EU capitals mull seizing Russia-linked energy assets

On Friday (13 May), Democratic Bulgaria party co-leader Hristo Ivanov called for the “deputinisation” of political and economic life in Bulgaria. [Shutterstock/fortton]

From Sofia to Berlin, governments are contemplating expropriating, nationalising and otherwise seizing energy infrastructure owned by Russia-linked companies.

Bulgaria is launching a political debate on the possible expropriation of strategic assets owned by Russian companies.

The pro-European Democratic Bulgaria, part of the ruling coalition, has called on the government to prepare for a possible takeover of various assets of Lukoil Bulgaria.

The company’s Neftohim refinery in the Black Sea port city of Burgas, the largest in the Balkans, supplies some 60-70% of the fuels for the Bulgarian market. The refinery is owned by Lukoil through the Swiss company Litasco, owned by a Russian parent company.

On Friday (13 May), Democratic Bulgaria party co-leader Hristo Ivanov called for the “deputinisation” of political and economic life in Bulgaria.

Democratic Bulgaria wants the introduction of a legal possibility to take control of strategic sites currently controlled by individuals associated with the Russian Federation or the Putin regime.

“For decades, the Kremlin has pursued its goals in the region through a wide range of instruments of intimidation and demoralisation, propaganda of public opinion, economic dependence, erosion of institutions and corruption of the ruling elite. Bulgaria is among the countries most affected by this type of hybrid penetration in the region,” the declaration read by Ivanov stated.

Martin Vladimirov, an energy expert at the Centre for the Study of Democracy, commented that if the refinery’s management does not adopt a new strategic vision for oil supplies, a new legislative framework may be needed to allow its nationalisation. “In this case, such a measure is justified, as Bulgaria’s national security is affected,” Vladimirov said.

Lukoil is also set to face difficulties in Italy, where media reports in April suggested that the state could nationalise its ISAB refinery.

In case of an EU oil embargo, Italy could consider the temporary expropriation of the ISAB/Lukoil refinery in Sicily as an option, sources confirmed to EURACTIV Italy on Monday. While Italy’s refining capacity is very limited, ISAB covers about 23% of the overall capacity with an annual production of 16 million tonnes.

Lukoil’s Italian refinery – which employs around 8,000 people in Sicily, where employment rates are among the lowest in Europe – currently buys 30-40% of its crude oil from Russia. An oil ban would thus likely lead to ISAB stopping production and moving, leading to severe job cuts and a potentially devastating impact on the local economy.

Meanwhile, in Germany, the government hopes to enact a law that will allow for the expropriation of critical infrastructure, EURACTIV Germany reports.

“These changes [to the 1975 energy security act] give us the opportunity to put critical infrastructure under – yes – trusteeship or, as a last resort, expropriation,” State Secretary to the economy and climate ministry Michael Kellner told the German parliament on Thursday (12 May).

“Surely we should learn a lesson from this crisis: that we never again put critical infrastructure in Russian hands or in the hands of states that are like Russia. That was a mistake, after all,” he added.

Expropriation and reconstruction

Meanwhile, on 9 May, members of the European Parliament spoke out favouring seized Russian assets being used to arm and rebuild Ukraine.

With estimates of the value of seized Russian funds and assets reaching some $300 billion, 80 MEPs said they should be repurposed to help fund the mammoth task of rebuilding towns and cities in Ukraine that have been destroyed due to Moscow’s invasion.

A letter calling for action was sent to the EU’s chief diplomat Josep Borrell asks “the European Commission put forward an urgent legislative proposal providing a clear framework allowing to redeploy Putin´s treasure to protect and rebuild Ukraine.” It should also coordinate with international partners to set up a reconstruction and defence fund endowed with Russia´s frozen international reserves, the letter continues.

On 5 May, President of the European Council Charles Michel also spoke in favour of Russian billions being repurposed in the same way.

“Personally, I am absolutely convinced that this is extremely important not only to freeze assets but also to make possible to confiscate it, to make it available for the rebuilding of the country (Ukraine),” Michel, president of the European Council, told the Interfax-Ukraine news agency.

While Berlin, Rome and Sofia have not mentioned repurposing in their efforts to expropriate, and nationalise and seize and freeze, questions over what will become of such assets in the medium to long-term remain.

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