Bulgaria Imposes Punitive Taxes on Russian Oil and Gas Transit, Hurting Hungary, Serbia
Russia continues to receive several sanctions and the latest was punitive taxes that Bulgaria imposed on its gas operations.
Forcing Russia Out of the European Market
Bulgaria decided to put punitive taxes on Russian-owned oil and gas operations. According to government officials, the move is to make Russia less financially secure. At the same time, the EU and NATO member wants Russia and its European buyers to look for alternatives.
On Friday the Bulgarian government established a Lv20 (€10) excise tax for every megawatt-hour traversing Russian gas. Previously, it slapped the Russian-owned Lukoil refinery in the Black Sea with a 60% profit tax. It aims to dislodge Russia from the European market.
Punitive Taxes on Russian-Owned Oil and Gas Operations
The new transit fee would be around 1/5 of the existing TTF benchmark gas price, which is €50p/MWh. Generally, transit fees are low single-digit percentages of the current gas cost.
“The calculation is that while we’re not consuming any more Russian gas, we’re still basically culprits [for other countries] in Europe continuing to consume Russian gas. The entire goal was to make that slightly less profitable and force Serbia and Hungary to look elsewhere,” said a person familiar with the Bulgarian government’s decision.
During Russia’s extensive Ukraine invasion, Bulgaria no longer gets Gazprom shipments. However, it allowed Russia to use its gas pipeline system to deliver fuel to Serbia and Hungary. These two countries are two of Europe’s Russian government supporters, with serious gas supplies.
According to Hungarian Foreign Minister Péter Szijjártó, the gas transit tax increase is unacceptable and a law with a vague background. He added that it was another attack to sabotage Hungary’s energy security and energy cooperation between Russia and Hungary.
However, Bulgarian Finance Minister, Asen Vassilev said that their objective wasn’t to make gas prices higher for consumers both in Hungary and Serbia. They just want to make it less profitable for Gazprom to transit gas through Bulgaria.
Bulgaria’s decision to impose punitive taxes on Russian gas transit fees alarmed Hungary and Serbia. Based on the new rules, fines will be between $10,750 and $54,000 on firms that don’t pay the duty before the end of each month.
“This topic will be discussed with … Hungary and Bulgaria, and Serbia will do everything to ensure that its citizens are not affected,” said Serbia’s Ministry of Mining and Energy.
Gazprom has a yearly gas supply contract of 4 billion cubic metres with Hungary’s importer MVM. It arrives in the country through Turkstream and its inland extension to Bulgaria, Serbia, and Turkey. Turkstream is a natural gas pipeline that runs from Russia to Turkey.
Bulgaria has been silent with its decision deprived of substantial announcement from the government since June from two opposing forces. These are the “We Continue the Change” and Democratic Bulgaria and Bulgaria’s long-ruling GERB, supported by United Democratic Forces.
As a major transit hub, Bulgaria has accommodated Russian deliveries and gas supplies from other countries. It includes other sources such as Azerbaijan, and Turkey to Romania, Moldova and Ukraine.
The parliament likewise initiated the major oil refinery at Burgas port should completely terminate Russian oil imports by October 1, 2024. Based on the law, Russian oil supplies must be decreased to 80% of the entire oil imports to Burgas by the end of 2023.