BULGARIA'S SOCIALIST PARTY: SOCIAL DEMOCRATS OR

C O N F I D E N T I A L SOFIA 000808

SIPDIS


E.O. 12958: DECL: 04/29/2015
TAGS: PREL PGOV ECON MARR IZ BU
SUBJECT: BULGARIA'S SOCIALIST PARTY: SOCIAL DEMOCRATS OR
CLOSET COMMUNISTS?

REF: 04 SOFIA 2054

Classified By: Ambassador James Pardew, reasons 1.4(b) and (d).


1. (C) SUMMARY. If opinion polls are correct, the Bulgarian
Socialist Party (BSP) is likely to play a leading role in the
next government. Street protests drove the last BSP
government from power in 1997 amid hyper-inflation and the
collapse of the banking system. More than eight years later,
many still question whether the BSP is truly reformed or has
sufficient qualified personnel to run the government. While
the rhetoric of the party leadership is pro-European and
pro-NATO, polls show that much of the party rank and file is
suspicious of both NATO and the United States. That said,
the BSP is unlikely to make any abrupt changes in Bulgarian
foreign and economic policy if the party comes to power.
They will, however, be more difficult for us to work with
than the current government, looking to Brussels and European
Socialists rather than Washington for guidance on most
issues. On economic policy, the BSP is hemmed in by an IMF
stand-by agreement, a currency board and impending membership
in the European Union. Political relations with Russia will
likely become warmer in a BSP government, and Russian
economic interests may gain ground. END SUMMARY.

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SOCIALISTS AHEAD, BUT HOW FAR?
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2. (SBU) Polls show the Bulgarian Socialist Party winning 22
to 27 percent of the popular vote in the June 25 election,
which under Bulgaria's proportional system will give them at
least a plurality in the next National Assembly. If the
actual vote is toward the high end of this range and overall
turnout is low, the Socialists could win an absolute majority
in the 240-seat parliament. However, at this point in the
campaign, most observers say the Socialists are unlikely to
win an absolute majority. A somewhat more likely outcome is
for the Socialists to fall short of a majority and seek to
form a center-left coalition government with one of the two
parties currently in power: the National Movement Simeon II
(NMSS) or the mainly ethnic-Turkish Movement for Rights and
Freedoms (MRF). A third possible scenario -- a center-right
coalition built around the NMSS -- is less likely, but still
possible if the right does better than current polling
indicates (septel).


3. (SBU) The victory of former king Simeon Saxe-Coburg
Gotha's centrist NMSS in the 2001 election shattered what had
become a de facto two-party system in Bulgaria pitting
ex-Communists against anti-Communists. The latter,
symbolized by the once-powerful Union of Democratic Forces
(UDF),is currently riven by infighting that risks making it
irrelevant in the coming elections. At the same time, a weak
party organization and the tendency of the Bulgarian
electorate to punish the incumbent will make it extremely
difficult for Simeon to pull off a repeat of his 2001
performance. Taken together, uncertainty about voter
turnout, disarray within the right, and the unpredictable
nature of support for the ex-king make it difficult to
foresee the outcome of these elections.

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A BIFURCATED PARTY
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4. (C) Critics of the BSP assert that the current moderate
leadership of the party is simply a front for hard-liners and
former members of the Communist-era security services. While
both are certainly present within the BSP, most neutral
observers believe their influence is exaggerated by the
party's opponents. Georgi Purvanov, the previous leader of
the BSP and now Bulgaria's President, turned the party
decisively toward the West when he was in charge. Though no
longer formally a member, his influence over the party
continues to be strong. Purvanov's protege and current party
chairman, 38 year-old Sergei Stanishev, epitomizes the
reformist wing of the party. The economic policies outlined
in his keynote speech to the annual party congress closely
mirror current policies: a more favorable business climate,
continued economic restructuring, low budget deficits, zero
taxes on dividends, and maintaining the currency board. Yet
even as he laid out his economic policy, Stanishev
repeatedly referred to the Congress delegates as "comrades."


5. (C) Stanishev's use of the term "comrade" illustrates the
bifurcated nature of the Bulgarian Socialist Party. Many of
its core supporters are elderly pensioners who have lost
ground economically since the fall of communism. Moreover,
unlike similar parties in Poland and other central European
countries, the Bulgarian Communist Party never split into
separate social democratic and communist organizations; it
simply changed its name. While the social democrats appear
to have the upper hand in the BSP, it is still a "big-tent"
party that must please its hard-line faction, if only by
addressing them as "comrades." An equally serious split
exists between young technocrats and older professional
politicians, leading many Bulgarians to question the
competency of the BSP to run a 21st-century government on the
verge of EU membership. "The BSP simply does not have enough
trained personnel to govern alone," is a frequently heard
refrain.

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IMPACT ON U.S. INTERESTS
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6. (C) Bulgaria is firmly in NATO and on the path to
membership in the European Union. The leadership of the BSP
supports a U.S. military presence in Bulgaria in principle,
although negotiations of a U.S. presence will be much tougher
with a BSP-led government. On the economic side, the
Socialists have said they will stick to the IMF stand-by
agreement and maintain the currency board. In short,
Bulgaria's general strategic orientation toward the West is
clear and unlikely to change. Yet within these broad
confines, the Socialists -- if elected -- will likely be far
more difficult for us to work with than the current
government. The party's Jurassic minority will oppose U.S.
interests, but it would be wrong to overestimate their
influence on the current leadership and especially President
Purvanov. Yet even the most reform-minded members of the
leadership take their cues not from Washington or London, but
from Brussels, Strasbourg, Berlin and Moscow. Stanishev
himself looks almost reflexively to the Socialist
International and the Party of European Socialists for
developing his party platform and drafting major policy
speeches. There are, unfortunately, few true Atlanticists in
the BSP.


7. (C) On Iraq, Stanishev has told his electorate that he
will pull Bulgarian troops out of Iraq as soon as the BSP
takes power. However, some of the most powerful insiders in
the party, including those around Purvanov, dismiss
Stanishev's promise as pre-election hyperbole. They say that
there will be no abrupt pullout after the election. Instead,
Purvanov's position -- and that of the current government --
that Bulgaria should withdraw its forces at the end of the
year will prevail. According to these sources, the BSP
cannot afford to begin its mandate with an act that would be
widely perceived as irresponsible. On the contrary, the BSP
needs to demonstrate that it is a responsible and predictable
actor on the international stage.


8. (C) Russia's influence over the BSP is hard to gauge. Out
of habit, most BSP leaders probably feel more at home with
Russians than with Americans. But this is as much due to the
limited contact between the BSP and the U.S. prior to the
reformists' ascent than to any lingering ideological affinity
for Russia. We now have excellent contacts within the BSP at
all levels. Nevertheless, for historical as well as cultural
reasons, there are far more Russophiles in Bulgaria than
there are in, for example, Poland or the Czech Republic. On
the political level, relations with Russia would likely
become warmer.


9. (C) The one area where Russia's influence is likely to
grow if the BSP takes power is in the economy. Most
Bulgarian companies with Russian business ties are aligned
with the BSP, especially in the energy sector. The Bulgarian
subsidiary of LukOil -- which pays some 20 percent of all the
taxes collected in Bulgaria -- is reportedly a BSP sponsor.
Similarly, Risk Engineering, the leading Bulgarian firm in
the nuclear power sector, is closely tied in with Russian
business interests. Beyond this, there are a whole series of
"Red businesses" whose owners became wealthy by stripping the
assets of state-owned industries during the previous
Socialist government, and who still owe a debt of gratitude
to the BSP.


10. (C) A Socialist government will not resolve corruption
issues in Bulgaria and could make matters worse as old habits
die hard. However, pressure from the European Union will
almost certainly lead to some kind of judicial reform,
regardless of who wins the election. The Socialist have made
judicial reform and the fight against organized crime a
center-piece of their campaign, but it is difficult to judge
their sincerity. In any case, we doubt there will be a
dramatic change in either direction under a BSP-led
government.


11. (C) The Socialists appear to have learned from the
economic mistakes of the Videnov government, when street
protests drove the Socialists from power after they ran the
economy into the ground. Under a BSP-led government, there
would likely be a greater emphasis on social welfare and
state-sector solutions to social problems, but still within
the confines of stable fiscal and monetary policies.
Privatization of the few remaining state-owned companies
might slow, but fiscal reality should prevail in the long run
-- the government simply cannot afford to keep money-losing
companies on the books forever. Stanishev has emphasized to
us that the BSP can not afford another failed government.

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COMMENT
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12. (C) If the Socialists come to power, a radical shift in
the direction of the country is unlikely, although promotion
of U.S. policy in Bulgaria will become far more difficult
with a BSP-led government. The U.S. can influence the
outcome of the current election campaign only at the margins.
We are funding a get-out-the-vote campaign by the National
Democratic Institute (NDI),which many believe will primarily
assist the center-right. We are also looking for ways to
demonstrate that the current government's close relations
with the U.S. have paid off (reftel),and thereby help
improve its results on election day. Regardless of these
efforts, the NMSS may well be the underdog on election day.
However, if the Socialists end up forming a coalition
government with the NMSS -- a scenario that many Bulgarians
believe is likely -- the participation of the ex-king's
party will have a moderating effect on the any BSP-led
government. Beyond this, we will continue to engage the
moderates around Stanishev and the President and try, to the
extent we can, to isolate the hard-liners within the BSP.