Bulgaria Imposes Tax on Russian Gas Flows in Fresh Jolt to Market

Bulgaria imposed a tax on Russian natural gas, which is transited across its territory, leaving traders to weigh whether the move may spark a dispute with Moscow and fuel shippers amid an already volatile market.

(Bloomberg) — Bulgaria imposed a tax on Russian natural gas, which is transited across its territory, leaving traders to weigh whether the move may spark a dispute with Moscow and fuel shippers amid an already volatile market. 

A new bill, published Friday and coming into force immediately, introduces a charge of 20 Bulgarian lev ($10.76) per megawatt hour of Russian-origin gas. That is about 20% of the price of Europe’s benchmark gas traded in the regional hub of Amsterdam.

Though Bulgaria does not import gas from Russia for its own needs, it is a significant route for the much-diminished pipeline flows that Russia sends to Europe after massive cuts in 2022. Almost half of Russian pipeline gas enters Bulgaria from Turkey via the TurkStream link, for further shipments to Hungary, Serbia and other parts of Southern Europe.

The move adds fresh uncertainty to an already rattled market. Europe’s gas prices have surged in recent days as threats to gas flows mount across the globe, including the Israel-Hamas war, potential strikes at key export plants in Australia and infrastructure vulnerabilities after a recent leak in a Baltic Sea pipeline where sabotage is suspected.

Russia’s Gazprom PJSC stopped supplying Bulgaria’s domestic market last year, after the country refused to pay in rubles for the fuel and switched to alternative suppliers, including Turkey. Last month, Bulgarian lawmakers approved a motion to gradually end imports of Russian crude oil, bringing the country in line with other European Union members.

Gazprom didn’t immediately respond to a request for a comment on the Bulgarian action. But Hungarian Foreign Minister Peter Szijjarto, whose country takes much of the transited gas, swiftly criticized the move as “unacceptable.”

“For a European Union member state to threaten another EU member’s gas supply is contrary to European solidarity, rules and is unacceptable,” Szijjarto said on Friday from Moscow, where he was attending an energy conference. 

The new levy, which features an exception for compressed fuel transported in specific containers, will apply to grid operators and final importers, but it’s not yet clear how it will impact other market participants.

The bill is intended to implement EU sanctions on Russia imposed in response to its invasion of Ukraine. Its objectives include “fair taxation of the profits made on the territory of the state and the increase of budget revenues,” according to lawmakers who drafted the measure.

Read More: Bulgaria Bans Russian Oil in Blow to Lukoil Refinery

 

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