CONTROVERSIAL ECONOMY/ENERGY MINISTER GOES TO THE

S E C R E T SECTION 01 OF 02 SOFIA 000252

SIPDIS

SIPDIS

STATE FOR ACTING E / DANIEL SULLIVAN;
STATE PASS TO USTR;
COMMERCE FOR DEPUTY SECRETARY SAMPSON;
ENERGY FOR A/S HARBERT

E.O. 12958: DECL: 02/25/2017
TAGS: ENRG ECON PREL OVIP BU
SUBJECT: CONTROVERSIAL ECONOMY/ENERGY MINISTER GOES TO THE
U.S. SEEKING INVESTMENT

REF: A) 06 SOFIA 1691 B) SOFIA 217

Classified By: Ambassador John Beyrle for reasons 1.4 (b) and (d)


1. (S) Bulgaria's Minister of Economy and Energy Rumen
Ovcharov heads to Washington and several other U.S. cities on
February 27 for an eleven-day road trip to drum up investor
interest in Bulgaria. His meetings at State, Commerce,
Energy and USTR will give us an opportunity to press for
stronger efforts against corruption and intellectual property
piracy, a streamlined regulatory environment, government
transparency, and diversity of energy supplies. Ovcharov is
an enigmatic and
controversial figure - linked to corruption and Russian
energy interests, but also to a more liberal economic policy
than many of his Socialist colleagues would support. He has
the political and mental juice to match the best players at
the table, but keeps his cards close to his chest. In
face-to-face meetings, he can be both charming and
off-putting.


2. (S) Our concerns about Ovcharov's dark side were
sufficient for us to recommend against meetings with his
counterparts at the cabinet level. "Conflict of interest"
would be the most charitable way to describe his relationship
with the private sector, both Russian and Bulgarian.
However, unlike some ministers in this government, we have no
reports of Ovcharov's involvement in corruption directly
affecting U.S. companies. To the extent that he has
benefited personally from his government
position, it appears to be primarily due to his cozy
relationship with various Russian energy interests and
Bulgarian middlemen involved in putting together large deals.


3. (C) Paradoxically, as the man responsible for attracting
outside investment, Ovcharov understands clearly that
corruption, and the perception that it is widespread, hurts
his country's economy. The Ambassador stressed to him on
February 23 that corruption - specifically in the Ministries
of Environment and Agriculture, but by extension in the
government as a whole - is the number one impediment to
increased U.S. investment. His Washington interlocutors
should emphasize that in order to attract
American investors, Bulgaria needs more than an educated and
low-cost work force. It needs transparency in business and
government. It needs courts that will decide legal disputes
fairly and expeditiously, and it needs to promote itself more
effectively with foreign investors. Even now, Bulgaria is
not a bad place for savvy American investors; the level of
corruption varies from sector to sector, big players have it
easier than small players, and the further you get from
certain government ministries, the more level the playing
field.


4. (C) Ovcharov is a key player in several areas of
importance to the U.S.: energy policy, IPR, investor support,
industrial offsets, arms-export licensing, and privatization,
to name a few. In the energy sphere, Bulgaria is far too
dependent on Russia, but has few other options in the short
term. Ovcharov knows this, but nevertheless concluded a
23-year deal with Gazprom. On the surface the terms of the
deal do not seem onerous: benefits include gradual price
increases over seven years to reach market prices and the
removal of a "take-or-pay" clause that burdened Bulgaria with
a high minimum payment under the old contract. The length of
the commitment, though, and the secrecy with which the deal
has been struck have led many to question what Bulgaria
really gave up for this deal. The answer is almost certainly
the construction of the new nuclear power plant at Belene on
the Danube, awarded to a Gazprom-owned consortium.


5. (C) Washington policy-makers will also want to raise
IPR. Bulgaria has made tremendous strides in the past year
or so, but there are still holes in enforcement, particularly
against Internet piracy, and the courts. Ovcharov and some
of his colleagues should be commended for backing efforts to
improve legislation, cooperating on regulatory and police
actions, and getting the word out publicly that piracy is
illegal, wrong, and just plain bad for the economy. We would
nominate Bulgaria for the Special 301 "Most Improved" award,
if such a thing existed. Nevertheless the government needs
to show more results arrests and convictions, shut down
several Internet sites, and demonstrate that it will continue
to follow through once it gets off the Watch List.


SOFIA 00000252 002 OF 002



6. (C) We were pleased to learn that Ovcharov will meet
with the Assistant Trade Representative. EC Trade
Commissioner Mandelson apparently asked Ovcharov to meet with
USTR to discuss the Doha round. While we have no illusions
that Bulgaria will be the key to resolving U.S.-EU trade
differences, Ovcharov's generally liberal outlook on markets
and Bulgaria's newness as a EU Member State give us a perfect
opportunity to start moving them into our corner.


7. (C) Bulgaria is a close NATO ally with troops on the
ground in Iraq, Afghanistan and Kosovo. Our Defense
Cooperation Agreement, signed by Secretary Rice in 2006, will
allow the deployment of U.S. forces to Bulgarian military
bases. And, as a new member of the EU, Bulgaria does not
carry all of the antagonistic baggage of our trade
relationship. It is a potential market for U.S. exporters
looking for a low-cost foothold in the EU, and for U.S.
investors willing to accept low-to-moderate risks, depending
on the sector. By actively engaging Ovcharov now and
challenging him to improve Bulgaria's image,
Washington policy-makers will help expand our already strong
bilateral relationship, and encourage Bulgaria to address
what is perhaps its greatest remaining weakness: endemic
political corruption and lack of economic transparency.
BEYRLE