CHARGE DISCUSSES ENERGY, KOSOVO WITH SLOVENIAN

UNCLAS LJUBLJANA 000072 SIPDIS SENSITIVE SIPDIS C O R R E C T E D C O P Y (ADDED SENSITIVE) EUR/NCE FOR TYEAGER, USDOC/ITA FOR CRUSNAK E.O. 12958: N/A TAGS: ECON ENRG BEXP PGOV PREL SENV SI SUBJECT: CHARGE DISCUSSES ENERGY, KOSOVO WITH SLOVENIAN BUSINESS LEADER Summary -------------- ¶1. (SBU) On 12 February, Charg met with Igor Bavcar, the CEO of Istrabenz--one of Slovenia,s largest conglomerates, which has holdings of 65 companies in the energy, tourism, investment, food, and IT sectors--to discuss issues ranging from Instrabenz,s latest business ventures to the upcoming Slovenian parliamentary elections. Bavcar briefed Charg on the various alternative energy projects that Istrabenz is currently engaged in or has planned, including a possible solar power plant in the port of Koper. Bavcar expressed concern that the escalating situation in Kosovo was likely to harm Slovenia,s business interests in the region. He concluded that Slovenia was too invested in the region to serve as an objective leader on the issue. Bavcar then discussed the state of foreign direct investment (FDI) in Slovenia, which he somewhat surprisingly characterized as being strong despite several impediments. Speculating on the upcoming parliamentary elections scheduled for the coming fall, he predicted that the next government is likely to be a mixed coalition of center-left and center-right parties. End Summary. Istrabenz Seeking Stake in Slovenian Energy Company Petrol -------------- -------------- ¶2. (SBU) Charg inquired about persistent rumors that Instrabenz intends to purchase a sizable stake in Slovenia,s government-owned energy firm Petrol. Bavcar confirmed that Istrabenz is negotiating the acquisition of a 25 percent stake of Petrol, but the firm has encountered difficulties with antitrust legislation. He added that the public in Slovenia is wary of such a deal and fears that Istrabenz may be growing too strong for the small Slovenian economy. Regarding the potential joint venture between the Russian energy firm Lukoil and Petrol, Bavcar expressed concern that the venture would only serve to increase Russia,s already strong influence in the Central European energy sector. He confessed, however, that he did not have the power to derail the deal, so the next best thing would be to secure a seat around the negotiating table. Bavcar told Charg that he personally did not see the value that Lukoil added to the venture. (Note. Chairman of the Petrol Supervisory Boards Viktor Baraga told Charg last week that the Petrol-Lukoil venture was dead, but Bavcar gave no indication in his discussion of the matter that this was the case. End note.) Istrabenz Looking to Expand its Alternative Energy Operations -------------- -------------- ¶3. (SBU) Istrabenz is very active in the natural gas industry and is seeking to increase its participation in alternative energy projects. Bavcar noted that Istrabenz is currently involved in several alternative energy projects, including two new biomass investments in Bosnia, and is considering building a small solar power plant in the port of Koper. He is curious to see the results of a project to build a liquid natural gas terminal on the Croatian island of Krk, although he says he is not optimistic about its success. Bavcar expressed similar skepticism about the feasibility of wind energy, noting that the winds in Koper are too strong for a wind energy plant. Kosovo CDI Could Harm Slovenian Business Interests in Serbia -------------- -------------- ¶4. (SBU) On the subject of Kosovo, Bavcar said he is happy that Tadic won the Serbian presidential election but that he is very worried that Slovenia recognizing Kosovo,s independence would have serious repercussions for Slovenian business interests in the region. Bavcar noted that Slovenia has significant investments in Serbia--mainly in the food processing industry--and hinted that Belgrade would retaliate against Slovenia through economic measures if Slovenia recognized an independent Kosovo. Bavcar posited that it would be better for France or Germany to make the first move because Slovenia--with over one billion dollars invested in Serbia and longstanding ties to both the Kosovo Albanians and the Serbians--is too connected to the region. He indicated that he thought Slovenia was being pushed to solve the Kosovo issue and questioned why this was the case. Foreign Investment in Slovenia Hampered by Government Interference -------------- -------------- ¶5. (SBU) Bavcar told Charg that he thought Slovenia had strong FDI inflows, but he identified two primary impediments to investment. One impediment is a prevailing protectionist sentiment among the public that has its roots in centuries of foreign occupation. The Slovenes appear concerned that outside forces--particularly the Austrians--are becoming too strong in Slovenia. The second major impediment is that Slovenian politicians still want to maintain power in the private sector through the control of state-owned funds. He explained that business leaders in Slovenia have increasingly moved to consolidate ownership of companies to protect against government interference. Bavcar Predicts Next Government will be Mixed Coalition -------------- -------------- ¶6. (SBU) When asked about the upcoming parliamentary elections and his political ambitions, Bavcar, who previously ran for Prime Minister, said he had no intention of reentering politics. He speculated that it would be impossible for the ruling Slovenian Democratic Party (SDS) to build a totally right-of-center coalition following the parliamentary elections this fall. He concluded that none of the parties are likely to be in a controlling position following the elections and that some type of unwieldy coalition would result. Bio Note -------------- ¶7. (SBU) Igor Bavcar is a well-known figure in Slovenia who played a prominent role in the country's independence movement. Bavcar began his career as a journalist, having served as chief editor of the newspaper Tribuna in the early 1980s. In 1988, he established a group known as the Human Rights Committee that initiated demonstrations in support of the four Slovene journalist--including the current Prime Minister Janez Jansa--who had been arrested by Yugoslav officials for criticizing the Yugoslav army. The demonstrations are widely seen as having served as a catalyst for Slovenia's drive for independence. Bavcar parlayed his notoriety from the independence movement into a successful political career. He served as Interior Minister (1990-1993) and as Minister without Portfolio for European Affairs from (1997-2000),distinguishing himself in the partisan Slovenian political community as an excellent coordinator. Bavscar transition from politics to the business world in 2002, when he took over as Chief Executive Officer of the Istrabenz Holding Company--one of the leading business groups in Slovenia. Bevcar is close to Prime Minister Janez Jansa but that relationship has grown strained over the years as Bavcar has sought to fully immerse himself in the business community. Bavcar says that he has no intention of reentering the political realm. COLEMAN