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

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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

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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