Bulgaria's government will restart negotiations with Germany's Rheinmetall over a planned joint venture to build a gunpowder and ammunition plant after concluding the project inherited from the previous administration requires a new legal and financial framework, Mediapool reported.

Following a meeting in Sofia between Prime Minister Rumen Radev, Economy Minister Alexander Pulev and Rheinmetall executives, both sides said they would hold regular talks to advance the project and explore broader defence cooperation.

The planned venture between Rheinmetall and Bulgarian state-owned arms manufacturer VMZ-Sopot, announced in October 2025, envisages production of gunpowder, NATO-standard 155-mm artillery shells and modular propellant charge systems. The investment was expected to approach €1bn and create about 1,000 jobs.

Pulev said a government review had found significant shortcomings in the original structure of the project.

"There is no founding agreement. There is no joint venture between VMZ-Sopot and Rheinmetall," he told reporters, adding that financing for Bulgaria's contribution had not been secured and the proposed site was unsuitable because it lacked the necessary infrastructure.

Despite the concerns, Pulev said the government remained committed to working with Rheinmetall and viewed Germany as a strategic economic partner.

"We want to find the right formula with Rheinmetall" to modernise Bulgaria's defence industry, strengthen domestic production and facilitate technology transfer, he said.

Rheinmetall said its strategic objectives remained unchanged.

The project is intended to secure supplies of propellant materials, strengthen Bulgaria's defence manufacturing capabilities and integrate VMZ-Sopot into Rheinmetall's global production network, Pascal Schreyer, chief executive of Rheinmetall's Energetic Materials business unit, said after the meeting.

"We decided to meet regularly in the future to discuss all issues that need to be discussed," Schreyer said.

The project has become the subject of a political dispute, with the previous government rejecting Pulev's assertion that financing had not been secured and arguing that funding had been included in its draft 2026 budget, which was never adopted.

The current government has previously said it intends to seek a revised financing structure, including potential support from the European Union's Security Action for Europe (SAFE) programme.