Identifier
Created
Classification
Origin
09SOFIA15
2009-01-12 15:11:00
CONFIDENTIAL
Embassy Sofia
Cable title:
BULGARIA: DIGGING OUT OF THE ENERGY HOLE
how-toVZCZCXRO4800 OO RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSR DE RUEHSF #0015/01 0121511 ZNY CCCCC ZZH O 121511Z JAN 09 FM AMEMBASSY SOFIA TO RUEHC/SECSTATE WASHDC IMMEDIATE 5689 INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC PRIORITY RUEAIIA/CIA WASHINGTON DC PRIORITY RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY RHEBAAA/DEPT OF ENERGY WASHINGTON DC PRIORITY RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
C O N F I D E N T I A L SECTION 01 OF 02 SOFIA 000015
SIPDIS
E.O. 12958: DECL: 01/11/2019
TAGS: ENRG ECON PREL PGOV BU
SUBJECT: BULGARIA: DIGGING OUT OF THE ENERGY HOLE
REF: SOFIA 0010 AND PREVIOUS
Classified By: Ambassador Nancy McEldowney for reasons 1.4 (b) and (d).
C O N F I D E N T I A L SECTION 01 OF 02 SOFIA 000015
SIPDIS
E.O. 12958: DECL: 01/11/2019
TAGS: ENRG ECON PREL PGOV BU
SUBJECT: BULGARIA: DIGGING OUT OF THE ENERGY HOLE
REF: SOFIA 0010 AND PREVIOUS
Classified By: Ambassador Nancy McEldowney for reasons 1.4 (b) and (d).
1. (C) Summary: The total gas cut-off, now in its seventh
day, has exposed the vulnerabilities and short-sightedness of
Bulgaria's Russia-centric energy policy. Nearly 100 percent
dependent on Russia for its gas, oil and nuclear fuel,
Bulgaria is clearly under Moscow's thumb. We are urging
senior government officials to seize this crisis as an
opportunity to dig the country out of its energy hole. Our
message is four-part: increase transparency; eliminate
intermediaries; boost diversity of supply; and make Bulgaria
a renewables and efficiency powerhouse. End Summary.
2. (C) Exactly one year ago in Sofia, President Parvanov
and President Putin kicked off "The Year of Russia in
Bulgaria," sealing the two countries' energy partnership with
the signing of a "grand slam" of big-ticket energy deals
including South Stream, Burgas-Alexandroupolis, and the
Belene Nuclear Plant. At the time, the Socialist-led
government never believed Russia would turn off the spigot.
What a difference a year makes. We are urging the
Bulgarians, both senior officials and private advisers, to
seize the opportunity offered by the Russia-Ukraine gas
dispute to get out from under Russian energy dominance.
Russian interests and the rent-seekers who feed on
Moscow-linked energy deals will resist, but a window of
opportunity has opened.
3. (C) Our message is four-part:
Transparency: The Bulgarian energy sector is a murky morass
of Russian-connected insiders and parasitic rent-seekers.
Shining a light on the players and deals will allow the
government and public to make market-based deals that are in
the public interest. At our invitation, on January 14 the
Extractive Industries Transparency Initiative will brief
Bulgarian Energy Holding Officials and NGOs on ways to bring
transparency to this sector. We are also urging transparency
in the ultra-secret contracts Bulgaria has with Gazprom and
its intermediaries as well as clarity in public procurements
for large energy projects such as the Belene Nuclear Power
Plant.
Intermediaries: Gazprom has so far insisted on using
Gazprom-owned or affiliated intermediaries to sell gas to
Bulgaria. They take a cut of the action, increasing consumer
prices and creating tax headaches for Bulgargaz. They also
protect Gazprom in the event of a cut-off, as the Bulgarians
have come to realize over the past week. We are urging the
elimination of these unnecessary intermediaries as Bulgargaz
begins negotiations for a new long-term gas supply contract
to replace current supply contracts that are set to expire in
2010 and 2012.
Diversification: While the Stanishev Government still
supports South Stream, the gas cut-off has reinvigorated
Bulgarian efforts to diversify away from Russian energy
sources. We are urging Bulgaria to think big. They will
continue to support Nabucco, pursue a hook-up to the
Turkey-Greece-Italy interconnector, a hook-up to the Romanian
gas transmission network, an LNG terminal in the Aegean, and
an expansion of the Chirin gas storage facility. Others are
talking about construction of a new, mid-sized oil refinery
to compete with Lukoil's Neftochim refinery and a new oil
storage facility. We will urge U.S. company involvement as
well as U.S. technical assistance through USTDA and other USG
entities.
Renewables and Efficiency: The gas cut-off is a wake-up call
for Bulgaria to rely on indigenous, renewable resources
including wind, hydro and solar. We are encouraging Bulgaria
to double currently-offered incentives to develop and use
renewable energy. Bulgaria remains the least
energy-efficient economy in the EU. We are urging the
government to put in place new incentives to make soviet-era
heavy industry and large apartment blocks more energy
efficient.
4. (C) Comment: Our message is simple: the gas crisis
has given the government the opportunity -- and a brief
window -- to discuss and implement projects and ideas that
were impossible only a month ago. We are pushing them to
bring real change to the way Bulgaria does energy. If the
government comes up with the goods - an innovative strategy
backed up by political support and financial resources - the
potential benefits are profound.
McEldowney
SIPDIS
E.O. 12958: DECL: 01/11/2019
TAGS: ENRG ECON PREL PGOV BU
SUBJECT: BULGARIA: DIGGING OUT OF THE ENERGY HOLE
REF: SOFIA 0010 AND PREVIOUS
Classified By: Ambassador Nancy McEldowney for reasons 1.4 (b) and (d).
1. (C) Summary: The total gas cut-off, now in its seventh
day, has exposed the vulnerabilities and short-sightedness of
Bulgaria's Russia-centric energy policy. Nearly 100 percent
dependent on Russia for its gas, oil and nuclear fuel,
Bulgaria is clearly under Moscow's thumb. We are urging
senior government officials to seize this crisis as an
opportunity to dig the country out of its energy hole. Our
message is four-part: increase transparency; eliminate
intermediaries; boost diversity of supply; and make Bulgaria
a renewables and efficiency powerhouse. End Summary.
2. (C) Exactly one year ago in Sofia, President Parvanov
and President Putin kicked off "The Year of Russia in
Bulgaria," sealing the two countries' energy partnership with
the signing of a "grand slam" of big-ticket energy deals
including South Stream, Burgas-Alexandroupolis, and the
Belene Nuclear Plant. At the time, the Socialist-led
government never believed Russia would turn off the spigot.
What a difference a year makes. We are urging the
Bulgarians, both senior officials and private advisers, to
seize the opportunity offered by the Russia-Ukraine gas
dispute to get out from under Russian energy dominance.
Russian interests and the rent-seekers who feed on
Moscow-linked energy deals will resist, but a window of
opportunity has opened.
3. (C) Our message is four-part:
Transparency: The Bulgarian energy sector is a murky morass
of Russian-connected insiders and parasitic rent-seekers.
Shining a light on the players and deals will allow the
government and public to make market-based deals that are in
the public interest. At our invitation, on January 14 the
Extractive Industries Transparency Initiative will brief
Bulgarian Energy Holding Officials and NGOs on ways to bring
transparency to this sector. We are also urging transparency
in the ultra-secret contracts Bulgaria has with Gazprom and
its intermediaries as well as clarity in public procurements
for large energy projects such as the Belene Nuclear Power
Plant.
Intermediaries: Gazprom has so far insisted on using
Gazprom-owned or affiliated intermediaries to sell gas to
Bulgaria. They take a cut of the action, increasing consumer
prices and creating tax headaches for Bulgargaz. They also
protect Gazprom in the event of a cut-off, as the Bulgarians
have come to realize over the past week. We are urging the
elimination of these unnecessary intermediaries as Bulgargaz
begins negotiations for a new long-term gas supply contract
to replace current supply contracts that are set to expire in
2010 and 2012.
Diversification: While the Stanishev Government still
supports South Stream, the gas cut-off has reinvigorated
Bulgarian efforts to diversify away from Russian energy
sources. We are urging Bulgaria to think big. They will
continue to support Nabucco, pursue a hook-up to the
Turkey-Greece-Italy interconnector, a hook-up to the Romanian
gas transmission network, an LNG terminal in the Aegean, and
an expansion of the Chirin gas storage facility. Others are
talking about construction of a new, mid-sized oil refinery
to compete with Lukoil's Neftochim refinery and a new oil
storage facility. We will urge U.S. company involvement as
well as U.S. technical assistance through USTDA and other USG
entities.
Renewables and Efficiency: The gas cut-off is a wake-up call
for Bulgaria to rely on indigenous, renewable resources
including wind, hydro and solar. We are encouraging Bulgaria
to double currently-offered incentives to develop and use
renewable energy. Bulgaria remains the least
energy-efficient economy in the EU. We are urging the
government to put in place new incentives to make soviet-era
heavy industry and large apartment blocks more energy
efficient.
4. (C) Comment: Our message is simple: the gas crisis
has given the government the opportunity -- and a brief
window -- to discuss and implement projects and ideas that
were impossible only a month ago. We are pushing them to
bring real change to the way Bulgaria does energy. If the
government comes up with the goods - an innovative strategy
backed up by political support and financial resources - the
potential benefits are profound.
McEldowney