Bulgaria sharply increased taxes on transit of Russian gas: who will suffer more

Sofia decided to help Washington win competition in the European energy market

Bulgaria’s increase in the tax for the transit of Russian gas via the Turkish Stream risks increasing the price of “blue fuel” for the EU by a quarter. On the one hand, Sofia will thereby make American liquefied gas, the delivery of which to Europe much more expensive than Russian exports, more competitive. On the other hand, it will still be more profitable for the Old World to enter into deals with our producers, since the transport component in the cost of hydrocarbons for Russian companies will in any case be lower.

The first to suffer from the fiscal maneuver of the Bulgarian government will be Serbia and Hungary, which, unlike their partners in the European Union, continue to purchase raw materials in our country. In this regard, Belgrade and Budapest are making claims against Sofia, equating Bulgaria’s new tax requirements almost to an economic crime. In particular, Hungarian Foreign Minister Peter Szijjártó expressed bewilderment why additional costs for anti-Russian sanctions, which in principle do not apply to “blue fuel,” will fall on the shoulders of their national consumers.

The concerns of Hungarians and Serbs about the significant increase in energy costs are well founded. Sofia does not hide that she intends, rather, not to financially punish Russia, with which the EU has serious political disagreements, but to simply profit from Moscow’s European fuel counterparties. The Bulgarians began to reduce purchases of hydrocarbons from our producers, and then completely stopped them, around the spring of last year, when Vladimir Putin ordered the transfer of payments from unfriendly countries for gas into rubles. At the same time, Sofia did not refuse to collect a transport commission for the transit of raw materials through its territory (the overland extension of the Turkish Stream pipeline and the internal gas transportation system) to Hungary and Serbia. Gazprom’s supplies in this direction are relatively small: about 6-7 billion cubic meters annually. However, updating fiscal rates will allow Bulgarians to increase their profits from such a simple business by almost $900 million.

“It’s hard to disagree with the fact that Bulgaria has taken the path of illegal regulation of its own financial base, which contradicts the legislative mechanisms of the EU,” says Alexey Grivach, deputy director general of the National Energy Security Fund. “The new tax is an undisguised discriminatory measure introduced exclusively in relation to transit Russian gas.” For experts, the structure of fiscal administration is completely incomprehensible: the remaining transit is formalized and paid for in accordance with the contract concluded by Gazprom and Bulgartransgaz. There was no provision for a new fee when this deal was signed. Half of Sofia’s annual gas consumption is provided by Azerbaijan through the Trans-Adriatic gas pipeline TAP and the internal European transport route – the IGB Interconnector, connecting Bulgaria with the national gas system of Greece. Sofia purchases the other half of the raw materials mainly on the open market through one-time exchange transactions with Turkey, Greece and Hungary. Most likely, this gas is of Russian origin and is sold to the Bulgarians by European counterparties who have accumulated a surplus of hydrocarbons above the plan.

“Bulgaria itself provoked an aggravation of relations, not so much with Russia, but with other full members of the European Union,” notes Sergei Suverov, investment strategist at Arikapital Management Company, associate professor at the Financial University under the Government of the Russian Federation. — Sofia will prove her claims in continental arbitrations. There is no doubt that the decisions made by the European courts will not be in Moscow’s favor.”

Meanwhile, as the expert believes, by increasing transit fees, Bulgaria is pursuing both its own greedy goals and providing a service to American suppliers of liquefied raw materials. Currently, LNG entering the Eurozone from overseas is trading at around $500-600 per thousand cubic meters. “Blue fuel” supplied by Russia via the Turkish Stream is sold cheaper: according to observers, by $20-30 per “thousand” cubic meters. Russia, having lost the opportunity to export significant volumes via pipelines, is increasing foreign sales of liquefied raw materials: their share in the energy balance of a number of Western countries (in particular, Belgium and Spain) is rapidly increasing. “American LNG, which Washington was going to flood the European market with, becomes uncompetitive in such circumstances,” the analyst believes. “Due to the dubious increase in transport taxes, Sofia is leveling out the difference between the cost of obviously expensive hydrocarbons from the United States and more attractive raw materials from Russia.”

However, there are other obstacles to American supplies. The Panama Canal Authority, through which most of the American LNG is exported, announced restrictions on the transit of ships back in the summer of this year. Traders have to avoid this route, transporting raw materials through the Cape of Good Hope and the Suez Canal, which significantly increases delivery time and, naturally, the contract price of “blue fuel”. Transporting LNG over long distances will increase the price of American energy resources, so it will still be more profitable for Europeans to purchase “toxic” liquefied fuel from Russian mining companies.