Meeting between Finance Minister, Lukoil Bulgaria CEO Mysteriously Cancelled

Business » ENERGY | July 28, 2011, Thursday // 12:43
Bulgaria: Meeting between Finance Minister, Lukoil Bulgaria CEO Mysteriously Cancelled The Thursday meeting between Bulgarian Deputy Prime Minister and Finance Minister Simeon Djankov and Lukoil Bulgaria executives did not take place. Photo by BGNES

The meeting between Deputy Prime Minister and Finance Minister Simeon Djankov and Lukoil Bulgaria CEO Valentin Zlatev scheduled for Thursday morning did not take place.

According to a media statement of the Finance Ministry, where the company's chief executive and a member of the supervisory board were expected to arrive at 10:00 a.m, the talks have been cancelled.

The announcement also confirms that the licenses of Lukoil's two tax warehouses, Lukoil Neftochim and Oil Terminal Rosenetz, continue to be suspended.

Thursday's meeting, which failed to happen for as-yet undisclosed reasons, had been appointed by Prime Minister Boyko Borisov, who hinted at a "potential deferral" which would be put up for discussion.

Sources from Bulgaria's Finance Ministry, the Customs Agency and legal experts have told Dnevnik daily that the Ordinance on tax warehouses does not provide for an option of negotiating a postponement and restoring the license as a result.

The decision of the Customs Agency head can be overruled or confirmed only by the court.

The Lukoil Neftochim refinery asked for a deferral in the end of last week.

On July 22, the Burgas-based oil processing plant announced that it had agreed with the customs authorities that it would install the measuring devices by the end of the year, which would absorb USD 11 M in investments.

"We thought we had reached an agreement with the customs about the extension of the deadline for mounting these devices", said Wednesday Dmitry Dolgov, Spokesperson of Russian Lukoil, citing the above information.

The Bulgarian Customs Agency, however, denied granting a deferral at the July 21meeting with the executives of the refinery.

Customs Agency head Tanov was adamant that a delay was out of the question.

As a result, Prime Minister Borisov's pledge that a rescheduling would be discussed Thursday triggered allegations of pressure exerted by the Russian side.

In a Thursday interview for the morning broadcast of state-owned TV channel BNT, Borisov reminded that Lukoil had been warned one month ago and the government had expected the company to take a more pro-active stance.

"There has been no compromise, the license has been revoked, the law has been observed", Borisov said, adding that he had grown tired of answering loaded questions whether the prices had not been inflated or whether something rotten was taking place at the refinery.

The Prime Minister explained that the new electronic devices would answer the questions about Lukoil's operation.

Lukoil has not yet commented on the cancelled meeting with Deputy Prime Minister Djankov.

According to unconfirmed information, senior representatives of Russian Lukoil arrived Wednesday in Sofia to discuss the suspended license.

The conflict between the Customs Agency and Lukoil Neftochim escalated Wednesday after the refinery ended up with a revoked fuel production and distribution license.

As a result, the company was forced to start phasing out capacities and to halt supplies to the market.

The measure sparked widely divergent political reactions, with the Bulgarian Socialist Party (BSP) terming the events "a theatrical play" due to the notorious close friendship between Zlatev and Borisov, while right-wing forces interpreted the move as "a declaration of war against monopoly".

Prime Minister Borisov himself hinted that a compromise was possible.

The sanctions against Lukoil were imposed after it failed to install the mandatory measuring devices by June 26.

The new equipment will allow the real-time electronic submission of information to the customs administration about the fuel volumes entering the processing plant and the fuel volumes released on the domestic and foreign markets.

This data is crucial for ensuring control over the payment of excise duty and VAT.

Vanyo Tanov recently declared that all other fuel firms had managed to provide the equipment and if tax irregularities were to occur, they could only take place at the Lukoil refinery.

In the meantime, Bulgaria's Commission on Protection of Competition (CPC) is to announce today the conclusions of its 4-month probe into Lukoil's alleged monopoly on the local fuel market.

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Tags: Simeon Djankov, Valentin Zlatev, Lukoil Bulgaria, Lukoil Neftochim, refinery, Vanyo Tanov, Customs Agency, Customs Agency head, excise duty, VAT

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