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Cablegate: Scenesetter for Spe Morningstar's December 4 Visit

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DE RUEHSF #0674/01 3291430
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O 251430Z NOV 09
FM AMEMBASSY SOFIA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6502
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEAIIA/CIA WASHINGTON DC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RHEBAAA/DEPT OF ENERGY WASHINGTON DC PRIORITY
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC PRIORITY

C O N F I D E N T I A L SECTION 01 OF 02 SOFIA 000674

SIPDIS

FOR SPE MORNINGSTAR

E.O. 12958: DECL: 11/23/2019
TAGS: ENRG PGOV PREL BU
SUBJECT: SCENESETTER FOR SPE MORNINGSTAR'S DECEMBER 4 VISIT
TO BULGARIA

Classified By: CDA Susan Sutton for reasons 1.4 (b) and (d).

1. (C) Summary: Bulgaria has experienced a profound change
in leadership and outlook since your visit in April. July
national elections ushered in a reformist center-right
government focused on fighting organized crime and corruption
and putting the country's fiscal house in order. On energy,
Prime Minister Borissov and his team want to break Sofia's
traditionally-cozy relationship with Moscow and focus on
diversification, transparency, and those projects with clear
economic rationale. This has not been easy. The new
government is facing entrenched domestic energy lobbies, weak
institutional capacity and bureaucratic reluctance to carry
out change and, in Russia, an irritated former partner that
still supplies nearly 100 percent of Bulgaria's gas and
nuclear fuel. PM Borissov seeks U.S. advice and support as
he develops and implements his bold agenda. An update on
Bulgarian energy issues is being sent via septel. End
Summary.

2. (C) When PM Borissov swept to power in July his energy
team immediately began to question Bulgaria's participation
in the large-scale, Russian-proposed energy projects,
including South Stream, the Belene Nuclear Power Plant and
the Burgas-Alexandroupolis pipeline. In September Borissov
told Russian PM Putin he would announce whether Bulgaria
would proceed with these projects after an evaluation of
whether they were in the Bulgarian national and commercial
interest. While an announcement is likely to be made in
December, it is clear that Belene is dead, at least for now,
and the present government has little interest in
Burgas-Alexandroupolis.

3. (C) South Stream is another issue. Upon taking office,
the new government clearly wanted out of South Stream, seeing
it as a Russian-dominated project with little economic
rationale. The Russians put on a full court press to
reaffirm Bulgarian participation, including a Putin-Borissov
telcon and meeting and outreach by Russian Energy Minister
Schmatko. When Borissov sought EU advice, it came in the
form of pro-South Stream lobbying by Berlusconi and a steady
stream of news of additional EU country participants in the
project. In the face of this pressure (and with no one of
Putin or Berlusconi's stature arguing otherwise) the
Bulgarians began to view South Stream not as a Russian, but a
European project, and this government did not want to be left
out. We fully expect Bulgaria to continue as a participant
in South Stream, but its participation will be low key.

4. (C) As one of the most energy-dependent countries in the
region and the one hardest-hit by the January gas crisis,
Bulgaria is also keenly focused on diversification.
Strategies include Nabucco, interconnectors (Bulgaria will
ask your help in securing EU funding for a Bulgarian spur to
the TGI interconnector), and nuclear sector diversification,
including possible participation in new reactor deployment.
It is on the nuclear side that we have can have the most
immediate impact. U.S. companies are lined up to offer
alternative nuclear fuel supplies and domestic spent fuel
storage capabilities, options that are quick, economical and
high impact in terms of diversification.


YOUR MEETINGS
-------------

5. (C) You will meet with Bulgaria's senior leadership, the
American business community, and key officials from the
Ministry of Economy and Energy and Bulgarian Energy Holding
tasked with carrying out the new government's energy policy.
Your outreach to the local media will help us answer the
Government's continued request that we express public support
(and political cover) for Borissov's bold energy moves.

Prime Minister Boyko Borissov: The 50-year-old former mayor
of Sofia is also a former bodyguard with a black belt in
karate and an equally flamboyant personality. Instinctively
and explicitly pro-U.S., he is a self-described
man-of-the-street. Your visit is partial answer to
Borissov's September letter to President Obama asking for
U.S. advice and engagement as the new government develops and
implements its bold, new energy policy.

President Georgi Parvanov: The only representative of the
old regime remaining in office, Parvanov is struggling to
assert influence over a government that sees him as a

SOFIA 00000674 002 OF 002


representative of everything that was wrong with the former
government. Before Borissov came to power, Parvanov
effectively managed energy policy and brokered an ever-closer
relationship with Russia (although that relationship soured
somewhat after the January gas cut-off). Parvanov is openly
critical of Borissov's new energy policy, saying it exposes
Bulgaria as an unreliable partner.

Minister of Economy and Energy Traycho Traikov: The
39-year-old Traikov was a complete unknown when Borissov
named him Economy and Energy Minister (after a long search
that proved nearly impossible to find an energy sector
specialist not beholden to the various Bulgarian energy
lobbies). A former financial manager in the electrical
distribution sector, Traikov is quiet and keeps his own
counsel. Although he seemed to lack weight and influence in
his first couple of months in office, he has since displayed
bureaucratic savvy and good instincts. However, we believe
all important energy decisions are still made by the Prime
Minister with some input from Deputy Prime Minister and
Finance Minister Simeon Dyankov.


OUR MESSAGE
-----------

6. (C) Your visit is an opportunity to show support for the
new government's energy policy, urge even greater
transparency in the energy sector, and explain U.S. energy
policy for the region, especially as it relates to how we
will work with the EU on issues of diversification and
relations with Russia. You may wish to emphasize the
following points:

-- Washington supports the Bulgarian Government's commitment
to enhanced energy security, diversification and transparency
in the energy sector;

-- Bulgaria's large-scale energy projects should be judged
on transparency, commercial-viability and diversification,
not on political considerations;

-- If Bulgaria continues its participation in South Stream,
we hope it will rely on its Washington-based legal counsel to
ensure the country's interests are protected;

-- Nabucco and interconnectors are essential to breaking
Gazprom's monopoly supplier position; and

-- American companies are eager to help the Bulgarian nuclear
sector through alternative nuclear fuel supplies and spent
fuel storage capabilities -- these are quick, tangible and
economically-attractive options to increase Bulgaria's energy
security.


SUTTON

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