“When Kremlin sneezes, Sofia suffers from fever”, reads an old anecdote from the Socialist period in Bulgaria. The potential threat over the Bulgarian economy stemming from the Ukrainian crisis is like a virus which is slowly going out of control. The negative effect could not be estimated precisely, but one thing is for sure-a possible imposition of sanctions against Russia would hit Bulgaria’s trade balance by some EUR 5 billion. Russia and Ukraine are among Bulgaria’s four biggest non-EU trade partners. The main threat is linked with a possible collapse of the energy market, due to the huge dependence of Bulgaria on Russian gas supplies. Moreover, the investment flow, the real estate market, the exports of wine, medicine and other items would be influenced negatively due to the depreciation of the Russian national currency.

Bulgarian exports to Russia cross Ukraine

“Possible sanctions against Russia are bad for all European countries”, commented Premier Plamen Oresharski. Russia is Bulgaria’s second biggest non-EU trade partner after Turkey. In 2013 the trade balance between Sofia and Moscow amounted to over EUR 5 billion. Bulgaria mainly imports gas and petrol from Russia and exports pharmaceutical items and machinery. Bulgarian companies are already incurring losses due to the crisis in Ukraine and the failure of Ukrainian companies to fulfill their duties under certain business contracts, the Bulgarian Chamber of Commerce and Industry alarms. Even if Russia does not suffer any economic sanctions, Bulgaria would still be negatively affected by the Ukrainian crisis, because nearly all exports of that country to Russia go through Ukrainian territory. The lack of investments and the depreciation of the Russian currency (Ruble) would affect the Bulgarian companies operating on the Russian market. These firms would suffer losses from lower exports. Some companies have already started to look for an alternative route. Others are hoping that they would continue to transport freely goods through Ukraine. The biggest Bulgarian investor in Ukraine-a company which manufactures industrial oils, continues to build a new refinery near the capital Kyiv.

Gas, petrol and nuclear fuel

Bulgaria imports over 80% of all energy resources from Russia. Gas supplies from that country are mostly exposed to risk. However, no disruption of the gas supplies from Russia was registered so far. The nuclear fuel for Kozloduy power plant also comes from Russia. However, according to experts, the nuclear power plant has reserves that will last in the next two years or so. The uranium also goes through Ukrainian territory, but it can be transported through alternative routes or by planes is necessary. Despite possible disruption in the petrol supplies to the Lukoil Neftochim oil refinery due to the fact that Russian petrol is loaded on ships on Ukrainian port, no problems have been registered yet.

Russian and Ukrainian investments in real estate and tourism

The business in Bulgaria and Russia could be affected mainly by a possible slump in the tourism and the real estate sector, because the Russian nationals are the No 1 investors in real estate properties in Bulgaria. Moreover, Ukraine and Russia are among the five biggest investors in Bulgarian tourism. However, some experts forecast that Bulgaria could benefit from the current crisis, as the tourist who used to spend their holidays on the Crimean peninsula can now head towards Bulgaria. In 2013 some 700 thousand Russian tourists visited Bulgaria. A 14% increase year on year was registered in the number of Russian tourists. Some 200 thousand Ukrainians spent their holiday in Bulgaria last year which stands for an annual increase of 13%. Representatives of the tourist field contend that if Ukraine becomes part of the EU and the visa regime is abolished, Bulgaria’s tourism would benefit a lot.

Bulgarian exports and depreciation of the Russian national currency

The depreciation of the Russian Ruble could harm the Bulgarian items on the Russian market. The Bulgarian wines for instance which form 2.5% of the Bulgarian export, would become more expensive due to the increasing expenditures of the importers. This sector would suffer substantial losses if sanctions are to be imposed over Russia. The latter also refers to the pharmaceutical industry, because trade with Moscow is estimated at hundreds of millions of Euros per year.

The indirect effects of the Crimean crisis over the Bulgarian economy are linked with the international prices of fuel and grain, comment representatives of the Institute for market economy.

English version: Kostadin Atanasov