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Cablegate: Senator Hagel Meets New Bulgarian Government

This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L SECTION 01 OF 03 SOFIA 001561




E.O. 12958: DECL: 08/30/2015


Classified By: AMB. BEYRLE FOR REASONS 1.4 B&D


1. (C) SUMMARY: Senator Hagel was the first Washington
official to meet the new government after the June elections.
He stressed energy and investment issues, Bulgaria's
strategic importance as an ally in the region that extends
eastward, and Bulgaria's need to improve its investment
climate by addressing government corruption and regulatory
roadblocks. Bulgarian officials stressed their desire for
increased U.S. investment. They also proclaimed Bulgaria a
loyal partner of the U.S. in NATO, Afghanistan and Iraq, and
said they were looking at ways to continue participation in
Iraq after their end-of-year withdrawal. END SUMMARY


2. (U) President Georgi Purvanov
Minister of Defense Veselin Bliznakov
Minister of Economy and Energy Rumen Ovcharov
Speaker of Parliament Georgi Pirinski
MP and Deputy Foreign Minister-designate Gergana Grancharova
Deputy Foreign Minister Lyubomir Kyuchukov
Member of Parliament, Foreign Affairs Committee, Christian

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3. (C) Purvanov stressed that relations between Bulgaria and
the U.S. are the best in history. Bulgaria is a serious and
predictable strategic partner which is firmly with the U.S.
in the Global War on Terrorism (GWOT). Purvanov - whose
position was not up for election in the June ballot -
believes this support will continue in the new
administration. He pointed to the continuity of foreign
policy under the new government as proof of the strength of
the relationship. Bliznakov said his goal is to stabilize
and strengthen Bulgaria's relationship with NATO countries -
particularly the U.S. Purvanov and Pirinski were grateful
for the prompt and generous assistance the USG provided for
flood-stricken areas.

4. (C) Senator Hagel described the purpose of his visit to
Bulgaria and the region, explaining the strategic importance
to the U.S. of the "arc" of countries from Bulgaria and
Romania across the Black Sea and Caspian Sea to the Caucuses
and Urals. Grancharova said it was important to get
congressional members to Bulgaria. She pointed to the need
to prove to the Bulgarian public the benefits of the
relationship with the U.S. The public mainly sees the "bad
news" out of Iraq and the relatively small amount of
U.S.-origin foreign direct investment. Pirinski described
his visit to the U.S. in September as an opportunity to meet
Senator Lugar and prepare for the visit of Purvanov.


5. (C) Purvanov looks forward to meeting President Bush in
October, where he hopes the two can discuss the format under
which Bulgaria can continue to participate in the coalition
in Iraq. He said Bulgaria has an idea of how to reinforce
its presence in Iraq, but did not elaborate. Bliznakov said
Bulgaria takes its Iraq commitment very seriously and will
stay until the end of the year. All withdrawal preparations
will be coordinated with the U.S. and other partners. The
GOB is discussing alternate ways to participate in future
missions in Iraq in order to preserve stability, Bliznakov
said. The military is also preparing for 2006 when Bulgaria
will assume responsibility for the airport in Kabul. Ten
percent of the Ministry of Defense budget is allocated to
participation in missions abroad. Bliznakov reiterated
Bulgaria's commitment in the war on terror, and supports the
U.S. goal of addressing terrorism in the regions that foment
it. He said there is currently no threat of fundamentalism
in Bulgaria, but the MOD will create an interagency team on
the issue. The only potential threat here is due to
Bulgaria's profile as a participant in anti-terror operations
worldwide, said Bliznakov.


6. (C) The U.S. and Bulgaria will now have to step up
negotiations on the U.S. presence here, which were slowed by
the elections, Purvanov said. He pointed to a clear
political will in parliament and in the country across all
major parties in support of the bases, but noted some details
would have to be ironed out. Vigenin, the Socialist
parliamentarian, said Bulgarian officials need to work with
voters to convince them of the benefits of the basing. Local
residents already support the plan, but that view does not
extend across the country. Vigenin said almost all parties
in parliament understand the need for a strategic partnership
with the U.S., the only opposition on this issue comes from
the extreme nationalist group Ataka.


7. (C) Bulgaria will strive to be an active member of the
NATO alliance, and will strike a balance between its own
self-interest and the needs of the allies, said Bliznakov.
He said Bulgaria after NATO entry was a stabilizing factor in
the Balkans, and the country is helping prepare regional
states for eventual NATO membership.
8. (C) According to Purvanov, Bulgaria wants to play a
stabilizing role in the Balkans. He hopes the U.S. and
Bulgaria can cooperate to modernize the military so Bulgaria
can be a more reliable NATO partner. Bliznakov said Bulgaria
will expand upon its current military achievements
domestically and in operations abroad, and modernize its
forces. He thanked the U.S. for the military assistance we
provide. Bliznakov outlined a plan through 2015 for
modernizing the military. Some of the highest 11 priority
areas - out of 35 - have already begun. Problems are
primarily due to lack of resources, not will. Ovcharov
called for increased cooperation between U.S. and Bulgarian
defense companies, including the need for offsets.

9. (C) Minister Bliznakov requested a meeting with the
Secretary of Defense at the Berlin Defense Ministerial

September 13-14. (Post comment: We strongly support this
request believing that such a meeting could influence
Bulgaria's decision to take on a new mission in Iraq and/or
increase its military presence in Afghanistan.)


10. (C) Purvanov extended his personal gratitude to the Bush
Administration for its consistent support of the imprisoned
medics in Libya. He said this issue is a more painful one
for Bulgarians than Iraq or Balkan problems, and mentioned
that settlement of the issue would go a long way to "calming
the situation here." Pirinski said Bulgaria is concerned
about the upcoming November 15 court decision regarding the
death sentence of the medics.



11. (SBU) Senator Hagel met with members of the American
Chamber of Commerce to learn about U.S. business issues. The
businessmen see the environment improving and noted both an
increase in business activity and a decrease in the amount of
corruption and regulatory inefficiencies. However, they
stressed that Bulgaria has a long way to go to become a
transparent destination for U.S. capital. Government
corruption - primarily at the mid-to-lower levels - is still
"prevalent." Deliberate slow-downs and selective enforcement
of the regulatory framework have worked against some
investors, presumably at the behest of competitors.
Investors feel the business climate overall will improve with
accession to the EU, but are concerned about Bulgaria's
capacity to absorb large amounts of assistance. MFA
officials agreed on the need for Bulgaria to improve its
ability to absorb the EU funds. The energy sector is a major
opportunity for investors, including possibilities in the
nuclear sector with the new plant at Belene, and with the two
pipeline projects, AMBO and Bourgas-Alexandropolous. AmCham
officials also raised the continued importance of a Double
Taxation Treaty to assist U.S. investors.


12. (C) Purvanov stressed the need to increase the level of
bilateral trade between our countries, saying he was not
satisfied with the current $760 million, or the $560 million
in U.S. direct investment. He said this amount was smaller
than neighboring countries with much smaller economies.
Senator Hagel agreed with the importance to both countries of
increased U.S. investment here, but stressed to all GOB
officials the concerns of American investors regarding
government corruption. He also raised the need for the
regulatory authorities to transparently and fairly manage
their sectors so as not to impede U.S. investors considering
Bulgaria as a destination.
13. (C) Purvanov agreed the criticism was warranted and
elaborated on the issue, saying Bulgaria had to improve the
efficiency of the judiciary and Bulgaria's administrative
capacity. He and Ovcharov pointed to constitutional changes
and legislation that will improve the judiciary and
investment regimes. But Purvanov stressed that the
implementation phase is where real efforts will be needed.

14. (C) Ovcharov said the government needed to start more
public-private partnerships similar to those in the U.S. and
improve conditions for small and medium-sized enterprises.
Purvanov said both the finalization of a Double Taxation
Treaty with the USG and a roadmap for facilitating Bulgaria's
inclusion in the visa waiver program would help improve
investment. Senator Hagel raised the privatization of the
Bulgarian film studios with the officials. Kyuchukov said
the government would not reverse the process, but the deal
could be challenged in the courts.

15. (C) Ovcharov said he wants to see more investment by U.S.
companies in the fields of information technology, automotive
technology, defense industries, mining, agriculture
(particularly organic), the chemical and pharmaceutical
industries, wine and energy. He said existing U.S. projects
are good ones and should continue to be supported by the GOB,
despite some minor problems.


16. (C) Senator Hagel noted the success of current U.S.
investments in the energy sector and suggested an increase in
the fields of nuclear, geo-thermal and hydro development. He
said the U.S. would like to work closely with Bulgaria to
further develop its energy sector and strengthen the economy.
Purvanov stressed the desire to continue building nuclear
power so as to increase its electricity exports in the
region. Ovcharov said the government must promote
investments, particularly in energy infrastructure projects
such as the Nabucco gas pipeline and the
Burgas-Alexandropolous and AMBO oil pipelines.


17. (C) Pirinski said parliament is focused on passing
legislation necessary for entry in the areas of Justice and
Home Affairs, agriculture, environment, trade and commercial
law, the latter to improve investment climate, intellectual
property rights.

18. (C) EMBASSY COMMENT: Bulgarian officials were clearly
pleased to welcome Senator Hagel as their first Washington
visitor after the elections. They took pains to stress the
continuity of the close relationship that the previous
government had worked hard to develop. GOB officials laid
out what they wished to accomplish in the short-to-medium
term - from EU accession to improved foreign investment and
continued participation in the GWOT. Senator Hagel's
meetings began what will be a period of intensive engagement
with Bulgaria and its new government. The Senator's visit
will be followed by a series of high-level introductory calls
by the new U.S. Ambassador, a possible meeting between MOD
Bliznakov and SecDef Rumsfeld at the informal NATO Defense
Ministerial, FM Kalfin's possible meetings on the margins of
UNGA, and Finance Minister Oresharski's planned bilats during
the World Bank/IMF meeting. This period of intensive
engagement will culminate with the meeting between the two
Presidents in Washington on October 17. END COMMENT


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