On 22 October 2025, the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) imposed sanctions on the Russian company Lukoil, extending to all subsidiaries in which Lukoil is the ultimate owner with a share of at least 50 + 1 per cent. The sanctioned Lukoil entities will be denied access to the global dollar economy, and any natural or legal person continuing to conduct financial transactions with them after 21 November 2025 risks being subjected to the same sanctions regime.

The options for preventing the entry into force of these sanctions, which do not depend on the Bulgarian government’s actions, and that do not mitigate the risk of future sanctions, are twofold:

• A change of the ultimate ownership through the sale of the intermediary holding companies in Austria and/or Switzerland;
• An independent OFAC decision to exempt the Russian assets in Bulgaria from sanctions under political pressure to avert adverse socio-economic consequences.

Therefore, the Bulgarian government must prepare measures and actions that can actively reduce the risks to the Bulgarian market and secure a place at the decision-making table concerning the control, management, and change of ownership of the affected assets:

• Appointment of a trustee and establishment of full operational and financial control over all affected Lukoil entities;
• Deconcentration of Lukoil’s monopoly position in Bulgaria through mandatory divestment orders by the Commission for Protection of Competition;
• Attraction of investors who are not exposed to sanction risk, including enhanced screening andoversight of potential new owners.

Source: Center for the Study of Democracy, based on data from the Bulgarian Commercial Register.

Lukoil Bulgaria supplies almost all petrol station chains and large fuel warehouse operators and wholesalers. In the retail market, it operates a network of 220 outlets with a little over 6 per cent market share by number of stations and 20% by sales volume. Lukoil Neftochim and Lukoil Bulgaria respectively own 74% and 90% of Bulgaria’s diesel and A-95 petrol storage capacity. Lukoil also owns the petroleum products pipeline, connecting the refinery with the largest fuel depots in the country.

The OFAC sanctions, which take effect on 21 November 2025, will disrupt payments, debt servicing and commercial operations of all companies controlled by Lukoil.

• Energy security: Without an adequate intervention strategy, the refinery risks halting operations within weeks, and the market may experience an acute fuel shortage within three to four months. The company’s attempts to circumvent sanctions through a change of the ultimate ownership by selling intermediary holdings in Austria and/or Switzerland, transferring funds to local banks outside the US financial system, or conducting transactions solely in euros and Bulgarian lev within Bulgaria, do not reduce the risk of secondary sanctions being imposed by OFAC.
• The Serbian case: A recent example of the impact of similar sanctions and the reluctance of international counterparties to engage with sanctioned Russian firms, even in the absence of dollar transactions, is the NIS refinery in Serbia, owned by the sanctioned Russian company Gazprom Neft. As of late October 2025, NIS petrol stations in Serbia no longer accept payments via the most popular bank cards; diesel sells at 3.40 BGN per litre (40% higher than in Bulgaria), and the refinery’s crude reserves can probably last only until mid-November.

This is why, relief from OFAC sanctions is crucial to ensure supply security while the required domestic measures are put in place.

Unlike Serbia, Germany opted for an alternative strategy by taking control of the management of the OFAC-sanctioned Russian companies operating on its territory.

• Strategic decoupling: As early as 2022, the German government amended the national legislation, and the Federal Network Agency (Bundesnetzagentur) imposed temporary trusteeship over Rosneft Deutschland, a Rosneft subsidiary holding shares in three German oil companies. This trusteeship is renewed every six months and, as of March 2025 the German government has announced that it will remain in force until at least 10 March 2026, if necessary. Berlin expects Rosneft to sell these assets to a non-Russian buyer, following due diligence and approval by the German government.
• Sanctions exemption: Germany requested and obtained a temporary six-month OFAC waiver for Rosneft’s refineries on its territory, which were sanctioned under the same decision as Lukoil.

The appointment of a trustee under the Law for the Administrative Regulation of the Economic Activities Related to Crude Oil and Oil Products to take temporary operational control over Lukoil would represent the most realistic measure to ensure energy security, prevent a supply crisis, and proactively mitigate the risk of future or secondary sanctions. Alternative solutions, such as the sale to a non-Russian investor or the revocation of sanctions, do not reduce the country’s sanctions exposure, as these fall outside the control of the Bulgarian authorities.

• Lukoil’s strategy: The Russian company cannot evade the sanctions and must negotiate every action with the sanctioning authority, OFAC. The sale of such a global network of enterprises operating across all segments of the oil supply chain is only plausible by transferring control of the affected entities to a (nominal) new owner, trusted by Lukoil. Such an arrangement could be conditional upon granting Lukoil a buy-back option at a later stage – a type of arrangement that is unlikely to be authorised by OFAC.
• What Bulgaria can do: The Bulgarian government may appoint a trustee to a company controlling a piece of the critical infrastructure of Bulgaria when there is a risk to the country’s national security or to the enforcement of international sanctions. The appointment is made by a Council of Ministers’ decision upon the proposal of the Minister of the Economy and Industry. The trustee shall:
  • Assume operational management of the company, including procurement, production, and fuel distribution;
  • Ensure continuity of production and supply;
  • Prepare a financial plan for the company’s operation under state supervision;
  • Be appointed for a six-month term, which could be extended only once for the same term.
• Ensuring supply security and price stability: The appointment of a trustee should proceed in parallel with negotiating a sanctions exemption with OFAC, allowing the refinery and other Lukoil assets in Bulgaria to continue operating after 21 November 2025. Alongside preparations for the appointment, an inter-agency action plan should be developed, including:
  • Establishing a team of experts with legal, financial and energy expertise to prepare preliminary crude oil supply contracts;
  • Activating the three standby agreements with the British company British Petroleum, the Spanish company Repsol, and the Canadian company Hatch, and preparing a logistics plan for regular crude deliveries to the Rosenets terminal from 21 November onwards;
  • Organizing tenders for the wholesale supply of final petroleum products.
• Management of the Asset Disposal: To secure a more effective long-term solution and a potential transition to a non-Russian strategic investor, it is necessary to:
  • Expand the powers of the trustee, enabling it to negotiate and conclude the sale of the Lukoil assets or restructure the ownership with Council of Ministers’ approval;
  • Extend the management period beyond six months, until completion of the sale process or normalisation of operations;
  • Establish a state-owned Energy Trust Fund under the umbrella of the Bulgarian Energy Holding to temporarily hold Lukoil’s shares and ensure the refinery’s financial stability;
  • Develop a strategic plan for the sale of assets to a Western investor through an international tender, under a Council of Ministers’ decision allowing participation solely by strategic investors from OECD member states.