Published: December 12 2023
Bulgaria has announced that it will no longer impose a tax on Russian transit gas in an effort to repair its relations with other EU countries and increase its chances of joining the Schengen Area. The country plans to amend its legislation to align with EU standards and abandon the controversial tax.
Abandoning the transit fee
Bulgaria's decision to withdraw the transit fee is not solely because of its unlawfulness but also due to ongoing negotiations with Russia and other interests. The country had introduced an additional tax on gas transit in October, which was criticized by Hungary, Greece, and North Macedonia.
Schengen Area membership
Postponing the introduction of increased tariffs for gas transit is a strategic move by Bulgaria to improve its chances of joining the Schengen Area. By not enforcing the penalty tariffs, the country hopes to avoid any obstacles to entering the Schengen Area. Bulgaria is also waiting for a potential punitive mechanism on Russian gas from the European Commission to apply in the future.
Seeking a deal with Lukoil
By not collecting the transit fee, Bulgaria aims to secure a deal with Lukoil, a Russian energy company. Bulgaria wishes to buy a stake in Lukoil, offering a transparent and professional investor instead of an offshore company. This deal could potentially lead to the acquisition of Lukoil's network in Bulgaria, including its refinery in Burgas, and alleviate the need for an energy contribution fee.
Possible outside pressure
It is speculated that Bulgaria may have yielded to outside pressure in raising gas transit fees. The country's decision to abandon the tax could be influenced by external factors, including the desire to repair relations with the EU and pursue other interests.
Overall, Bulgaria's decision to drop the gas transit fee demonstrates its willingness to improve relations with the EU and increase its chances of joining the Schengen Area. Additionally, it presents an opportunity for Bulgaria to secure a deal with Lukoil and potentially benefit its energy sector.
Questions & Answers
Why did Bulgaria decide to drop the gas transit fee? Bulgaria decided to drop the gas transit fee in order to improve relations with other EU countries and to enhance its chances of joining the Schengen Area. The country plans to amend its legislation to find an EU-level approach.
What was the amount of the gas transit fee that Bulgaria planned to introduce? Bulgaria planned to introduce an extra tax of 20 levs (10.23 euros) per megawatt hour on gas transiting through the country.
Why did Hungary describe Bulgaria's decision as a "hostile move"? Hungary considered Bulgaria's decision to introduce the gas transit fee as a "hostile move" and demanded an investigation by the European Union. Hungary's main gas route under the long-term Hungarian-Russian gas contract is the TurkStream pipeline through Bulgaria, and the transit fee would have affected this route.
Which other countries criticized Bulgaria's measure of introducing the gas transit fee? Greece and North Macedonia also strongly criticized Bulgaria's measure of introducing the gas transit fee.
Why did Bulgaria decide to postpone the introduction of increased tariffs for gas transit from Russia? Bulgaria postponed the introduction of increased tariffs for gas transit from Russia because it wants to join the Schengen Area. The country fears that enforcing the penalty tariffs could hinder its entry into the Schengen area.
What is Bulgaria hoping for in exchange for not collecting the transit fee? Bulgaria is hoping to win another deal by not collecting the transit fee. Specifically, it wants to buy a stake in Lukoil, as the Russian parent company wants to sell its operations in Bulgaria. By purchasing Lukoil's network and refinery in Burgas, Bulgaria hopes to secure a beneficial deal and potentially forget the energy contribution fee.
What are the other interests that might have influenced Bulgaria's decision to drop the transit fee? Aside from wanting to improve relations with other EU countries and join the Schengen Area, Bulgarian-Russian negotiations on the transit fee issue may be in full swing. Additionally, Bulgaria hopes that the European Commission will impose a "punitive" mechanism on Russian gas, which Bulgaria would then be eager to apply.
