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Cablegate: Bulgaria: Putin's Visit to Bulgaria: Energy

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OO RUEHFL RUEHKW RUEHLA RUEHROV
DE RUEHSF #0033/01 0161053
ZNY SSSSS ZZH
O 161053Z JAN 08
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S E C R E T SECTION 01 OF 03 SOFIA 000033

SIPDIS

NOFORN
SIPDIS

PASS TO EUR/NCE BULGARIA DESK OFFICER MARK TURNER

E.O. 12958: DECL: 01/16/2033
TAGS: ENRG PGOV PREL BU
SUBJECT: BULGARIA: PUTIN'S VISIT TO BULGARIA: ENERGY
FOCUSED

REF: A. 07 SOFIA 1396
B. SOFIA 0023

Classified By: CDA Alex Karagiannis for reasons 1.4 (b) and (d).

1. (C//NF) SUMMARY: Bulgarian leaders have publicly stated
they hope Russian President Vladimir Putin's two-day official
visit to Bulgaria January 17-18 will lead to improved, more
pragmatic bilateral relations, but Putin's "all business"
agenda and the Russians' heavy-handed negotiating style are
becoming irritants. Putin's delegation--which includes high
level government ministers and the chiefs of Russia's major
energy companies--will sign a number of agreements,
especially in the energy field, including on the
Burgas-Alexandropolous oil pipeline (BAP), the Belene Nuclear
Power Plant (NPP), and, possibly, the South Stream gas
pipeline (refs A and B). The sheer weight of Russia's
economic presence here will continue to sustain Moscow's
influence in business and political life, no matter how much
the Bulgarians chafe at Russian strong-arming in the lead-up
to the visit. END SUMMARY.

2. (SBU) Russian President Putin and his wife Lyudmila will
arrive on a two-day official visit to Sofia, January 17 at
the invitation of Bulgarian President Georgi Parvanov. This
will be Putin's first visit to Bulgaria since 2003. Upon
arrival, Putin and his wife will attend a gala concert at the
National Palace of Culture to officially kick-off 2008 as the
"Year of Russia" in Bulgaria. The formal part of the visit
will begin January 18 with a welcoming ceremony for the
Presidential couple at St. Alexander Nevsky Square. Putin
will then hold a one-on-one meeting with Parvanov, to be
followed by talks between the two official delegations.
Parvanov and Putin will also visit a Bulgarian-Russian
exhibition at the National History Museum, dedicated to the
130th anniversary of Bulgaria's liberation from Ottoman rule.
Later in the day Putin is scheduled to hold meetings with
Prime Minister Sergei Stanishev and Parliamentary Speaker
Georgi Pirinski. The Russian delegation accompanying Putin
is expected to include Foreign Minster Sergey Lavrov,
Minister of Industry and Energy Victor Khristenko, Minister
of Transportation Igor Levitin, Moscow Mayor Yuri Luzhkov,
and Putin's heir apparent Dmitri Medvedev. The CEOs of
Gazprom, the Unified Energy System of Russia RAO, and
Atomstroyexport complete Putin's entourage.

----------------------------------------
ENERGY DEALS DOMINATE PUTIN'S TO DO LIST
----------------------------------------

3. (C) Energy will be high on the Putin agenda. During the
visit, the CEOs of the Bulgarian, Russian and Greek companies
involved in the Burgas-Alexandropolous pipeline project will
sign a shareholders agreement setting up an international
project company that will be registered in The Netherlands.
Representatives of Bulgaria's National Electric Company (NEK)
and Russia's Atomstroyexport will sign an agreement on
Russia's construction of the Belene Nuclear Power Plant
(NPP). Deputy Prime Minister and Education and Science
Minister Daniel Valtchev and his Russian counterpart are
expected to sign a bilateral agreement on cooperation on the
import of spent nuclear fuel from Bulgarian nuclear research
reactors to the Russian Federation. Under the terms of this
agreement, Russia will agree to accept the highly enriched
uranium (HEU) and take responsibility for its transport
inside Russian borders. (Note: The United States is working
to complete a related bilateral agreement with Bulgaria later
this month under which the United States will agree to
orchestrate and fund the removal of the HEU from the reactors
and transport it to the Russian Federation.)

4. (C/NF) Russian pressure on Bulgaria to sign an
Intergovernmental Agreement (IGA) on the South Stream gas

SOFIA 00000033 002 OF 003


pipeline is unrelenting. According to our sources,
negotiations between Bulgaria and Russia on South Stream
ended January 9 with no agreement on key IGA issues. On
January 10 the Bulgarian side, against the advice of its
newly-hired South Stream legal counsel, made proposed
concessions that did not meet Russian demands. After a
January 11 phone call between Putin and Bulgarian PM
Stanishev, the Russians decided to send additional South
Stream negotiators to Sofia on January 14 in an attempt to
make Bulgaria give up its self-declared red-lines, including
majority ownership of the pipeline on Bulgarian territory.
On January 13, the Prime Minister's chief of staff told the
Ambassador that it was increasingly unlikely that Bulgaria
would agree to sign the IGA during Putin's visit. The
Russian and Bulgarian negotiators hit a January 15 impasse,
and the Russian delegation is scheduled to return
empty-handed to Moscow. But we can anticipate another
Russian push to test Bulgaria's resolve.

5. (C) Other than energy, Russia and Bulgaria will also
discuss Kosovo, relations with NATO, the CFE treaty, and
missile defense. Bulgaria's highly unbalanced foreign trade
deficit, which, in 2006, represented 46 percent of Bulgaria's
entire trade deficit, is another likely topic of discussion.
Putin and members of his delegation are primed to sign
several non-energy agreements, including a deal for a new
ferryboat connection between Bulgarian and Russian Black Sea
ports and agreements in the areas of culture, science and
technology, labor, and anti-organized crime cooperation.
Contrary to expectations, the hot topics of Russian arms
licenses and Moscow's property claims will not be discussed,
(though lowerlevel delegations have, in fact, held intense
talks).

-------------------------------------
A "DIFFICULT BUT PREDICTABLE PARTNER"
-------------------------------------

6. (C/NF) In the lead-up to Putin's arrival, Bulgarian
leaders have publicly called for a more pragmatic approach to
Bulgarian-Russian relations, noting Bulgaria's NATO and EU
membership should not prohibit good ties with Moscow. In a
January speech, PM Stanishev stated Bulgaria would like to
see "a more well intentioned, intensive and pragmatic pursuit
of dialog" between the two countries as well as a
reinvigoration of economic ties. President Parvanov--who has
a good personal relationship with Putin (Ref A)--has
described the Russian leader as "a difficult but predictable
partner." But despite public statements about hopes for
pragmatic relations, Bulgarian leaders have begun to chafe at
Russia's bullying negotiating style and Putin's
"all-business" approach to this visit. Bulgarian officials
are disappointed that Moscow is putting the focus of the
visit on Russian-tilted deliverables while ignoring the
presentational and public aspects of the visit that are
essential to selling it as a joint success. Putin refused
Bulgaria's suggestion to visit landmarks related to
Bulgarian-Russian historical ties such as the Shipka memorial
in central Bulgaria (an important battle site in the
Russo-Turkish War which led to Bulgaria's liberation) and the
Monument of the Soviet Army in Plovdiv. Putin apparently
turned down an invitation to go skiing with Parvanov. These
snubs, as well as Russia's intense pressure on South Stream
have all been leaked to the press.

---------------------------------------------
PUBLIC ATTITUDES: GREAT, MORE ROAD CLOSURES
---------------------------------------------

7. (C/NF) While Russia does well in Bulgarian pubic opinion
polls, Putin's impending visit is not generating overwhelming
public interest. Media coverage has been lighter than that
seen in the lead-up to President Bush's June 2007 visit,

SOFIA 00000033 003 OF 003


although there have been articles highlighting Putin's
political and personal life and focusing on bilateral
relations and Bulgarian-Russian energy projects. The
Bulgarian media has noted that unlike the other new
post-communist EU states, such as Poland, Romania, and the
Baltics, Bulgaria's relations with Russia seem to be on the
rise, as Bulgaria seeks to boost its economic ties with
Russia.

8. (SBU) Center-right opposition, environmental and human
rights groups have said they plan to demonstrate in downtown
Sofia against Putin's policies, Russian-related projects, and
Bulgaria's growing dependency on Russia. A number of
environmental groups have urged Bulgarians to protest against
the Belene Nuclear Power Plant (NPP) and the
Burgas-Alexandropolous oil pipeline. The Democrats for
Strong Bulgaria (DSB), led by the staunchly anti-Moscow
former PM Ivan Kostov will protest Putin's visit. Kostov
stated Putin's "imperial policies pose a direct threat to the
Bulgarian national interest," and added "the visit will
accelerate large scale energy projects which turn Bulgaria
into a Trojan horse of Putin's oligarchy in the EU." None of
these protests is likely to be remarkable in size. For most
residents of Sofia, Putin's visit is simply another
high-profile arrival of a foreign dignitary whose security
measures will likely include street closures and blockades
that will add congestion to a city with poor infrastructure
and already-heavy traffic.

9. (S//NF) COMMENT: Putin's visit is important
economically and politically for the Bulgarian Government.
It is also a key moment to advance Bulgaria's national
interests and break the old instinct not to antagonize
Moscow. The Russians have not helped themselves by snubbing
the "feel good" aspects of the visit. But even if Sofia
manages to resist Russian pressure to sign an unfavorable IGA
on South Stream, the sheer weight of Russia's economic
presence will continue to press on Bulgarian business and
politics. We will maintain high-level engagement with senior
Bulgarian officials willing to stand up to Russia, bolstering
their instincts to seize and use the options available--such
as expert legal counsel--to resist Russian pressure. As
Bulgaria gains greater self-confidence and is further
integrated in the Euro-Atlantic partnership, it will find it
easier to protect and advance its--and our--interests. END
COMMENT.
Karagiannis

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