Bulgaria introduced a fee for transit of Russian gas through its territory

On October 16, Hungary and Serbia reacted sharply to Bulgaria's decision to raise the transit fee for Russian natural gas, which transits through our country to the west. According to calculations, this should add another 3 billion BGN to the state coffers.

The decision was published in the State Gazette on Friday and makes natural gas to Serbia and Hungary more expensive by BGN 20 (10.20 euros) per MWh. Prime Minister Nikolai Denkov said Bulgaria had every right to impose this charge. He gave the example of the contract with the Turkish company Botas, concluded by the caretaker government. It contains a fee related to the import and processing of liquid natural gas.

"In fact, the fee we have introduced creates an opportunity for real competition between liquid natural gas from different sources and the gas that comes from Russia," Prime Minister Denkov said.

Russian natural gas in transit through Bulgaria became about 20% more expensive with the introduction of the charge. Currently, the price of blue fuel in Europe is traded at just over 94 BGN, so an additional increase of nearly 20 BGN is significant. According to the Prime Minister, Bulgaria has the right to introduce the charge and the countries concerned already have alternatives.

"When the caretaker government entered into the contract with Botash, there was a levy related to the import and processing of LNG and in fact the levy that we have introduced creates the possibility of real competition between LNG from different sources and that which comes from Russia. Bulgaria has the right to levy a charge on the import and transit of Russian gas."

However, analysts say the reasons for the fee are different.

"I have a suspicion that this is a way to raise revenue, as new loan will be taken out, there are problems with the collection of some taxes," said Assoc. Prof. Dr. Vasil Petkov, head of the Department of IER and Business at the University for National and World Economics (UNWE).

"Such a decision is very controversial and carries serious risks. It is a kind of duty on Russian gas imports. Such a duty is not coordinated with other member states. Bulgaria has no right to unilaterally introduce import taxes because we are part of a common European market," said Martin Vladimirov, Director, Energy and Climate Programme, CSD.

It is possible that arbitration could result, and thus harm relations with the countries concerned.

"This fee is a violation of the long-term contract we have with Gazprom for gas transmission through the Bulgarian grid. You know, this agreement was concluded after an auction in 2020, which set a fixed transit price for 20 years In practice, this fee increases Gazprom's transit costs significantly, which could lead to an arbitration dispute and Gazprom winning it."

This may seriously harm our relations with Serbia, Associate Professor Vasil Petkov says.

"They have not always been good relations. It's not good to have Hungary as an enemy in the EU because it has accusations against Bulgaria anyway for not doing enough about the migrant flow."

However, according to the prime minister, it was Serbia and Hungary that benefited from a special permit for Russian gas supplies, but when there was no alternative.

"Now other possibilities have appeared there are interconnectors so there is a possibility for alternatives and therefore Russian gas should not enjoy special preferences," Nikolai Denkov said.

The argument that Bulgaria is imposing additional sanctions on Russia because of the war is also not strong enough, analysts said. Since the fee increase is a minimal part of Russia's payments for this, and its total oil and gas revenues for September rose by 15%.