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Ministers warn Bulgaria risks losing billions of dollars in arbitrage against Gazprom

Russia's Gazprom suspended gas exports to Bulgaria in April after Sofia refused to make payment in rubles.
Russia's Gazprom suspended gas exports to Bulgaria in April after Sofia refused to make payment in rubles.

Bulgaria could lose billions of dollars in an arbitration case against Russian Gazprom, caretaker Energy Minister Rossen Hristov said on August 25.

Gazprom stopped deliveries to Bulgaria at the end of April, after the country refused to pay in rubles and despite having a contract until the end of 2022.

Hristov’s statement comes after the government decided to start negotiations with the Russian company on renewed supplies, and amid mass protests against that decision. It was backed by his colleague, caretaker Defence Minister Dimitar Stoyanov.

The energy minister said that the contract with Gazprom includes a “take or pay” option, under which the country is obliged to buy at least 80% of the annual amount of gas. Hristov said that the country has used 1bn cubic metres (bcm) of natural gas since the beginning of the year and could be forced to pay for another 1.4bcm.

“Therefore, if we do not use the remaining quantity it is possible that we go to arbitration with the potential possibility to lose billions,” he said as quoted in a statement.

This was pointed out as one more reason for the caretaker government of Gulub Donev to seek resumption of the deliveries.

Hristov also said the price of Gazprom’s gas was close to that of the gas sold by Azerbaijan and is 50% lower compared to that of the liquified natural gas (LNG) the country could have acquired from the US. 

However, experts say that it was Gazprom that stopped fulfilling its obligations under the contract with Bulgaria and the country has reasons to file an arbitration case against the Russian company and win the case. Moreover, if Bulgaria starts talks with Gazprom on the renewal of deliveries, the country would lose its possibility to win an arbitration case.

Thousands protested against the government’s plan to turn to Moscow for gas in the evening of August 24. The third #GaZwithme protest, the largest so far, demands the government to give up talks with Gazprom, accusing it of national treason.

Earlier in August, Hristov said the talks with Gazprom are inevitable, after the government decided to give up buying six tankers of US LNG agreed by the previous government of Kiril Petkov. Donev’s cabinet claimed it was unable to secure slots for unloading the tankers but experts argued that Greece had been offering such slots.