Trump’s Sanctions Undermine Putin’s Sway in the Balkans

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(Bloomberg) — When the latest US sanctions against Russia’s oil industry hit last month, Bulgaria had an urgent problem. One of the companies targeted, Lukoil PJSC, owned the country’s biggest oil refinery, a legacy of cozy ties with Moscow.

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The government decided to seize the Neftohim facility near the Black Sea and Lukoil’s other assets. It revoked shareholders of any rights and appointed a manager to negotiate a potential sale. It took a parliamentary committee just 26 seconds to undo 26 years of ownership and endorse the move ahead of a looming US deadline for a solution.

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The unexpected turn of events has led to the biggest blow to Russia’s economic footprint in the Balkans in decades. President Donald Trump’s action against Russian oil companies has cut at the core of the Kremlin’s power in a region where East and West have jockeyed for influence for centuries.

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In Serbia, the government is considering buying back the country’s oil and gas company Naftna Industrija Srbije AD, taking control from Russian owner Gazprom PJSC. Embattled President Aleksandar Vucic wants to avoid nationalizing it, but he needs to convince Washington of his intentions to get rid of Gazprom to dodge sanctions that could hurt his country.

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In Bulgaria, politicians and analysts have for years raised concerns over Russia’s disproportionate stake in the economy, and energy in particular. Lukoil has complained of political pressure to sell its refinery and 220 gasoline stations dotted across the country. But until now nothing happened. 

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“The core of Russia’s influence is built upon energy domination through oil and gas, remains of the Soviet times that weren’t broken for years,” Ruslan Stefanov, chief economist at the Center for the Study of Democracy in Sofia. “Much of this is now gone. These are the last breaths, which is why they cause so much anxiety.”

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Officials in Sofia and Belgrade realized that staying in Russia’s orbit became untenable after Vladimir Putin’s full-scale invasion of Ukraine in February 2022.

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Bulgaria is a European Union member that’s about to adopt the euro, while Serbia one day wants to join the bloc. But bonded by history and reliance on Russian energy, governments dragged their feet.  

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After centuries of close ties, Russia’s economic power in the two nations increased in 1999. Lukoil bought Neftohim, now Bulgaria’s largest company. Serbia, meanwhile, found itself isolated after NATO bombed the country to force its army from Kosovo, ending the last major bloody Balkan war. Russia became a key ally in backing Serbia’s refusal to recognize Kosovo’s independence.

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The change all comes down to US pressure because the EU doesn’t have the leverage, said Stefanov. Without the sanctions, it wouldn’t have happened, he said.

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Once complete, the push to force out Russian oil giants from Bulgaria and Serbia will help neuter Putin’s influence, according to Mario Bikarski, senior Europe analyst at research company Verisk Maplecroft. That comes as “opportunities for lobbying and other forms of engagement with political and business elites have shrunk,” he said.