Bulgaria was granted an exemption from European Union sanctions banning imports of Russian oil, ostensibly to ensure the country did not face acute fuel shortages, even though wider EU policy aimed to cut off the country’s main cash flow. Russia after the full-scale attack on Kiev, Politico writes.
But could Bulgaria continue to import Russian oil if its price is above the upper limit?
Customs officials in Sofia wanted to know for sure, so they reached out to EU officials asking for “clarification,” according to a private email dated Aug. 4 seen by Politico.
“Crude oil imported under these derogations must not be equal to or below $60 per barrel,” the EU’s response reads.
According to confidential customs data seen by Politico, from August to October, Bulgaria imported Russian crude oil at prices higher than allowed. According to the calculations of the think tank “Center for Energy and Clean Air Research” (CREA), the value of the supplies is estimated at 640 million euros. The money went to Russian energy companies, which pay taxes that help fill the Kremlin’s war coffers.
The sanctions loophole is a typical example of the wide-ranging flaws that are eating away at the EU’s efforts to stop the billions that Russia earns from energy exports. Roughly a year after the initial sanctions were passed, legal loopholes, combined with poor enforcement and growing parallel trade, continue to secure Moscow’s fossil fuel revenues and power nearly half of Vladimir Putin’s budget.
In addition, a whole new black market has emerged to insure, transport and hide Russian fuel as it travels around the world.
In other words, the sanctions have not been achieved. Russia’s revenue from oil exports has fallen by just 14% since the restrictions were imposed. Russia’s fossil fuel revenues hit an 18-month high in October.
It also seems that the EU has exhausted its options to do something about it. The EU’s latest package of sanctions, to be finalized at a leaders’ summit this week, focuses mostly on administrative changes that experts say will do little to curb widespread tax evasion.
Bulgarian monitoring
The reason for the Bulgarian hole in the price limits is probably a clerical error.
When the EU wrote into law the G7 price cap, officials specifically barred EU shipping firms and insurance companies from trading Russian oil above the $60 threshold to non-EU countries. The aim was to reduce the Kremlin’s revenue while keeping global oil flows stable.
But officials never considered imposing similar rules on supplies to EU countries, in part because Brussels banned Russian crude by sea the same day.
Except for Bulgaria
According to CREA data, the revenues from Russian oil exports from sales in Bulgaria in the August-October period – a third of which are from sales above the limit prices – brought the Kremlin about 430 million euros in the form of direct taxes.
More broadly, Lukoil’s crude oil imports to Bulgaria have brought Russia more than €2 billion in export earnings since the sanctions took effect in February, according to a new analysis by CREA and the Center for the Study of Democracy . And the Kremlin has earned 1 billion euros from direct sales taxes, Politico revealed last month.
Bulgaria has now promised to shorten by six months the deadline for waiving the Russian ban on oil exports, temporarily moving it to March.
And Kiril Petkov, the former prime minister, told “Politico” that the circumvention of the price limit must also “absolutely” be stopped.
The Bulgarian Ministry of Finance and Lukoil did not respond to requests for comment.
The deep dark waters
Instead of accepting strict rules designed to drain its finances, Moscow has begun a race to circumvent sanctions, looking for loopholes in what one senior Ukrainian official described as a “cockroach strategy.”
To ensure that it can sell its fossil fuels at whatever price it can get, in violation of the oil price ceiling and other restrictions, Russia has led the creation of a parallel supply market that, through a mixture of violation and neglect of laws line the pockets of its state energy companies and oligarchs.
A “shadow fleet” of aging tankers has emerged, mysteriously managed through a network of companies that disguise their ownership, often trading the fuel they carry to other ships at sea. To help them avoid the jurisdiction of Western sanctions while meeting basic maritime requirements, a host of obscure insurance companies have sprung up in countries like India.
As Russian deals move further away from Western operators and traders, that makes tracking them even more difficult, said Katona, an oil analyst at Kpler.
He said “every single” type of Russian oil was now trading above the price ceiling, while CREA estimated that only 48% of Russian oil cargoes were carried by tankers owned or insured in G7 countries and the EU in October.
At the same time, countries like India have increased their imports of cheap Russian crude by 134%, CREA found, refining it and then selling it everywhere. This means that European consumers may unknowingly be fueling their cars with fuel made from Russian crude oil, while at the same time funding Moscow’s armed forces.
The Dying West?
In Brussels, political leaders seem to have thrown up their hands. When EU leaders gather at their summit on Thursday, the package of sanctions they are expected to approve will do little to stem the flow of energy money to Russia, omitting any measures targeting Russian oil or reducing at the upper price limit.
Until such measures are taken, Russia’s finances will not really take off, says Alexandra Prokopenko, an economist and non-resident scholar at the Carnegie Center for Russia and Eurasia.
“The Russian economy is a pretty big animal,” says Prokopenko, “so it’s hard to shoot it down with one shot.”
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2023-12-13 09:41:00
#Politico #bitten #Lukoil #Bulgaria #feeds #Putins #regime
