Cablegate: Bulgaria: Waivering On Belene Npp

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OO RUEHDBU RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSL RUEHSR
DE RUEHSF #0711/01 3551057
ZNY CCCCC ZZH
O 211057Z DEC 09
FM AMEMBASSY SOFIA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6545
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 000711

SIPDIS

DEPARTMENT FOR SPE MORNINGSTAR, DOE FOR ELKIND,CUTLER,
EKIMOFF

E.O. 12958: DECL: 12/17/2018
TAGS: ENRG PREL PGOV BG
SUBJECT: BULGARIA: WAIVERING ON BELENE NPP

REF: SOFIA 696

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

1. (C) Summary: In energy meetings with the Russians on
December 10-11, the Bulgarians held their red-lines on the
Burgas-Alexandroupolis oil pipeline, proceeded with South
Stream, and waivered on the Belene Nuclear Power Plant.
While Russian Energy Minister Schmatko appeared to us to have
returned home with more than expected, particularly on
Belene, our contacts tell us that the Russians left seemingly
displeased with a lack of progress on the major projects, and
Russian pressure for forward movement continues. Another
energy delegation, led by Economy and Energy Minister
Traikov, will head to Moscow December 23 for additional
talks. If those culminate in the eventual Russian ownership
of Belene, it will represent a dramatic blow to Bulgarian
energy security. End Summary.

2. (C) A Russian energy delegation led by Energy Minister
Sergey Schmatko was in Sofia December 10-11 for regular
meetings of the Bulgarian-Russian Intergovernmental Economic
Commission. Topping the agenda were three major energy
projects, the South Stream gas pipeline,
Burgas-Alexandroupolis oil pipeline and the Belene Nuclear
Power plant, all of which were agreed to by Bulgaria's last
government. After taking office in July, the new government
of Boyko Borissov began to re-evaluate Bulgaria's
participation in these projects. Borissov promised PM Putin
an answer on Bulgaria's intentions by the end of the 2009.
The December energy discussions were designed as a forum to
announce Bulgaria's decisions.

SOUTH STREAM
------------

3. (C) As expected, Bulgaria stated it would proceed with
the South Stream pipeline, seeing it as a European project
offering diversification of route. Our contacts tell us that
no real progress was made on South Steam during the December
10-11 meetings, causing Minister Schmatko to half-seriously
propose to his Bulgarian counterpart that the two governments
take over project negotiations since the companies involved
-- Gazprom and the Bulgarian Energy Holding -- were making
little progress. Head of the Bulgarian Energy Holding Galina
Tosheva told us that the shareholders agreement on South
Stream was "80 percent ready" and the Bulgarian-Russian
project company would likely be registered in Sofia in the
first quarter of 2010. Once the company is registered, a
project feasibility study would be conducted, after which an
investment decision would be made by the Bulgarian side.

BURGAS-ALEXANDROUPOLIS
----------------------

4. (C) The Bulgarians held their ground on BAP, insisting
that the Bulgarian side must do an environmental impact study
of the project before it decides whether to proceed. The
study is likely to take as long as 18 months. The new
Bulgarian Government is skeptical of the benefits of this
project in terms of revenues and is exploring whether the
deal can be made more attractive to the Bulgarian side.

BACK-STEPPING ON BELENE
-----------------------

5. (C) The real drama of the December talks surrounded the
Belene Nuclear Power Plant. The new government took office
highly skeptical of the project. When strategic investor RWE
pulled out on October 28, the project was frozen. Russian
pressure to restart Belene has been intense, with Moscow
offering to become a majority owne. Our contacts have given
conflicting read-outsof whatwas discussed and agreed with
the Russias. Minister Traikov told us December 14 that
Bulgaria may consider offering Russia a majority stake in the
project "initially" but he could not explain exactly what
that would entail. Deputy Energy Minister Maya Hristova told
us the talk of offering a majority stake to Russia was a
Bulgarian strategy to buy time while Sofia searches for other
strategic investors. Bulgarian Energy Holding CEO told us
she sees any offer of an ownership stake to Russia as a
national security concern, but she worried she was
increasingly being over-ruled by the Ministry of Economy and
Energy on Belene matters. Tosheva said BEH would issue a
tender for an independent adviser to help Bulgaria think

SOFIA 00000711 002 OF 002

through the financial aspects of Belene and explore its
options.

6. (C) Comment: When RWE pulled out of Belene in October,
the project seemed dead. Russia has put it on life support,
with both sweeteners and new forms of pressure. Unsatisfied
with the progress made at the intergovernmental meetings,
according to our energy contacts Moscow has summoned Energy
Minister Traikov for additional Belene talks on December 23.
If Bulgaria agrees to Russian ownership in Belene, energy
security will take a dramatic step backward in Bulgaria and a
huge opportunity to correct the mis-steps of the previous
government will have been lost -- points we have repeatedly
stressed.

SUTTON

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