BULGARIANS TOUT A SUCCESSFUL ENERGY SUMMIT

C O N F I D E N T I A L SECTION 01 OF 03 SOFIA 000205 SIPDIS FOR SPECIAL ENVOY FOR EURASIAN ENERGY DIPLOMACY MORNINGSTAR E.O. 12958: DECL: 04/26/2019 TAGS: ENRG ECON PREL PGOV BU SUBJECT: BULGARIANS TOUT A SUCCESSFUL ENERGY SUMMIT REF: SOFIA 0180 AND PREVIOUS Classified By: Ambassador Nancy McEldowney for reasons 1.4 (b) and (d). ¶1. (C) Summary: Overcoming intense Russian pressure and European skepticism, the April 24-25 Sofia Energy Summit focused on the key principles and policies of energy security rather than on individual projects. The event's deliverable, a declaration endorsed by the 30 participating delegations, is a hard-fought document stressing the need for all European gas projects to be governed by the principles of transparency, diversification and market orientation; the proof will come in its implementation. On the margins of the event, private sector proponents of the Turkey-Greece-Interconnector, Nabucco and South Stream pipelines argued their projects' relative merits while the Bulgarian Energy Holding and Gazprom waged a war of words in the press over details of upcoming South Stream and gas supply deals. Taken as a whole, the event exceeded deliberately understated expectations by bringing together key suppliers, transit countries and consumers to agree, if only on paper, on the need for greater transparency, accountability and reliability in the gas sector in the wake of the January gas crisis and amid global financial turbulence. All documents related to the Sofia Energy Summit, including interventions and the summit declaration, are available at: http://www.intelink.sgov.gov/wiki/Portal:Bulg aria Energy . End Summary. BACKGROUND -------------- ¶2. (C) Titled "Natural Gas for Europe: Security and Partnership" the April 24-25 Sofia Energy Summit brought together 28 delegations (8 at the head of state or government level),the European Commission and the EBRD to discuss gas-related energy security in the wake of the January gas crisis. The agenda featured prepared interventions by each delegation head, most of whom used the opportunity to highlight national diversification efforts. Kicking off the event, Bulgarian President Parvanov stressed the need for transparency in all segments of the gas supply chain and, surprisingly, given past Bulgarian reticence, the creation of a European energy regulatory authority. U.S. Special Envoy for Eurasian Energy Diplomacy Richard Morningstar stressed that while no single project holds the key to energy security, all projects that go forward must be based on the principles of diversification, transparency and market viability. EU President Barroso highlighted the EU's response and solidarity during and after the January gas crisis. Turkish President Gul described Turkey's desire to become "Europe's fourth natural gas corridor." Russian Energy Minister Sergey Shmatko underlined his country's need to diversify away from Ukraine's transit network and stated Russia would soon hold a South Stream conference for interested South East European governments and companies. (Note: Gazprom invited the Bulgarian Energy Holding to such a multilateral South Stream event in Sochi on May 15.) Whereas most speakers touted their nation's energy policies, Georgian President Saakashvili used part of his intervention to rail against Russia's incursion into Georgia in summer ¶2008. ¶3. (C) The key summit deliverable was a declaration on key principles and policies supporting energy security, including transparency, solidarity, diversity, market-based transactions, and legal remedies for contract non-performance. Agreement on the declaration was hard-fought. With the Russians insisting on a direct mention of South Stream in the lead-up to the summit, the European Commission, at the request of the Bulgarians, took over declaration negotiations with the Russians in mid-April. The Russian delegation continued to block the adoption of the declaration until the summit's final hour, when, according to Bulgarian Energy Envoy Peter Poptchev, Russian Energy Minister Shmatko withdrew Russia's hold on the document, citing a positive bilateral meeting on the summit's sidelines with U.S. Energy Envoy Morningstar. FIREWORKS ON THE MARGINS -------------- ¶4. (C) While diplomacy reigned on the plenary floor, debate heated up on the margins. At a business forum organized by SOFIA 00000205 002 OF 003 the Bulgarian Energy Holding just prior to the summit, representatives of the three main regional pipeline projects touted their own projects while jabbing their competitors. Elio Ruggeri of Edison argued passionately for Turkey-Greece-Italy Interconnector (ITGI) saying its prospects were brightest and urging a future Bulgarian spur to the project. Executive Director of the Nabucco gas pipeline Reinhard Mitschek stressed his project's contribution to the region's energy security as it offered a real alternative to Russian gas. Gazprom's head of external economic relations Stanislav Tsigankov casually dismissed the argument that competition existed between South Stream, TGI and Nabucco, implying that South Stream alone had guaranteed volumes and was further along than the other two. Azeri representatives and the StatoilHydro Azerbaijan speaker hinted that Azeri gas did not necessarily have to go through Turkey only. ¶5. (C) Meanwhile, Gazprom and the Bulgarian Energy Holding were waging a war of words in the press over negotiations for Bulgaria's new long-term gas supply contract and Russian demands that Bulgaria sign a cooperation agreement on South Stream during the summit itself. Gazprom's Tsigankov outraged the Energy Holding by asserting his company's intentions to eliminate Bulgargaz (part of the Energy Holding) in its next gas supply contract with Bulgaria in order to service Bulgarian end-users directly. In response, Bulgarian officials leaked word that Moscow had been attempting to force Sofia to allow South Stream to use Bulgaria's existing pipeline infrastructure to cut project costs. Tsigankov and Energy Minister Shmatko were last minute substitutes for Alexy Miller and PM Putin, respectively, who canceled their participation when Bulgaria refused to sign the South Stream agreement on the summit's margins. (Note: Bulgarian Prime Minister Stanishev subsequently initialed a similar South Stream agreement in Moscow on April 28, although the document's exact contents are still unknown.) COMMENT -------------- ¶6. (C) Despite the last minute withdrawal of key producing country heads of state, the Bulgarians breathed a sigh of relief and believe they chalked a win with the Sofia Energy summit. In the face of intense Russian pressure and naysayers predicting Sofia would host a "ball at which only Putin would dance," the Bulgarians kept the focus on principles and policies rather than on individual projects. It wasn't easy. Moscow's chilly reception of PM Stanishev on April 27 suggests that bilateral relations with Russia, despite diplomatic smiling and stiff upper lips, are not sailing smoothly. End Comment. ¶7. (U) SUMMIT PARTICIPANTS: Albania - President Bamir Topi Armenia - Ambassador Sergei Manasarian Austria - Vice-Minister of Economy, Family and Youth Alfred Maier Azerbaijan - Minister of Industry and Energy Natiq Aliyev Bosnia and Herzegovina - Chairman of the Presidency, Nabojsa Radmanovic Bulgaria - President Georgi Parvanov Croatia - President Stjepan Mesic Czech Republic - Deputy Prime Minister for European Affairs, Alexander Vondra European Commission - President Jose Barroso European Bank of Reconstruction and Development - Business Group Director, Energy, Riccardo Puliti Egypt - Special Representative of the President of Egypt and Minister of Petroleum, Sameh Fahmy France - Ambassador Etienne du Poncen Former Yugoslav Republic of Macedonia - Deputy Prime Minister Ivica Bocevski Georgia - President Mikheil Saakashvili Germany - Director General of Energy Policy and Federal Ministry of Economics and Technology, Detlef Dauke Greece - Prime Minister Kostas Karamanlis Hungary - Secretary of State of the Ministry of Foreign Affairs, Jeno Faller Italy - Minister for Economic Development, Claudio Scaiola Kazakhstan - Special Envoy Lyzzat Kiinov Moldova - Deputy Minister of Economy and Trade, Sergiu Sainchuk Montenegro - President Filip Vujanovic Qatar - Emir Sheikh Hamad bin Khalifa Al-Thani SOFIA 00000205 003 OF 003 Romania - Minister of Economy, Adriean Videanu Russia - Minister of Energy, Sergei Shmatko Slovenia - Ambassador, Head of the Task Force for Energy & Infrastructure, MFA, Primoz Seligo Serbia - President Boris Tadic Turkey - President Abdullah Gul Turkmenistan - Deputy Minister of Foreign Affairs, Toili Babaevic Komekov Ukraine - Ambassador Viktor Kalnik United States - Special Envoy for Eurasian Energy, Richard Morningstar McEldowney