Oligarchic hustles in Bulgaria: How a bank could threaten national security?

For about 9 months Bulgaria’s economy has been plagued by the residual tremors from the spectacular collapse of Corporate Commercial Bank (CCB) owned by the Bulgarian oligarch Tsvetan Vasilev. Since November 2014 the bank’s license of operation has been revoked and it has been taken over by officials of the Bulgarian Central Bank.

As with most such affairs in Bulgaria’s most recent history, the smell of foul play is unavoidable. To date, the cost to the taxpayers due to the insolvency and the consequent guarantees paid out to the depositors amounts to 3 billion Bulgarian levs (or around 1.5 billion Euro). The more time passes, the more the whole affair looks like a pre-arranged money grab. The CCB was the head of the business empire of Tsvetan Vasilev with nearly a hundred companies directly or indirectly connected to it. The bank has been releasing loans to a large number of these companies exceeding the credit limit for connected entities laid out by Bulgarian legislation. Typically, this has happened without any sanction by any of the responsible authorities due to incompetence or wrong-doing.

Until recently, the ongoing legal and institutional procedures of highly technocratic nature had slipped from the spotlight of public attention. Since most private depositors received their money from the National Bank Guarantee Fund, the tensions in society faded. What remained is to decide what to do with the bank’s assets and how to trace most of its credits. This turned out to be an increasingly daunting task as most of the borrowers are covered up by complex ownership chains and even offshore registrations. CCB had been giving loans to major media owning holdings, fellow oligarchs and their ventures, telecoms, arms producers to name a few.

We will not go into further detail tracing the network of companies around Vasilev as the point of this article is elsewhere.

On 24 March the Belgian citizen Pierre Louvrier arrived in Bulgaria for a staged press conference at which he announced that his company LIC33 (Louvrier Investment Company) is buying six strategic companies from Tsvetan Vasilev’s holding.

The portfolio is really impressive:

  • the ammunition producer “Dunarit”,
  • the airplane repair and maintenance factory “Aviomans”
  • the people-metric company “Garb”
  • the digital multiplex “First Digital” which transmits the signal of the Bulgarian National Television (BNT)
  • the leading provider of radio and television broadcasting NURTS whose infrastructure is used by all major national and private media in Bulgaria
  • 43 % of the Bulgarian Telecommunication Company (commercially operating as Vivacom) – the ex-state owned telecom with the highest turnover and explicit control over the underground communication network of Bulgaria.


The official price for all this is 1 Euro combined with a pledge to repay 900 million Euro to the companies’ creditors. These creditors are believed to be none other but Vasilev’s own CCB.

Naturally, this announcement raised many eyebrows. Shortly after, the Bulgarian cabinet expressed a dull statement calling for the investors to “uncover the source of their capital”. However, many observers saw this reaction as inadequate and soft.

What is actually happening?

It is not difficult to imagine that the acquisition of such a portfolio itself should be an issue of national security irrespective of the price. Nevertheless, none of the regulatory agencies in Bulgaria expressed any concerns about this deal. There was no reaction from the State Agency for National Security (DANS) either.

There are three main version circulating the public sphere.

The Bulgarian investigative journalism portal Bivol reported that LIC33 and Louvrier himself are connected to the business entities of the Russian oligarch Constantine Malofeev. Louvrier reportedly headed the private investment fund “CFG Capital” which is a part of Malofeev’s “Marshall Capital”. Bivol continued its publication by stating that Louvrier left CFG Capital in November 2014 while his new company LIC 33 does not appear to be registered in France (apart from a mailbox) as officially  claimed. Malofeev on the other hand is a close aide to Vladimir Putin and was involved in the events of last year’s Crimea annexation. His financial support is also claimed to be behind the separatist republics of Eastern Ukraine. Malofeev is indeed known to observers as Putin’s henchman when it comes to shady operations at Russia’s doorstep.

The Bulgarian daily “Capital” is also introducing a version under which Tsvetan Vasilev himself is behind Louvrier’s LIC33. The idea of the oligarch is to reclaim the jewels of his crumbled empire before the syndics start calling back all loans given out by CCB. This would mean that the six companies can be declared insolvent and consequently they could be sold to different investors or business circles.

It is also fairly probable that Tsvetan Vasilev has his links with Malofeev and these two scenarios are not actually mutually exclusive.  The Russian bank VTB is the 3rd largest shareholder in the Bulgarian Telecommunication Company which Louvrier is attempting to buy. VTB also owns a 10% share part from Vasilev’s insolvent CCB. All these details should not be neglected lightly as VTB is the bank closely intertwined with the Kremlin and its mock-name is publicly known in Russia as “Putin-bank”. Bulgarian journalists have been commenting the fact that Vasilev’s business empire has a Russian connection for years. Of course, with the complex network of ownership, the lack of any interests by authorities, and deliberate provision of political “umbrellas” it remained difficult if not impossible to prove anything. Even if such a relationship could be proven, Bulgarian economy is open and investors could come from almost anywhere.

What are the implications today?

All mentioned above could remain in the business sphere if we would omit some important considerations.

First, the nature of the portfolio being transferred to LIC 33 is very strategic as it gives control to vital telecommunications and some military industries. Clearly, any transfer of these properties should be carefully examined be it even to the closest ally.

Second, Constatine Malofeev is on the EU’s sanction list due to his involvement in the Ukrainian crisis. Even if he would not be on this list, it has become clear for years that Russian investment never remains only an “investment”. The Putin regime has been using Russian businesses as levers for assertion of foreign policy in their geopolitical games. Coupled with the nature of the portfolio on sale, clearly this deal could lead to severe loss of sovereignty for the Bulgarian government. The Balkans and Bulgaria in particular are an important sphere in which the Kremlin would like to expand or retain its influence especially now when Russia is head-to-head with the West.

Third, Tsvetan Vasilev who is currently residing in exile in Belgrade waiting for a decision on extradition, should not have been allowed in the first place to concentrate such a bundle of companies within his business domain. The siphoning of the CCB and the consequent events should have been prevented by the relevant Bulgarian authorities like the Central Bank, the Commission for Competition Control, and the National Security Agency. Bulgarian society as whole cannot shrug off the feeling of a disastrous mix of corruption, incompetence, and business-politics collusion when it comes to this affair.

What is the lesson?

Currently, after many voices have been raised by journalists, observers, experts and politicians within the ruling coalition the deal is suspended until all institutions carry out their investigations. The Parliament adopted a quick piece of legislation which allowed the prosecutor’s office to call deals void if proven that the national interest is threatened.

So far so good. However, we are yet to see what will be the result of all these actions. Certainly, the main moral of this story is the fact that Bulgarian institutions have again shown their lack of motivation and capacity to defend the interests of the country. With public trust in Bulgarian state institutions being very low, such inadequacy does not help improve the image of the government. The current right-leaning coalition cabinet headed by Boiko Borisov is putting all blame on his predecessor Plamen Oresharski’s team. This being partially true, is still not a convincing argument as the responsible institutions also failed to act most recently under Borisov’s nose.

Acting post factum has become a trade mark of Bulgarian politics over the past decade or so. Here again the same principle could be observed. Deliberately or not, the institution of the republic almost allowed a suspicious deal with considerable consequences to go by. As Europe is not any longer surrounded by peaceful bliss, it is imperative that Bulgarian politicians rethink the geopolitical environment in which the country is situated and assess the actual risks for the national security. The new realities of “hybrid” and “propaganda” wars make telecoms, broadcasting networks, and people metrics as useful as armored divisions and destroyers when it comes to destabilizing the domestic front. Escaping the clutch of Gazprom with the suspension of the South Stream pipeline, Bulgaria may now see another attempt to meddle with its economy and security.