Identifier
Created
Classification
Origin
07SOFIA1240
2007-10-17 11:04:00
CONFIDENTIAL
Embassy Sofia
Cable title:  

BULGARIANS UNDER PRESSURE ON SOUTH STREAM PIPELINE

Tags:  ECON ENRG PGOV BG 
pdf how-to read a cable
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DE RUEHSF #1240/01 2901104
ZNY CCCCC ZZH
O 171104Z OCT 07
FM AMEMBASSY SOFIA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4427
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
RHEHNSC/NSC WASHINGTON DC PRIORITY
C O N F I D E N T I A L SECTION 01 OF 02 SOFIA 001240 

SIPDIS

SIPDIS

EUR FOR DAS BRYZA

E.O. 12958: DECL: 10/16/2017
TAGS: ECON ENRG PGOV BG
SUBJECT: BULGARIANS UNDER PRESSURE ON SOUTH STREAM PIPELINE

REF: SOFIA 1073

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

C O N F I D E N T I A L SECTION 01 OF 02 SOFIA 001240

SIPDIS

SIPDIS

EUR FOR DAS BRYZA

E.O. 12958: DECL: 10/16/2017
TAGS: ECON ENRG PGOV BG
SUBJECT: BULGARIANS UNDER PRESSURE ON SOUTH STREAM PIPELINE

REF: SOFIA 1073

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


1. (C) Summary: Bulgaria is under intense pressure from
Russia to sign a joint message on the South Stream pipeline,
according to our Ministry of Economy and Energy (MOEE)
contacts. The Bulgarians disagree with proposed Russian text
that would allow the South Stream project to use existing
Bulgarian pipeline infrastructure rather than build a new
pipeline. If agreement can be reached on this document, the
Bulgarian Minister of Economy and Energy would travel to
Moscow to sign the statement November 8-9. After the
document is signed, Russia wants the two sides to conduct
break-neck negotiations on an Intergovernmental Agreement on
South Stream, which Moscow wants to present as a deliverable
during President Putin's planned visit to Sofia in January

2008. The Bulgarian Government is over its head in the
negotiations and needs expert advice, according our MOEE
contact. End Summary.


2. (C) MOEE Deputy Minister Galina Tosheva told polecoff
October 17 that Russia is pressuring Sofia to sign a joint
statement on the proposed gas pipeline project South Stream
by early November. According to Tosheva, the Russian draft
(which Tosheva provided),allows South Stream to use existing
pipeline infrastructure in Bulgaria, rather than build a new
pipeline on Bulgarian territory. Tosheva fears Russia's plan
is to use South Stream to bypass the Ukrainian pipeline
system entirely rather than to offer an additional route for
Russian gas exports. The MOEE is against this proposal
because it would not provide a new source of revenue from
tariffs and may require Bulgaria to ultimately give up some
control over its existing pipeline system. On October 16
Bulgaria sent back edits to the draft joint statement (which
Tosheva also provided),which include specific text that
South Stream involves a "new, additional" pipeline on
Bulgarian territory. If agreement is reached on this text,
Tosheva said Bulgarian Minister of Economy and Energy Petar
Dimitrov will travel to Moscow November 8-9 for a signing

ceremony.


3. (C) Once the joint statement is signed, Russia wants to
conduct negotiations on an Intergovernmental Agreement (IGA)
on South Stream at break-neck speed. Tosheva said Russia
wants to present the IGA as a deliverable during Putin's
planned visit to Sofia in January 2008. Tosheva expressed
concern about Bulgaria's ability to conduct these
negotiations. No one on the Bulgarian South Stream Working
Group, which Tosheva heads, is a pipeline attorney or has
experience negotiating this type of agreement. Divisions
within the six-member Bulgarian working group further
complicate matters. Tosheva said PM advisor Valentin
Radomirski appears to be overtly pro-Russian and is
pressuring the working group to rush into an agreement with
the Russians. She noted that the Bulgargaz representative on
the working group usually follows Radomirski's lead.
(Comment: In our direct contacts, Radomirski takes a more
skeptical view on the geostrategic and business case for
South Stream, citing Bulgaria's already heavy dependence on
Russian energy. But, we also understand the politics of
dealing with Russia and preparing for Putin's visit. And,
because PM Stanishev appointed him to the Board of Directors
of Bulgargaz, anything Radomirski says will carry even
greater weight as the group looks for a political signal. End
Comment.)


4. (C) Tosheva said the Russians had proposed an IGA
modeled after the Russian-Bulgarian-Greek agreement on the
oil pipeline Burgas-Alexandropolous (BAP),which she views as
a flawed document, heavily biased in Russia's favor (reftel).
Sofia's primary concern is ownership. Unlike the BAP
project, Tosheva said Bulgaria should insist on majority
ownership of the part of the pipeline on Bulgarian territory.
She said EU Energy Commissioner Piebalgs told her that the
EU would not support majority Russian ownership of the
project, and that the GOB should use the excuse of EU
regulations "to stall or cancel the project," if the
Russians insist on majority shares.


5. (C) When asked whether Bulgaria had made any effort to
include Italy in a multilateral IGA, on the assumption that
Bulgaria would be more comfortable negotiating with Russia
alongside another EU member, Tosheva said she was highly
interested in talking with the GOI. She said given the
sensitivities of the situation, she was unsure who within the
GOI would be receptive to such a proposal. She asked whether

SOFIA 00001240 002 OF 002


we might be able to quietly recommend a trustworthy contact
on energy within the GOI. Post will contact Embassy Rome for
recommendations.


6. (C) Comment: Tosheva inquired whether the USG could
provide an energy adviser, preferably a pipeline attorney, to
advise the GOB on setting up the South Stream IGA. Before we
investigate this possibility further, we asked her to confirm
that Bulgaria's decision-makers would welcome and/or follow
the advice of an outside expert. Tosheva's request also begs
the question why Bulgaria itself is not investing in legal
representation to advise on formation of an IGA, especially
given mistakes made during negotiation of the IGA on
Burgas-Alexandropolous. Post has repeatedly stressed the
need for competent legal counsel when dealing with the
Russians on energy projects. Tosheva claims there is no
funding for such an adviser, since pro-Russian elements
within the government do not see the need for legal counsel.
Tosheva said the EU seems to prefer a hands-off approach and
has not offered assistance. We will continue to push the
Bulgarians to retain their own expert counsel (as they now
have for the BAP project) but to ensure we are covering all
bases, we request input on whether the USG could offer
assistance to the GOB, as well as on possible experts and
sources of funding for this purpose. As the Bulgarians rush
to possible November meetings/signing, we need to arm them
with a clear analysis and points they can use with Moscow to
block precipitous action. We believe Tosheva, Dimitrov (for
whom we are putting together a program for a possible U.S.
visit) and Radomirski will welcome our direct input. End
Comment.

Beyrle