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IdentifierCreatedClassificationOrigin
08SOFIA503 2008-07-25 12:53:00 CONFIDENTIAL Embassy Sofia
Cable title:  

SOUTH STREAM RATIFIED; MORE ON GAS CUTS TO GREECE

Tags:   ENRG ECON BU 
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VZCZCXRO6151
OO RUEHAG RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHSF #0503 2071253
ZNY CCCCC ZZH
O 251253Z JUL 08
FM AMEMBASSY SOFIA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5262
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC PRIORITY
RHEBAAA/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUEAIIA/CIA WASHINGTON DC PRIORITY
					  C O N F I D E N T I A L SOFIA 000503 

SIPDIS

EUR FOR DAS BRYZA, DEPT FOR ENVOY GREY; ENERGY COORDINATOR
MANN

E.O. 12958: DECL: 07/23/2018
TAGS: ENRG ECON BU
SUBJECT: SOUTH STREAM RATIFIED; MORE ON GAS CUTS TO GREECE

REF: A. SOFIA 471

B. ATHENS 1019

Classified By: CDA Alex Karagiannis for reasons 1.5 (b) and (d).



1. (C) After several days of contentious debate, Parliament
ratified the South Stream Intergovernmental Agreement with
Russia July 25. The vote was 140 in favor, 47 against.
After the vote, BSP MP and former Energy Minister Rumen
Ovcharov defended South Stream, saying it was in line with
European energy strategy and had the blessing of the Eruopean
Commission. Opposition MPs blasted the deal, saying it posed
a threat to Bulgaria's national security. Meanwhile,
Bulgargaz continues to move foward with the project.
Bulgargaz head of international projects Denitsa Beyazova
(strictly protect) told us July 24 that Bulgargaz officials
are currently in Moscow to sign a confidentiality agreement
to see a Russian-produced feasibility study on South Stream.
She said it is becoming apparent that Bulgaria will not
insist on an unbiased feasibility study, but instead will
move ahead with the Russian study. The next step, she said,
will be to start negotiations on the South Stream Bulgaria
shareholders' agreement. Beyazova, who is suspicious of the
South Stream project, recommended the USG urge the GOB to
insist that state-owned Bulgargaz make use of its outside
legal counsel to advise on the structuring of the
shareholders' agreement.



2. (C) Beyazova also provided more details on Bulgargaz's
role in recent gas cuts to Greece (ref A). She said
Bulgargaz decided not to pump gas to Greece during scheduled
pipeline maintenance in July (reftels) as part of a
negotiating strategy on a potential Bulgargaz/Greek deal on
gas swaps. She explained that Bulgaria is currently
experiencing a .6-.7 bcm shortage of gas. In the past
Gazprom could be relied upon to make up this shortfall, but
this year Gazprom is refusing, probably, she said, due to
Bulgargaz-Gazprom negotiations over a new long-term gas
supply contract and perceived Bulgarian foot-dragging on
South Stream. Bulgargaz is looking elsewhere to make up for
this shortage and is in negotiations with Greece on a gas
swap. Bulgaria would contract for 1 bcm of LNG to be
delivered to Greece in exchange for the right to take off gas
from the pipeline that would normally transit to Greece.
Beyazova said Bulgargaz CEO Lubomir Denchev is currently in
Athens working on this project. She added that Bulgargaz has
been talking with Gaz de France about the 1 bcm LNG contract.



3. (C) Comment: We cannot verify Beyazova's assertions,
but her claim about the gas swaps may be valid. CEO Denchev
mentioned an upcoming deal on LNG with Greece in our
discussion with him July 17. As head of international
projects, Beyazova has access to sensitive Bulgargaz
contracts and strategic plans. Her employer has noticed her
low regard for South Stream, and may be shutting her out of
the latest negotiations on this particular project. South
Stream's ratification came as no surprise, but the
confidentiality agreement and likely biased feasibility study
are bad news. We are urging the government to hold to a
higher standard, especially in light of the July 23 EU report
which takes Bulgaria's reputation for transparent and
effective money management to severe task.
Karagiannis