Rheinmetall Agreement in Doubt as Government Raises Project Funding Concerns

The government will review the agreements signed with German defence manufacturer Rheinmetall, it emerged during a hearing of the Economy Minister before the parliamentary committee responsible for economic policy.

According to Deputy Prime Minister and Minister of Economy, Investment and Industry Alexander Pulev, the project faces significant funding challenges and alternative financing options will need to be explored.

At the end of last year, it was announced that Rheinmetall would build a €1 billion ammunition and propellant manufacturing plant in Bulgaria, creating around 1,000 new jobs. Under the original agreement, Bulgaria committed to investing approximately €420 million, with the funding expected to come through the European Union's SAFE programme.

The negotiations also became the subject of a political dispute between former Prime Minister Boyko Borissov and President Rumen Radev over who had been responsible for attracting the German investor.

Nine months after the agreement was signed by the Zhelyazkov government, the current administration has decided to conduct a comprehensive review of its key provisions.

"The Bulgarian national interest is not fully protected. We agreed to almost everything without attempting to introduce certain requirements, such as reducing some of the licensing payments to Rheinmetall or ensuring that Bulgarian suppliers participate in part of the overall supply chain," Pulev said.

He stressed that Germany remains one of Bulgaria's key strategic partners but acknowledged that financing the project has become a major obstacle.

"From the outset, it was announced that funding would come through the SAFE mechanism. It has now become clear that only a very small proportion of those resources—no more than 10 to 15 per cent—can actually be used to build manufacturing facilities. That would be far from sufficient when Bulgaria is expected to contribute at least €400 million. Under the current framework, financing the project in this way will be extremely difficult. We will need to identify another bankable financing structure, potentially involving additional European funding or the reallocation of existing programmes," he said.

The GERB-UDF parliamentary group insisted that the Zhelyazkov government had already allocated the necessary funding in its draft budget.

"Our colleagues from Progressive Bulgaria also included €47 million for the Iganovo company in their medium-term fiscal framework for 2026. They are now obliged to secure the remaining funding. If this project fails, they will bear responsibility," said GERB-UDF MP Temenuzhka Petkova.

Democratic Bulgaria expressed concern that the project could be deliberately undermined.

"There should be no doubt that if Bulgaria walks away from this investment, the plant will very quickly be built in a neighbouring country. This is a project with guaranteed profitability that would produce critically important ammunition for the Bulgarian Armed Forces and NATO's eastern flank," said Democratic Bulgaria MP Ivaylo Mirchev.

Speaking on the current affairs programme Oshte ot denya ("More from the Day") on July 9, representatives of We Continue the Change called for the agreements to be made public.

"We must produce according to NATO standards, but we also need complete transparency about how public money will be spent. If the project is in Bulgaria's interest, we should proceed. If not, the public deserves to know exactly what lies ahead because we will all bear the consequences," said MP Bogdan Bogdan.

The nationalist Vazrazhdane party argued that local residents should have the final say.

"The production of propellants and explosives carries enormous risks. Bulgaria will not become stronger by industrialising the Rose Valley with explosives against the wishes of its residents," said Vazrazhdane MP Krasstyo Vrachev.

The planned Rheinmetall facility is expected to create more than 1,000 new jobs, but opinion among local residents remains divided.

"It would create employment opportunities and provide stable long-term jobs for local people," one resident said.

"These are toxic substances. We have already suffered enough pollution. I worry about the future of our children," another resident commented.

Two days ago, the Plovdiv Administrative Court issued a final ruling overturning the Karlovo Municipal Council's decision to hold a local referendum on the proposed factory.