BULGARIA: TOTAL CUT IN GAS SUPPLY SPARKS CRISIS

C O N F I D E N T I A L SOFIA 000001 SIPDIS E.O. 12958: DECL: 01/05/2019 TAGS: ENRG ECON PREL PGOV SUBJECT: BULGARIA: TOTAL CUT IN GAS SUPPLY SPARKS CRISIS Classified By: Ambassador Nancy McEldowney for reasons 1.4.(b) and (d). ¶1. (C) Summary: The dispute between Russia and Ukraine over natural gas hit Bulgaria broadside on January 6, when the country discovered that 100 percent of its gas supplies had been suspended indefinitely. PM Stanishev has reached out to his Russian and Ukrainian counterparts to demand an immediate resumption of supply and the EU has issued a supportive statement. At the same time, the government has launched emergency measures, to include mandatory reductions in use by industry, activation of gas reserves, and, where possible, a switch to other energy sources. Though some here claim that these emergency procedures are sustainable for at least two-three weeks, record breaking cold and snowfall along with already vicious political attacks from the opposition, indicate that the crisis is likely to widen quickly. This first ever complete cut of gas to an EU member has put Bulgaria and its EU brethren in an acutely uncomfortable position. No longer able to deny the reality of Russia's predatory energy policy, they many now be willing to do something about it. End Summary. ¶2. (C) At 3:30 am Gazprom gas supply to Bulgaria was cut without warning. FM Kalfin told Ambassador January 6 that Bulgaria received no advance warning of the shut-off. He noted that Bulgaria immediately discontinued gas transit to Turkey, Macedonia and Greece in order to preserve the gas in the Bulgarian pipeline system (about 20 million cubic meters.) Bulgargaz then put in place an emergency response, dipping into the gas reserve at Chirin, which can supply about 4.5 mcm a day, or about one-third of Bulgarian gas consumption. Bulgargaz is rationing supplies to customers, with social institutions such as hospitals, schools and district heating plants coming first. Just over three percent of households (mostly new construction) are gasified, so restrictions are more likely to affect industries. The Minister of Economy and Energy is meeting with the 60 largest industrial gas users January 7 to inform them of the emergency measures. If the gas is not turned back on by January 8, the Minister of Economy and Energy will likely extend the emergency measures, forcing all facilities with the capability to switch to other sources of fuel. The next step would be to announce a national emergency in order to tap into domestic and EU strategic energy reserves. Estimates of the amount of time Bulgaria can maintain a semblance of normalcy -- and avoid public discontent -- range from four days to just under a month. ¶3. (C) While reluctant to assign blame for the situation, the FM called the cut-off "absolutely unacceptable." Bulgargaz has contracts to buy Gazprom gas at the Ukrainian/Romanian border from three fully or partially Gazprom-owned intermediaries: Overgas, Wintershall and GazpromExport. None of these entities were informed of the shutdown. Each of them heard about it not from Gazprom, but from Bulgargaz. After a marathon emergency Council of Ministers meeting on the gas crisis the morning of January 6, Bulgaria went on the diplomatic offensive. PM Stanishev spoke with PM Putin. FM Kalfin spoke with his Czech counterpart as well as Ukraine's Ambassador to Sofia, who argued that his country does not have any gas and therefore cannot supply anything to Bulgaria. The Bulgarians are urging the EU to take a strong stand to bring the crisis to an end, although Kalfin does not think the EU should mediate specific terms of a contract between Russia and Ukraine. ¶4. (C) Comment: Part of Bulgaria's cozy energy relations with Moscow flowed from Gazprom's reliability as a supplier. That has changed. While Bulgarian officialdom is not (yet) pointing fingers at Russia, there is clear acknowledgment that greater diversification is needed. The longer this crisis continues, the clearer that need will be. Bulgaria's energy sector suffers from many deficiencies: shady intermediaries, lack of transparency, and an almost complete dependence on Russia for gas (and other energy). There is much work to be done. Once the crisis is over, we are likely to have a more willing partner in Bulgaria as we move forward on these issues. McEldowney