Bulgaria Assumes State Control of Lukoil's Burgas Refinery Amid U.S. Sanctions

Parliament Acts to Secure Energy Supplies

On Friday, November 7, 2025, the Bulgarian Parliament approved significant legal changes to bring the country's largest oil refinery, Lukoil Neftochim Burgas, under state control. The decision comes in direct response to the United States' sanctions imposed last month on major Russian oil producers, including Lukoil, over the ongoing conflict in Ukraine. These sanctions are slated to take effect on November 21, 2025, and are anticipated to halt the refinery's operations due to financial institutions' refusal to process payments involving Lukoil-affiliated entities.

The Bulgarian government's primary objective is to protect the nation's energy security and avert potential fuel shortages. The law was fast-tracked through parliament, reflecting the urgency of the situation.

Mechanism of State Control and Potential Sale

Under the newly adopted legislation, a special administrator will be appointed to assume extraordinary powers over the Lukoil Neftochim Burgas refinery. This administrator will be authorized to exercise the shareholders' voting rights and possesses the authority to sell shares to a new owner, subject to government approval. Crucially, Lukoil will be stripped of its voting rights and its ability to appeal these decisions.

The refinery, located in the Black Sea city of Burgas, has been owned by Lukoil since 1999 and is recognized as the largest oil refinery in the Balkans and Bulgaria's most significant industrial enterprise. It boasts a processing capacity of approximately 7-9 million tons of crude oil per year, or 240,000 barrels per day, and supplies over two-thirds of Bulgaria's domestic fuel needs. In 2024, the refinery reported a turnover of around 4.7 billion euros ($5.4 billion).

Previous Measures and International Reactions

This latest action follows a series of steps taken by Bulgaria to reduce its reliance on Russian energy. These include:

• Taking operational control of the Burgas Rosenetz oil terminal from Lukoil in August 2023.
• Imposing a punitive 60% tax rate on the refinery's owner in October 2023, designed to incentivize a sale, with the rate dropping to 15% for a new owner.
• Announcing that exports of Russian processed oil would cease by January 1, 2024.
• Completely stopping imports of Russian crude oil in March 2024.

Earlier attempts by Lukoil to sell its international assets, including the Burgas refinery, to Swiss-based trader Gunvor Group, fell through after the U.S. Treasury reportedly labeled Gunvor a 'Kremlin puppet'.

The move has not been without its critics. Opposition lawmakers expressed concerns about the speed of the legislative process and the potential for legal challenges from Lukoil against the Bulgarian state. Ruslan Stefanov, an expert from the Center for the Study of Democracy, described the government's approach as 'risky', warning of possible lawsuits and significant compensation claims from Lukoil. Concerns have also been raised that the appointment of an overly powerful administrator could deter potential buyers for the refinery.