The Shipka 20 deal: How the EU and US sanctions against Russia are secretly circumvented

The Russian state-owned enterprise Goszagranostranost organized a secret auction for the sale of the property on ul. 20 Shipka Street in Sofia. The applicants have already deposited or will make today a deposit of 850,000 euros in a sanctioned Russian bank and in rubles. The auction itself will be held on October 30 and 31. This scheme violates US sanctions and two European regulations. The transfer of ownership should not be allowed by the Bulgarian institutions, because this would also violate the sanctions. The seller and the buyer have developed a scheme to overcome these obstacles through the court.

The documents for the secret auction, commissioned by the Russian state-owned enterprise for the management of foreign properties Goszagranomy and organized by the Russian Auction House (RAD), were obtained on the secure reporting platform of ICIJ – the International Consortium of Investigative Journalists, known for the “Panama Papers” and “Pandora Papers” global investigations. BIRD.BG is the Bulgarian partner of ICIJ and gained access to the documentation. Its content was subsequently confirmed by a second, independent source.

The “attack” on Shipka 20 already violates sanctions

The documentation describes the exact procedure for the participants in the tender. By the end of today’s working day, October 27, 6 p.m. Moscow time, they must submit an application for registration, which includes proof of a deposit of €850,000 or 10% of the starting price of €8,500,000. The deposit must be paid in rubles to an account in PSB Bank in the city of Yaroslavl (formerly Promsvyazbank), which is under sanctions from the EU and the United States. This means that the possible contenders for participation in the auction have already violated or will violate the sanctions.

An interesting fact is that in the initial documentation another bank is indicated, which is not under sanctions, but subsequently the account was changed by the State Foreign Property to the one in the sanctioned bank.

The auction itself for the property of 3,371 sq.m., including a building on 4 floors with a built-up area of 554 sq.m and a garage will be held on the online platform http://www.lot-online.ru with lot code: RAD – 428692. The initial price is 8.5 million euros and the bidding will be in increments of 10,000 euros. It will start on October 30 at 6 p.m. and end on October 31 at 11 a.m. If a winner of the auction is determined, he has a few days to pay the full amount and commission for the platform, after which a preliminary contract for the sale will be concluded with him.

BIRD sent questions by e-mail to the State External Property Service and the organizer of the auction, the Auction House of the Russian Federation (AHRF). No response had been received until the editorial end of the article.

Our reporter looked at the property, which looks deserted. No one lives in the building, but there are security cameras. A jeep with number CB4056TT is parked in the yard, which currently does not have a valid compulsory civil liability insurance.

Who will register the illegal transaction?

If a buyer of the property is determined on October 31, difficulties come, including a second violation of sanctions – the first is the transfer of amounts to a sanctioned bank. In order for the new owner to take possession, the transaction must be confessed by a Bulgarian notary and entered in the Property Register by a registry judge. However, both actions are illegal as they violate Regulation (EU) No 833/2014 of 31.07.2014 and its amendments, as well as Regulation (EU) 2022/1904 of 06.10.2022.

The consequence of these European regulations is that according to the Law on Obligations and Contracts, any contract for the purchase and sale of property owned by the Russian Federation would be null and void. Both notaries and judges are obliged to ensure that contracts are null and void.

It is unlikely that the applicants for this property have not made a legal analysis of what awaits them and a solution will be sought that will “legally” circumvent and violate European sanctions.

It is most likely that the buyer will receive a refusal to register, but will file a lawsuit under Article 19 of the Law on Contracts and Contracts and ask the court to declare the preliminary contract final, and the seller (the Russian Federation) will remain passive. The Sofia City Court should not allow such a claim to be considered because the preliminary contract is null and void, it was concluded in contradiction with the law. But the non-admission can be appealed to the Sofia Court of Appeal. With all these conventions, we have already witnessed judicial breakthroughs in these key courts that legitimize the impossible.

And who will earn millions from the Bulgarian state property?

It is obvious that the price of the property opposite the Doctor’s Monument is very attractive and the investor will return it with a big profit. As Capital newspaper has already written, there are appetites for the property from a company associated with Valentin Zlatev, but this does not seem to please the government and especially Delyan Peevski. With an express law, they included Zlatev’s company in the list of enterprises related to Lukoil, the sale of which will be decided by the State Agency for National Security.

In addition, it is not indisputable that the Russian state can prove ownership of the lucrative terrain at the navel of Sofia. After all, it is a municipal property that was ceded free of charge to the Embassy of the Soviet Union for diplomatic needs, and not for sale to a private person.

This is evident from Protocol 38 of 31.10.1957 and Protocol 43 of 28.11.1957 of the Sofia City Council (then People’s) Council, which regulated the cession of municipal properties for the needs of the embassies of the Soviet Union, Czechoslovakia, Yugoslavia, Romania and Switzerland. But while Switzerland paid for its property, it was “ceded to the Soviet Union free of charge.”

Shipka 20 is not the only Russian property that will be sold, BIRD learned. Three more properties in top locations in Pancharevo, Pancharevo district. Izgrev and ul. Rakovska are on the counter and will be sold under the same scheme with a secret auction. Which means that violations of sanctions will continue.

Lead photo: Delyan Peevski (top left), Valentin Zlatev (bottom left), the building on ul. 20 Shipka Street in Sofia. Collage: BIRD.BG

Евроатлантикът Пеевски печели от търговия с Русия

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