The Neftohim refinery in Burgas is taking advantage of the exemption granted to it to import Russian crude oil to do so at prices higher than the upper limit set by the European Commission, thereby providing huge revenues for the Russian budget. This is stated in the analysis of the Bulgarian Center for the Study of Democracy and the Research Center for Energy and Clean Air (CREA), reports Mediapool.bg, which is quoted by Rador Radio Romania.

The same organizations published a report a month ago, according to which “Naftohim” violates the oil embargo on the export of petroleum products from Russian oil. This was denied by both Lukoil and the customs agency, and the European Commission said it would check the data. In the interval between these news, information appeared that “Lukoil” decided to sell “Naftohim”.

Between August and October 2023 alone, the refinery had 20 shipments of Russian oil for which it paid above the maximum price of $60 a barrel, providing the Kremlin with $468 in revenue, according to a study by the two organizations published on Wednesday. a million dollars

More than a quarter of all fuel exports from the Naftochem Refinery in April-October 2023 were related to ship-to-ship shipments in the EU with final destinations in a number of countries outside Europe. One in three was headed to the US, the report added.

Regime gates

His findings are that Lukoil is exploiting an apparent loophole in the oil price cap regime to increase the Kremlin’s tax revenue, and that European and Bulgarian authorities, as well as Western shipping and insurance companies, have de facto enabled this lucrative oil trade. for the Kremlin.

Moreover, by giving Bulgaria a two-year grace period to suspend imports of Russian oil, Brussels is allowing Bulgaria to waive the $60 price cap rule. As a result, the price of imported oil in Burgas suddenly increased by almost 30 dollars from the previous price of less than 60 dollars.

Therefore, according to the two organizations, the European Commission should take immediate action to establish an oil price ceiling for seaborne imports of Russian crude oil, which is still allowed for Bulgaria under the exemption (derogation) from the ban on imports of Russian oil into EUROPE.

The opinion of an expert who supports the thesis of GERB on the immediate cancellation of the exception is to close this loophole in the regime of sanctions against Russia as soon as possible.

If the exemption remains in force until March 1, 2024, as the authorities’ latest intention, compliance with the price ceiling of $60 per barrel should be monitored, and the difference between the import price and the average price of Brent oil should be confiscated, to prevent the Russian company from receiving excess profits from the sale of fuel on the Bulgarian market.

According to the data presented in the study, the average import price of Russian crude oil at the Rosenet terminal near Burgas increased steadily from $54.9/barrel in June 2023 to $85.5/barrel in October.

At the same time, average monthly imports of Russian crude increased from 2.75 million barrels between February and June to about 4 million between July and October and provided Russia with additional oil revenues of at least $690 million. The authors of the analysis believe that it could have been $231 million less if the transactions had been at the upper limit of the limit.

The profit did not go to Bulgaria, but to offshore

Thanks to the concession, the Burgas refinery exported €984 million worth of fuel in the first nine months of 2023, according to calculations in the report.

By the end of October, Naftochem had processed about 34 million barrels of Russian crude oil, and Lukoil, which controls the oil supply chain in Bulgaria and much of Southeast Europe, had made an excess profit of more than $700 million.

However, a very small part of the amount will be returned to the Bulgarian budget. The rest was transferred to offshore subsidiaries in Switzerland, the Netherlands and the United Arab Emirates, the study said.

It also echoes the previous report’s findings that Lukoil uses European ports and key hubs in international waters for ship-to-ship transfers and exports to non-EU countries.

Between February and July 2023, 3.36 million barrels of gasoline left Bulgarian ports on voyages where the country of final destination was concealed through a series of open shipments. This makes up 27% of the refinery’s total sales abroad, analysts add.

Fuel mixing and increased transfer between tankers on the high seas

In most cases, low-quality fuel is transshipped onto ships carrying higher-quality products, increasing the cost of final exports and, as a result, the profit that Lukoil receives, they say. The fuel products are sold in several countries including USA, Egypt, Turkey, Nigeria and more.

Between April and October 2023, at least five vessels carrying more than 1 million barrels of Lukoil oil products worth about $87 million were involved in tanker-to-tanker transfers in international waters, mostly near Malta, and their final destinations were American ports. Florida, New York and Houston.

According to CREA estimates, a year after the introduction of oil sanctions against Russia (December 5, 2022), the volumes of Russian crude oil pumped into EU waters by the end of October 2023 increased by 54%. According to the analysis, the derogation for oil Imports of Russia was used for additional sales of crude oil to the EU and possible illegal supplies of finished products to other member states, as well as to Turkey and North Africa.

To prevent future violations, the report’s authors recommend banning transhipment operations in EU waters that rely on tugs and shore support from the port authorities of Romania, Greece, Malta, Spain and Italy. Port authorities should check oil logs to record the movement of cargo on board ships, the organizations recommend.

What can be done?

Both oil customers and government agencies should conduct due diligence, especially on vessels that have undergone multiple administrative changes. Operations involving “shadow tankers” with no or questionable insurance and hazard monitoring pose a risk to coastal waters and should be banned, two think tanks say.

According to them, fines for violating the rules of retreat should be increased to 10% of the company’s annual income, and the price ceiling for Russian oil should be lowered and dynamically set at the level of 50% of the spot price of the base price of Brent oil. type

This would encourage Russia to continue selling oil on the world market, but would significantly reduce the country’s budget revenue and deprive it of resources to support the military effort in Ukraine, the report said. Mediapool (acquisition of Rador Radio Romania)