Institutional hurdles and a prosecutor’s probe delay the signing of a landmark joint venture with the German defence giant.

Bulgarian institutions are delaying the implementation of a key multi-billion-euro defence investment to build two factories for gunpowder and artillery shell production in partnership with the German defence corporation Rheinmetall.

The joint venture between the state-owned military plants in the Bulgarian town of Sopot and one of Europe’s largest defence conglomerates has stalled at the final stage. The contracts were initially expected to be signed by the end of September, but the process has already been delayed by nearly two months.

“Given the importance and specificity of the matter, the negotiations are being conducted in depth and in detail,” the government noted, adding that the agreement “is expected to be signed once the talks are completed, with the specific date to be announced later.”

In Bulgaria, every major deal remains uncertain until all bureaucratic hurdles are cleared – but in Rheinmetall’s case, the prosecutor’s office has also become involved. The initial plan envisaged two plants to be built on the premises of the state-owned VMZ-Sopot facility. Rheinmetall would hold 51% of the joint ventures, while VMZ-Sopot would retain 49%, with the German company transferring intellectual property and technology.

Bulgaria plans to invest over €600 million in the project through the EU’s SAFE (Support for Ammunition and Fuel in Europe) financing instrument, under which the country has applied for €3.27 billion. The goal is to strengthen Europe’s security by boosting defence industry capacity after Russia’s full-scale invasion of Ukraine and to support the modernisation of Bulgaria’s army from Soviet-standard artillery to NATO-compatible systems.

In September, when Rheinmetall CEO Armin Papperger expected the contracts to be signed, a formal obstacle emerged.

A YouTuber, Stanislav Tsanov – who previously worked for the TV channel of the radical pro-Russian party Ataka, published a video claiming to expose internal irregularities at the Sopot state plant, citing an anonymous insider. His channel has 685,000 subscribers in a country of 6.4 million people. The video was released just before the expected signing of the Rheinmetall deal.

Tsanov then approached President Rumen Radev, who has often been accused of expressing pro-Russian positions and opposing military aid to Ukraine. The two met on 15 September at the presidential office, along with Tsanov’s source. A press statement followed, announcing that the president would refer the matter to the prosecutor’s office.

“The presidential institution referred the matter to the competent authorities on 24 September, following a report by journalist Stanislav Tsanov about violations and abuses at VMZ-Sopot.” While various obstacles emerge in Bulgaria, Rheinmetall has already signed a €535-million deal to build a gunpowder plant in Romania.

By the end of November 2025, Bulgaria must present a national investment plan under SAFE, outlining specific projects and annual funding allocations. One of the key requirements is that each country must participate in at least one joint production project with another state – from the EU, EFTA or Ukraine, to enhance Europe’s strategic autonomy, foster technology exchange and increase investment efficiency.

Yordan Bozhilov, founder of the Sofia Security Forum and former deputy defence minister, told EUalive that Bulgaria “must have production capacity for 155-millimetre shells” as the country transitions to that artillery system, which is “key for European security and Ukraine.”

He expressed support for the gunpowder plant with Rheinmetall but said that the production of 155-millimetre howitzers “should be based not on political ideas but on an economic platform – it must generate returns.”

“For Bulgaria, it is crucial that when adopting a new weapons system, such as the 155-millimetre howitzers, it is compatible with domestic production,” Bozhilov noted. “We have information that Bulgaria intends to purchase the CAESAR artillery system from France, but Rheinmetall’s shells are not certified for that company’s guns. It is strange to adopt a system for the army while producing ammunition that is incompatible with it.”

The expert added that Bulgaria had requested €3.2 billion under SAFE, while Romania applied for €17 billion. Part of Romania’s funds will go into road construction, he said, which would enhance NATO’s military mobility.

Bulgaria’s specific SAFE projects are still unknown. Bozhilov noted that individual project batches can be submitted every six months, provided the total amount remains within the approved envelope.

So far, the joint venture with Rheinmetall is the only publicly known collaborative project. Whether this will mark a breakthrough for Bulgaria’s defence industry or turn into yet another political saga with an uncertain outcome remains to be seen. If Sofia wishes to make use of EU financing, time is running out.