London / Helsinki / Sofia – November 9

A joint investigation by Global Witness, the Centre for Research on Energy and Clean Air (CREA), and Center for the Study of Democracy (CSD) today reveals that a refinery in the European Union appears to be exploiting sanctions exemptions and boosting Moscow's tax revenues from within the bloc.

Neftochim Burgas is Bulgaria’s largest refinery. Since the invasion of Ukraine, it has become one of the top global consumers of Russian oil. Our investigation reveals that the refinery guzzled over 4.95 million tonnes of Russian crude in the first ten months of 2023, contributing an estimated €1.13 billion to the Kremlin in direct tax revenues. According to Russian president Vladimir Putin, that would be enough to fund the Wagner mercenary group’s operations for an entire year.

When the EU banned Russian oil in December 2022, Bulgaria was granted an exemption to ensure domestic supply. “The purpose of the exception is for Bulgaria to be able to get supplies and not sell imported Russian oil to other countries” a spokesperson for the European Commission statedlast year.

But our investigation reveals that instead of meeting Bulgarian demand, the refinery, majority-owned and operated by Russian fossil fuel giant Lukoil, appears to be exploiting the exemption.

Analysis of industry data reveals that Russian oil now makes up 93% of Burgas’ imports, rising from 70% before the invasion. At the same time, Burgas exported large amounts of the products it refined; the plant’s seaborne exports of refined oil products alone were valued at €984 million in the first 10 months of 2023.

Burgas is prohibited from exporting products made from Russian oil. But the refinery continues to send oil products to the EU under the ‘’mass balance’’ rule, which allows it to export providing they equal less than Burgas’ imports from countries other than Russia.

In August, the Seaexpress loaded 40,000 tonnes of fuel oil from Burgas, before unloading its cargo two weeks later in the Dutch port of Rotterdam. The transaction does not in itself violate sanctions – under the mass balance principle, a final determination can only be made in February 2024, when a year’s worth of import and export data will be reviewed to determine if the refinery has exceeded its allowance of European sales.

The investigation reveals that so far this year, Bulgaria has exported more to the EU than it imported from countries other than Russia, raising serious questions about whether Burgas is going to be able to comply with the mass balance law.

Burgas is not only creating a backdoor route for Russian oil into the EU – the refinery has also exported products to other embargoing jurisdictions like the United States. Shipping data shows that this year, the US imported over 70,000 tonnes of refined product from Burgas.

Christopher Lambin, Senior Data Investigations Advisor at Global Witness said: ‘’Whether or not Burgas ends up breaching the letter of the EU’s Russian oil embargo, its actions undermine the spirit of the ban.

Lukoil is guzzling Russian oil on EU soil, and selling oil products to Europe, contributing more than €1 billion to the Kremlin this year in the process.

The EU should close the many loopholes in its ban on Russian oil and step-up investment in the clean energy transition’’.

Isaac Levi, Europe-Russia Policy and Energy Analysis Team Lead at CREA said: “Burgas’ increased reliance on Russian crude oil highlights how loopholes in the sanctions are enabling a refining hub for Russian oil to operate within EU borders. Russian oil is fueling vehicles in the EU, and channelling funds to the Kremlin. Bulgaria’s sanctions exemption must end and the Russian owned refinery sold to reduce financial flows that are used by Putin to wage war on Ukraine. The refinery has imported non-Russian crude oil previously, showing it has an alternative, and therefore must be banned from buying Russian oil”.

Martin Vladimirov, Director of Energy and Climate at the CSD said: "There is an urgent need to strengthen the implementation and enforcement of the oil sanctions by lifting the derogation given to landlocked Central European countries and Bulgaria as there are no technical or economic justifications for the exemptions. The EU should also ban the transshipments of Russian oil products that arrive in EU ports which are then transported onwards to non-EU destinations."

Contacted for comment, Lukoil subsidiary Litasco S.A, the major shareholder of the refinery, said that it was complying with all applicable laws and regulations, including the G7 price cap rules.