Assen Vassilev of WCC-DB: Gunvor’s withdrawal from the Lukoil deal puts Bulgaria in a difficult position

The news of Gunvor’s withdrawal from the deal to acquire Lukoil’s overseas assets is “deeply concerning”, as the Bulgarian government had effectively been hoping for the transaction to go through, thereby avoiding the need to take any direct action regarding Lukoil.

Speaking in the studio of “The Day Begins” on November 7, Assen Vassilev – chairman of We Continue the Change and MP from the 'We Continue the Change – Democratic Bulgaria' parliamentary group – explained:

“When the deal was first announced, we warned that the decision of the US Office of Foreign Assets Control had to be awaited. We have now seen that this decision is negative.”

“This is the same office that imposes the Magnitsky sanctions,” Vassilev continued, “so from this point onwards, there is no way to appeal. That is why the company itself has confirmed that it is withdrawing from the deal.”

“This places us in a rather serious situation, because on 21 November, if the Bulgarian government has not taken action or if no alternative deal is reached – which is practically impossible in the remaining two weeks – all banks will stop servicing Lukoil. This means the company will be unable to purchase crude oil and, consequently, unable to produce and sell fuel, as it cannot operate with funds."

Vassilev explained that such a scenario had been considered as early as 2022, during preparations following the outbreak of the war in Ukraine. A similar contingency plan was also reviewed under the Denkov cabinet, he added.

“There is a detailed, hour-by-hour plan outlining the actions to be taken from the moment sanctions are imposed. The plan exists, but it should have been activated two weeks ago, because the timeframe is extremely tight and the required steps are complex,” Vassilev said.

He noted that while the plan could function over an extended period, it must be implemented by “a competent person with an international team”.

“From now on, the questions are for the Zhelyazkov government – what measures will it take to ensure there is no disruption to fuel supplies,” he added.

Vassilev warned that any interruption of oil supplies would have severe repercussions for the entire economy, potentially worse than the Covid crisis from an economic point of view:

“In that scenario, all forecasts for economic growth, VAT revenues and so on would change dramatically. I sincerely hope we do not reach that point. The Bulgarian government has not only the ability but also the obligation to act extremely swiftly to prevent such a situation, as it would affect all sectors,” he said.

Turning to the state budget for next year, Vassilev noted that it contains no significant expansion of social spending, apart from an additional 120 leva for the second year of maternity leave.

“What we see is extremely poor allocation of resources – opaque accumulation of funds and forecasts that simply won’t materialise. There is a way to avoid dipping into the pockets of Bulgarian citizens, and it’s not particularly complicated,” he concluded.