Bulgaria Levies Transit Tax on Russian Natural Gas

Bulgaria’s Prime Minister Nikolay Denkov defended his government’s decision to impose a tax on Russian gas traveling through the country (Flickr).

Bulgaria became the first member of the European Union to impose a transit fee on Russian natural gas when President Rumen Radev signed a new amendment into law on October 13. The new law has prompted anger from fellow EU members Hungary and Serbia, who rely on Russian gas for the majority of their energy needs. The bill imposed a new tax of 10 euros per megawatt-hour on Russian gas transfers effective as of its  October 13 date of passage. 

The TurkStream pipeline delivered an estimated 43-45 million cubic meters of gas per day to Serbia and Hungary from Russia via Bulgaria. The gas supplied to Serbia and Hungary comes from Russian energy giant Gazprom, which ceased supplying to Bulgaria in April 2022 when Bulgaria refused to begin paying in rubles, the Russian currency. Bulgaria at the time allowed the pipeline to continue through so Gazprom could supply other states willing to pay in rubles. In addition to increasing the prices of Russian natural gas for Serbia and Hungary, the tax would bring up to two billion leva (about 1.08 billion USD) to Bulgaria’s budget.

Hungary’s Foreign Minister Peter Szijjarto branded the move a “hostile” act jeopardizing both nations’ energy security in an appearance on Hungarian state television after its passing. Szijjarto promised an upcoming joint statement between Serbia and Hungary and further cooperation between the two nations on the matter. 

Weighing in on the controversy, European Commission spokesperson Olof Gill shared plans to discuss the fee introduction with Bulgaria while in Brussels on October 20. Bulgarian Prime Minister Nikolay Denkov emphasized that the tax comes from a desire to route funds away from Russia's state budget as it wages war in Ukraine, not a desire to harm fellow EU members. Denkov further noted that Russian energy deliveries to Serbia and Hungary helped increase Russian influence in the region. Although the Bulgarian Parliament has generally been supportive of supplying aid in the form of weapons to Ukraine, President Rumen Radev has been criticized for his pro-Kremlin stance.

Despite this split, the country has worked to distance itself from the post-Soviet sphere of influence since Russia’s invasion, with five billion levs (about 2.7 billion USD) in arms deals at different stages with Western manufacturers. Bulgaria has announced plans to abandon Russian oil by October 2024, intending to reduce imports to 80% by the end of 2023. However, the struggle remains for the only refinery in Bulgaria, currently supplied and controlled by Russia’s Lukoil, to find another source of natural gas, a problem exacerbated by the continued ban on Kurdish energy.