Bulgaria needs to look into itself and ask whether it could be at risk of failing to police sanctions against those connected to the Russian state, now a pariah following the invasion of Ukraine, writes Nick Kochan.
Nick Kochan is a UK-based freelance journalist who writes about corruption and economic crime.
As an investigative journalist who has been monitoring the effect and progress of Western sanctions on Russia since 2014, it is clear to me that those at the highest level of the State and Treasury departments in Washington are planning to come down even harder on those with connections, even if they are tenuous, to the Kremlin and its financial backers.
It is with this crackdown in mind that Bulgaria now needs to raise its game and move against those suspected of such connections.
This is also the message of a letter sent by US Congressman Warren Davidson to Janet Yellen, the Secretary of the US Treasury, which oversees the Office for Foreign Assets Control, the US sanctioning body.
Published just before Christmas, it sent out a warning to Bulgarian businessmen as well as government officials and prosecutors, who think that they can work with, or even be close to, Russian interests and still remain out of the sights of the American and European sanctions authorities.
Bulgaria has multiple ties with Russia because of its history, current politics, trade, and economy. Flipflopping by Bulgarian politicians over their approach to receiving Russian energy supplies when this has been subject to sanctions is only one example of the country’s ambivalent approach to the Kremlin.
Warren Davidson’s letter to Yellen is unequivocal in stating that the “blatant disregard” of US sanctions by the Bulgarian Prosecutor General is “unacceptable and must be addressed”.
That is as strong a clarion call to action as any for those seeking to preserve Bulgaria’s links to the American-led Western alliance, not to mention the concern it expresses about the transparency of Bulgaria’s judicial and legal system.
While the US congressman may have focused on a number of Bulgarian deals and dealmakers, he singles out one arrangement in particular for his warning.
This was the use of Russian money to facilitate the sale to Bulgarian businessman Spas Rusev of the Bulgarian Telecoms Company, Bulgaria’s second-largest mobile provider, whose trading entity is Vivacom.
It is clear that Davidson was referring to this deal when he wrote to Yellen, “Bulgarian critical infrastructure and defence companies are routinely transferred to Russian sanctioned banks and other corrupt elements in spite of sanctions.”
VTB Bank and its executives were the largest shareholders in the consortium that owned the telecoms company. Evidence produced at a High Court trial in London, which I attended, alleged that the Russian bank financed Rusev’s purchase of shares to the tune of €35 million.
This is not completely in accord with Rusev’s view of the loan and purchase. He accepts that he was part of (and led) an international consortium (acting via the corporate entity Viva Telecom (Luxembourg) SA) that acquired BTC/Vivacom in 2016.
He said he did not personally enter into any loan arrangements with VTB Bank to purchase shares in Vivacom. VTB Bank provided funding to Viva Telecom (Luxembourg) SA (i.e. the international consortium making the purchase of shares in BTC/Vivacom, of which he was part), Rusev has claimed.
What is not in doubt and what he does not deny is the essential role of VTB in the deal. The reason why this is so critical to the sanctions debate is that VTB is at the heart of Russia’s financial system and is its second-largest bank after Sberbank.
Many VTB executives are close to the Kremlin. VTB has been the subject of sanctions from The American Office of Foreign Assets Control (OFAC) since 29 July 2014 following Russia’s occupation of Crimea. OFAC has been the world’s leading policeman of sanctions against Russian interests.
The Russian bank was cut off from access to the SWIFT funds transfer system in 2022, and the EU authorities have severed links between the EU subsidiary and its parent bank. Many VTB directors are named on sanctions lists. In light of these connections, should the government of Bulgaria not now scrutinise this bank’s role in the Vivacom deal?
Such scrutiny would clear up some of the issues raised by the Congressman and strengthen Bulgaria’s reputation as a strong and reliable western ally.
BTC was later sold to United Group, a hedge fund based offshore, in 2018, but Rusev remained deputy chairman of BTC’s supervisory board until August 2022, some six months after Russia’s invasion of Ukraine.
Rusev has established himself as one of Bulgaria’s most influential businessmen, winning recognition both at home and in the international community, but his involvement in this leading telecom deal is unsettling.
This is doubly so given his closeness to Bulgaria’s political leadership and to owners and editors of some key parts of Bulgaria’s media. This is something he is quite happy to acknowledge.
Indeed, Rusev has developed a successful and unimpeachable business career and founded TeleLink EAD, a highly successful Bulgarian telecommunications company. This was the launchpad for his communications empire.
His recent acquisition of Bulsatcom, the Bulgarian satellite and internet company, for €130 million cemented his pre-eminence. We got a glimpse into his wealth when he engaged in a dispute with his Swiss financial adviser over managing a fabulous art collection.
Bulgaria is likely to feel the heat of American efforts to bear down on those with Russian connections.
As the US intensifies their moves to pinpoint those links and interests to the Kremlin, countries would do well to look deeper into their financial and business networks to minimise their risk of sanctions breaches.
Failing to get that right could expose them to fines and penalties at best, and to isolation from the economic community at worst. That would damage an entire economy, a cost Bulgaria can surely ill afford.
