open season” procedure for allocating Turk Stream capacity as expected attracted only one bidder—Gazprom and its proxy MET.
Even more troubling, Bulgartransgaz experts calculated that the minimum access and transmission price required for Balkan Stream’s project profitability was BGN 31.66/MWh for 1,000 cubic meters of gas along the CS Provadia-Kireevo (Serbian-border) route.
Gazprom ignored this minimum price and instead presented a “take it or leave it” offer of no more than BGN 20/MWh—a rate equivalent to tariffs on the already depreciated Trans-Balkan pipeline.
Under pressure from geopolitical considerations—and personal debts owed by Borisov and Peevski to Putin for the failed South Stream project—Bulgartransgaz accepted an unprofitable deal.
A comparison of Bulgartransgaz’s pre-tax profits from 2019 and 2023 confirms that expert warnings were entirely justified. An extra BGN 25 million in return of a BGN 3 billion investment?!
Gazprom’s Push to Bury the Trans-Balkan Pipeline
Even more alarming were the additional concessions made to guarantee Turk Stream’s implementation.
A quick glance at Bulgartransgaz’s website shows that natural gas volumes flowing through the two pipes of the Trans-Balkan pipeline in the Kardam–Negru Voda 2 & 3 section—with a total capacity of 12 billion cubic meters—are currently at zero.
This comes at a time when these pipelines are a crucial part of the Vertical Gas Corridor, meant to transport significant non-Russian gas volumes to Ukraine, Moldova, Hungary, and Slovakia.
The explanation? The section of the Trans-Balkan pipeline between the CS Lozenets and CS Provadia compressor stations—which precedes the Kardam-Negru Voda 2 & 3 section—was blocked for Turk Stream exclusive use. And for four years, Bulgartransgaz has done nothing to restore capacity along this route.
As a result, the “zero flow” at Kardam–Negru Voda 2 & 3 will persist for the foreseeable future.
In short, to secure transit revenues from Russian gas via Turk Stream Bulgartransgaz has deliberately forfeited comparable revenues from the Trans-Balkan pipeline to Romania.
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Thankfully, sensible professionals at Bulgartransgaz opposed Gazexport’s proposal to dismantle or scrap the second and third pipelines between Kardam and Negru Voda. However, most of them have since left the company.
Maneuvers to Conceal Losses
To obscure financial losses, Bulgartransgaz’s management deliberately masked the cross-subsidization of Turk Stream transit with revenue from domestic transmission and other customers.
They achieved this by consolidating all transmission and transit revenues into a single category, making it nearly impossible to track financial flows from Balkan Stream and other sources.
To compensate for lost revenue from Gazexport, Bulgartransgaz raised transmission tariffs on the national grid and other routes—shifting the burden onto consumers and businesses.
It was not Bulgaria’s national energy regulator (CEWRC), but rather the Association of European Energy Regulators (ACER) that exposed the manipulation of the entry-exit tariff methodology and cross-subsidization between the transmission and transit networks.
This mismanagement is most evident at network junctions that serve both the national and transit networks, such as Vulchi Dol in the North-East Operating Region.
Here, Bulgartransgaz’s management arbitrarily split costs 50/50 between the national and transit networks—despite the fact that the volume of gas flowing through the national network is only a fraction of that in the transit system.
The result? Cross-subsidization—where Bulgarian consumers and businesses are forced to pay higher fees to cover losses from unprofitable transit contracts.
The Real Cost of Turk Stream
The Trans-Balkan pipeline in reverse—a key component of the Vertical Gas Corridor—remains effectively blocked, except for the Kardam-Negru Voda 1 section. This has allowed Gazprom to monopolize transit flows via Turk-Balkan Stream.
By agreeing to Gazprom’s terms on Turk Stream, Bulgaria forfeited a $1 billion, 10-year revenue stream under a “take-or-pay” transit contract, locking itself into deepened dependence on Russian gas.
Summary of Profits and Losses:
- BGN 3 billion invested through debt
- BGN 25 million in additional annual revenue (<1% return on investment)
- Subsidized Gazprom with below-cost transit rates, compensated by higher fees on other clients
- Lost BGN 2 billion in Trans-Balkan pipeline transit revenues
- Blocked competition, undermining gas diversification, heightening dependence on Russian gas, and reducing market resilience
Despite these losses, former Prime Minister Borissov and current Bulgartransgaz CEO Malinov continue to hail Turk Stream as an “unqualified success.”
The Future as the Past
If you think the failures of Turk Stream (Balkan Stream) are behind us, think again. The traps have been set, ensuring Bulgaria will pay for them for years to come.
Take, for example, the long-term maintenance costs of Balkan Stream’s warranty over the next decade.
By law (Article 160(4) of the Spatial Planning Act), when a gas pipeline is built, the contractor must provide an irrevocable 10-year warranty, covering all necessary repairs at their own expense (Article 163a of the same Act).
The Arkad consortium, responsible for constructing Balkan Stream, did provide a guarantee—but instead of a bank guarantee, it submitted an insurance policy covering BGN 254 million, issued by OZK Zastrahovane, a company owned by Hristo Kovachki, who has ties to Magnitsky-sanctioned political oligarch Delyan Peevski.
However, OZK Zastrahovane has a capital of just BGN 20 million!?
A Warranty in Name Only
The flaws in this arrangement became immediately evident.
Due to the rushed construction, several sections required repairs and finishing work in the first years. But when the question arose who should pay, the insurer refused to cover the costs.
Rather than filing a claim under the insurance policy, Bulgartransgaz chose to absorb the expenses itself—nearly BGN 400,000—effectively waiving its rights under the insurance.
It remains an open question why this insurance policy was accepted in the first place, given that:
- The insurer lacked sufficient capital and reserves
- There were no reinsurance contracts to guarantee coverage
This deliberate waiver of insurance and warranty claims is not unprecedented in Bulgartransgaz’s history, but never before has it happened on a project of this scale.
At its core, this constitutes criminal negligence.
Even more concerning, these improperly recognized costs should never have appeared in Bulgartransgaz’s financial statements—since warranty maintenance is a legal obligation of the contractor, not the state-owned company.
What Happens When a Major Breakdown Occurs?
The risk of a major failure is significantly higher due to the rushed, substandard construction. If a serious breakdown occurs during the warranty period, who will foot the bill? Given the insurance policy is useless, the costs will fall on Bulgartransgaz and, ultimately, Bulgarian taxpayers. And yet, we are still told that Turk Stream is a successful business project. These expenses should not be recognized as justified by the auditors of BTG.
Cui Bono? Who Benefits?
I won’t hand you ready-made answers—draw your own conclusions.
But let’s be clear—who benefits from Turk Stream?
It’s certainly not Bulgarian citizens.
Not Bulgartransgaz.
Not the state.
Not energy consumers.
The real answer?
Look no further than Vladimir Putin’s press conference, where he referenced the €800 million that “disappeared” into companies linked to top Bulgarian politicians and oligarchs.
A classic case of Bulgaria’s post-communist era politics:
👉 Nationalization of losses.
👉 Privatization of profits.
The Problems for Bulgargaz
The operational stability and competitiveness of Bulgargaz have deteriorated since the launch of Turk Stream. While the pipeline benefits Gazexport and its intermediaries, Bulgargaz is squeezed by:
- Gas supply contract termination by Gazprom and related pressures
- Inflated gas supply replacement and added transmission costs
- Gas price manipulation by Gazprom at the behest of the Kremlin
If Bulgargaz attempts to expand its trading base beyond Bulgaria—for instance, by selling surplus gas to Serbia—it faces an unequal playing field against Gazexport and Turkey’s BOTAŞ.
This unfair competition extends beyond Bulgargaz. Any Bulgaria-based gas company not directly tied to Gazexport or its proxies faces:
- Higher transit fees
- Limited access to Turk Stream capacity
- Market exclusion in key regional economies (North Macedonia, Greece, Serbia, Hungary, Moldova, Slovakia)
At the same time, Russian gas reaches Bulgaria at inflated prices—higher than in neighboring countries—enriching intermediaries like Litasco’s affiliate, Sustainable Energy Supply.
Bulgaria’s Missed Opportunity: A Shift to Alternative Gas Sources
Had Bulgaria fully transitioned to Azeri gas and direct LNG supplies from the U.S. and Qatar, prices could have been at least 20% lower.
For comparison at current price levels:
- U.S. LNG could land in Bulgaria for €30/MWh
- TTF spot price stand at €50/MWh
But instead of energy independence and lower prices, Bulgaria remains trapped in Russian supply chains.
Orban Über Alles: Hungary’s Russian Gas Advantage
While Bulgaria suffers financially, Hungary reaps the benefits of Russian gas deals.
Hungary buys 7.5 billion cubic meters of Russian gas (2025) at an approximately 10% discount—a benefit worth approximately $400 million.
This allows Hungary to:
✔ Sell gas at lower prices than on the Austrian exchange (linked to German and Western European markets)
✔ Expand its regional market reach with cheap Russian gas
✔ Advance Viktor Orbán’s gas-to-geopolitics leverage—promoting Trumpism without buying a single liter of U.S. energy
In contrast, Bulgaria gains nothing—neither financially nor geopolitically.
The More Bulgaria Transits Russian Gas, the Less It Gains
- 20+ billion cubic meters of Russian gas are expected to flow through Strandzha and Strandzha 2 in 2025
- These flows will generate $12 billion in revenues at current prices
- The bulk of profits will go to Gazexport and intermediaries, mostly from Turkey and Hungary, while Bulgaria will receive only $250 million in transit fees
Why is Bulgargaz’s Regulated Gas Price 84 BGN/MWh, While Market Prices Exceed 100 BGN/MWh?
The answer lies in the oil-indexed Azeri gas contract, which is offsetting the higher cost of Russian gas from Turk Stream.
But the absurdities don’t end here:
- Some cheap Azerbaijani gas received in equal monthly installments must be forcibly resold below TTF spot prices due to seasonal demand fluctuations and limited storage capacity
- The main buyers? The same companies that resell expensive Russian gas back to Bulgargaz—such as Greece’s Mytilineos
The Cost of Failing to Ban Russian Gas
Had Bulgaria: banned Russian gas imports entirely and gradually switched to Azeri gas and direct LNG from the U.S. and Qatar, gas prices for consumers would be at least 20% lower—both regulated and market-based.
This shift would:
- Enhance energy security
- Reduce exposure to Russian market and geopolitical manipulation
- Align Bulgaria with EU energy diversification goals
The Case for a €10/MWh Surcharge on Russian Gas
Everyone along the Turk Stream route profits: Russia, Turkey, Greece, Serbia, Hungary and all intermediaries. In the meantime, Bulgaria absorbs all the risks—while Bulgarian consumers and businesses bear the cost. A €10/MWh levy (or excise duty) on Russian gas entering Bulgaria would:
✔ Stimulate competition by making alternative gas sources more viable
✔ Counteract Russian gas price dumping in the region
✔ Enhance Bulgaria’s energy security and reduce vulnerabilities
✔ Ensure Bulgaria captures a fair share of transit benefits
It’s time for Bulgaria to stop being a passive transit corridor and start leveraging its strategic position for real economic gains.
A €10/MWh surcharge on Russian gas is not just an option—it’s a necessity.
It is time for Bulgaria to stop being a passive transit player and start leveraging its strategic position to secure real economic benefits. A €10/MWh surcharge on Russian gas is not just an option—it is a must.
Ilian Vassilev
