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