Bulgaria imposed tax on Russian gas

Bulgaria has introduced a tax on Russian natural gas transiting through its territory, which has raised concerns among traders about the potential for a dispute with Moscow and fuel suppliers in an already volatile market, as reported by Bloomberg.

The Hungarian foreign minister, whose country relies heavily on the transited gas, has criticized this move, deeming it “unacceptable.” Szijjártó stated,

The threat to the gas supplies of one EU member state by another EU state contradicts European solidarity and the established rules.

Peter Szijjártó, Hungarian Foreign Minister

A new bill, published on Friday and effective immediately, imposes a levy of 20 leva ($10.76) per megawatt-hour of Russian-sourced gas. This levy represents about 20% of the price of European benchmark gas traded at the regional hub in Amsterdam.

Even though Bulgaria itself does not import gas from Russia for its own needs, it plays a crucial role as a transit route for the significantly reduced pipeline flows from Russia to Europe following substantial cuts in 2022. Nearly half of Russia’s pipeline gas enters Bulgaria from Turkey through the “Turkish Stream” connection, with further deliveries to Hungary, Serbia, and other parts of southern Europe.

This move introduces fresh uncertainty into an already unstable market. Natural gas prices in Europe have been on the rise in recent days due to various global factors threatening gas supplies, such as the conflict between Israel and Hamas, potential disruptions at key export facilities in Australia, and infrastructure vulnerabilities following a recent gas pipeline leak in the Baltic Sea, suspected to be sabotage.

Last year, Russian company Gazprom ceased supplying Bulgaria’s domestic market after the country declined to pay in rubles for fuel and turned to alternative suppliers, including Turkey. Last month, Bulgarian MPs approved a proposal to gradually phase out imports of Russian crude oil, aligning the country with other European Union members.

The new charge, with an exception for compressed fuels transported in special containers, will apply to network operators and end importers. It is not yet clear how it will impact other market participants. The bill aims to implement EU sanctions against Russia, a response to its invasion of Ukraine, with the primary goals being “fair taxation of profits generated within the state and an increase in budget revenues,” according to the lawmakers responsible for drafting the measure.

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