Quite often, important decisions in Bulgaria are taken on a Friday late afternoon, more or less away from the media attention. One of the latest examples of that also unlocked a new wave of tensions between the pro-EU government, a product of an uneasy coalition between two otherwise opposing blocks, the fragmented parliament and the soft-on-Moscow Presidency. Against this background, election weary Bulgarians headed to the ballots again last Sunday, this time for mayoral elections, accidentally coming after the country’s two-year general election cycle.
Bulgaria tries to take back what it lost, the President vetoes it
On October 13, the government took the decision to add an extra tax of 10.20 euros per megawatt hour on Russian natural gas transferred through the Turkstream pipeline - a controversial project since its commissioning in 2005 and a heavy legacy for ex-PM Boyko Borissov and his party GERB, who in 2019 greenlighted the shipment of gas through the pipeline, guaranteeing revenues to Russia’s Gazprom, isolating Ukraine, and with Bulgaria having little to actually benefit from the move.
The move, a rare instance of Bulgaria standing tall against Russia, was heavily criticised by officials and analysts from Serbia and Hungary, both of whom are importing Russian gas through Turkstream. It was described as a “big problem” by Serbia’s President Alexander Vucic to Politika newspaper, “unacceptable” and “against the idea of European solidarity” by Hungary Minister of Foreign Affairs and Trade Péter Szijjártó of Hungary, who made his comments while on Russian Energy Week in Moscow at the time.
On October 16, Prime Minister Nickolai Denkov of We Continue the Change party (part of the uneasy ruling coalition along with allies Democratic Bulgaria and at the same time - opponents GERB and United Democratic Forces) said that the extra tax creates a healthy competition, would stimulate Hungary and Serbia to find other energy sources and claimed that the move would bring more than 2.2 billion euros to Bulgaria’s annual state budget.
North Macedonia joined Serbia and Hungary’s choir. On October 25, North Macedonia's Economy Minister Kreshnik Bekteshi said to local media that Skopje will seek compensation if the measure brings unwanted changes. “We will not be extorted by Bulgaria or anyone else".
Finance Minister Assen Vasilev, who was instrumental in Bulgaria parting way with Gazprom in April 2022 and levying taxes on Lukoil in 2021, downplayed the event and said that this is not a discriminatory measure as it doesn’t burden Serbian or Hungarian consumers: “The gas tax was previously discussed with the European Commission and with the neighbouring countries - Romania, Greece, Turkey. It is within the right of any sovereign state to impose taxes on one or another kind of commodity”, said Vassilev to Capital Weekly newspaper on October 26, three days after the European Commission indeed backed Bulgaria’s transit tax. “Gazprom's supply contracts are priced at the entry point in the respective country. So the measure only reduces the revenues of "Gazprom". Bulgaria pays similar fees in Greece, in Turkey for the supply of liquefied gas and the use of transit pipelines. So all of this is not really something that is unique, new or fundamentally unheard of.”
Meanwhile, GERB leader Boyko Borissov, Bulgaria’s PM between 2009-2021 (with short breaks), has largely stayed silent on the subject. At this stage, it’s unclear whether the situation might trigger a revision of his willingness to collaborate with Moscow back in 2019. On 31 August, the Sofia Prosecution announced an investigation of allegedly doubtful deals around the construction of the pipeline in Bulgaria, however, no further update has come up.
In a twist, on Thursday President Rumen Radev, known for his Kremlin allegiance in key moments and his scepticism on Bulgaria diversifying energy resources, imposed a veto on the extra tax and stated that he will probe the Constitutional Court on the matter. “The measure only causes uncertainty and chaos”, Radev said and in tune with Hungary, described the move as against European values. Vassilev on his part stated that President Radev is acting “against Bulgarian national interests”, “in the interest of Russia and Gazprom”.
The coalition seems less in coordination regarding whether to end the derogation for the import of Russian oil through Lukoil, a major job provider and economic staple in Burgas, or make the business of the company go transparent, as much as possible.
According to Vassilev, Bulgaria expects altogether 200 million euro from Lukoil in taxes for 2023 after around 87 million euro in 2021 and 206 million in 2022. Previously, Lukoil Neftohim has not paid taxes between 2009-2020 and has claimed that through those years it has been operating on a financial loss.
The standoff with Russia and Bulgaria’s local elections
In local media, the conundrums with Turkstream and Lukoil largely stayed overshadowed by the recent mayoral elections in which there is a lot at stake.
The coalition, being consisted of two opposing blocks, nominated two different candidates for Sofia, both political novices - tech entrepreneur Vassil Terziev and Anton Hekimyan, a known journalist and most recently news programme director at bTV, which caused uneasy discussions on whether he has always twisted the content in favour of GERB.
After the first round last Sunday, on November 15 there will be a tense run-off between reformist candidate Vassil Terziev, nominated by We Continue the Change, Democratic Bulgaria and grassroot organisations Save Sofia and Sofia’s Team, and economist and syndicalist Vanya Grigorova, the fresh face of two pro-Moscow parties, Bulgarian Socialist Party and the recently formed The Left-Wing!, surprisingly surpassing GERB’s Hekimyan.
There’s no doubt that the run-off will also be framed as a tight battle between a pro-EU and a pro-Moscow candidate. Terziev remains the tooted next mayor of Sofia after taking over 31 per cent of the popular vote, with Grigorova casting second with over 22 per cent.
In any case, this would mean a historic end of 18 years of political dominance by centre-right conservative GERB in Sofia. Borissov solidified his political ambitions as a mayor in 2005-2009 and then the party comfortably but controversially ruled through Yordanka Fandakova stepping from 2009 onward. The unprecedented blow in GERB’s influence and the newfound confidence of We Continue the Change / Democratic Bulgaria will no doubt put further strain on the coalition, potentially influencing Bulgaria’s foreign policy and holding the risk of weakening the Euro-Atlantic profile of the government.