BULGARIAN FM KALFIN'S WASHINTON MEETING WITH THE

C O N F I D E N T I A L SECTION 01 OF 02 SOFIA 000162

SIPDIS

E.O. 12958: DECL: 04/02/2019
TAGS: PREL PGOV ENGY BU
SUBJECT: BULGARIAN FM KALFIN'S WASHINTON MEETING WITH THE
SECRETARY, APRIL 8

Classified By: Charge Alex Karagiannis for reasons 1.4 (b) and (d).


1. (C) SUMMARY: FM Kalfin arrives just after his sprint to
Ashgabat and the NATO and U.S.-EU Summits and just two
weeks before Bulgaria's April 24-25 Energy Summit on
natural gas. Anxious for a successful summit, Bulgaria is
struggling to confirm high-level attendance and thread the
needle that can balance EU skeptics of its initiative,
Russian strong-arming on South Stream and the U.S.
strategic focus on principles -- transparency, diversity,
market rules -- rather than simply on projects and
pipelines. Kalfin is determined to deliver. Smart, savvy,
sensible, and honest, he has President Parvanov's ear and
PM Stanishev's confidence, testament to his skills given
their increasingly prickly personal and political
relationship. As the government stumbles towards summer
parliamentary elections, its commitments to us on
Afghanistan and regional security in South Eastern Europe
and the Black Sea remain firm, but its capacity to deliver
is shrinking. Kalfin is above the political fray and is
positioned to remain influential. Your meeting will help
secure positive decisions from a government that looks for
a U.S. boost. END SUMMARY.

Electoral Politics at Center Stage
--------------

2. (C) Kalfin will accompany President Parvanov to the
NATO Summit and PM Stansihev to the U.S.-EU Summit. He
will be instrumental in defining and implementing policy as
the two leaders manage their increasingly testy
relationship. The government is staggering to the end of
its five year term with notable achievements, especially
in economic growth, but now overshadowed by world conditions.
A cynical public is worried about job losses and poor social
services; it is frustrated and angry over rampant corruption,
high-profile scandals, and EU funds withheld over
mismanagement. The political season is in full swing as the
country heads to summer elections; risk averse political
survival instincts are taking hold. But Bulgaria's
pro-Atlantic orientation is set; it has supported us in
Iraq, Afghanistan, Kosovo, NATO membership issues, and MAP
for Georgia and Ukraine. Bulgarians look to the U.S. as
they set policy courses.

ENERGY SECURITY
--------------

3. (C) Over 95 percent dependent on Russian gas, Bulgaria
suffered dearly from the two-week Russian-Ukraine gas
dispute and cut-off in January. It now looks to build
interconnectors with neighbors. More strategically, it is
determined to showcase its long-planned April 24-25 energy
summit and help bring greater energy security to Europe.
At our urging, Bulgaria has proposed an agenda based on the
principles of transparency, diversification, market-based
decision making and best business practices. The Russians
are now leveraging Putin,s possible participation to
pressure Bulgaria to highlight its South Stream project.
The Bulgarians are resisting any multilateral signings or a
bilateral deal on their part, but cannot guarantee what
other countries (or companies) might do. They know their
credibility is at stake with us, the EU, and Central Asian
and Caspian countries that they cultivated for alternative
supplies and routes. They are working closely with us on
the declaration and are eager to hear who will represent
the U.S.

AFGHANISTAN
--------------

4. (C) Despite public opposition to overseas deployments
and though saddled with a limited capacity military,
Bulgaria has come through on Afghanistan when presented
with specific, targeted requests. It withdrew 153 soldiers
from Iraq (at GOI request),and we have requested an
equivalent number be shifted to Afghanistan. Specifically,
we have requested modest increases (two more OMLTs, medical
teams, civilian experts, and consolidation of forces in the
South) all well within Bulgaria's capacity. With an eye on
elections, some here want the decision left to the new
government. A clear message to Kalfin will help get a
positive decision now.


5. (C) We have worked hard to improve Bulgarian military
capacity, making it more deployable and more NATO
inter-operable. We have proposed an F-16 deal, but the
erratic and weak Defense Minster threw a spanner in
the works, stalling the process and forcing us to wait
until a new government is in place. We still believe it is
in our mutual interest to end Bulgarian dependence on Russian
MiG's that are ineffective and very costly to maintain (over
$100 million a year). An investment in U.S. aircraft would
lock the Bulgarians into a long-term relationship with us and
transform their military, ending decades of Russian
influence and graft-induced military procurements.

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ECONOMY
--------------

6. (C) After five years of impressive growth, Bulgaria is
now feeling the effects of the global financial crisis.
Fortunately, strict fiscal conservatism has left the
country with sufficient buffers to avoid the financial
turbulence seen in many of its neighbors, at least for
now. But Bulgaria's small, open economy is vulnerable to
potential outside shocks including restricted lending by
its mostly foreign-owned banking sector and the shrinking
of its European export markets. The Socialist-led government
is loath to look for outside help as elections loom and has
ruled out a precautionary agreement with the IMF or ECB
assistance. Bravado is no substitute for prudent planning;
Bulgaria must prepare for a potential economic rough ride.

CORRUPTION/RULE OF LAW
--------------

7. (C) Within the EU, Bulgarians have the least
confidence in their public institutions; confidence in
police, prosecutors, and judges is shockingly low at less
than 20 percent. Serial scandals in multiple ministries, a
culture of impunity for venal and corrupt public officials,
organized crime rackets, and EU withholding of funds for
mismanagement have rocked the political establishment.
Reforms to date have not made an appreciable dent in
systemic problems. But there is some incremental progress,
thanks to U.S. and EU pressure. Our word counts especially
heavily. A firm U.S. message on the integrity of the
electoral process and on successfully prosecuting suspected
criminals will resonate quite well here with a public that
values our leadership.


8. (C) COMMENT: The U.S. enjoys high public approval.
Bulgaria prides itself on being a predictable and reliable
partner. It wants to burnish its international reputation,
in concert with support for U.S. policies. Prime Minister
Stanishev and President Parvanov are committed to start on
the right foot with President Obama. Your meeting and
public remarks will set the tone and parameters for a
renewed relationship. Kalfin will come back galvanized to
get things done. END COMMENT.

Karagiannis