BULGARIA: PM RATIONALIZES RUSSIAN PRESSURE ON

C O N F I D E N T I A L SECTION 01 OF 02 SOFIA 000221

SIPDIS

E.O. 12958: DECL: 05/10/2019
TAGS: ENRG ECON PREL PGOV BG
SUBJECT: BULGARIA: PM RATIONALIZES RUSSIAN PRESSURE ON
ENERGY PROJECTS

Classified By: Ambassador Nancy McEldowney for reasons
1.4 (b) and (d)


1. (C) Summary: In a move that prompted scathing ridicule
by local media, Bulgarian Prime Minister Stanishev rushed
to Moscow less than 24 hours after the April 24-25 regional
energy summit in Sofia (which Putin refused to attend).
While in Moscow, Stanishev signed yet another "secret"
agreement on South Stream and is rumored to have discussed
possible Russian government financing for the Belene
nuclear project. In a subsequent discussion with
Ambassador, Stanishev was subdued but straightforward. He
described the Russians as clearly holding the upper hand
but defended his actions as preserving Bulgaria's best
interests. On the four specific contested points of
transparency (publishing the South Stream agreements),
eliminating intermediaries, securing compensation for the
January cut-off, and clarifying that South Stream
represents a second pipeline through Bulgaria (and not
simply additional volumes through existing infrastructure),
Stanishev came home empty handed. End Summary.


2. (C) The Prime Minister skated past media criticism of
his Moscow trip (including reports of a frosty Putin
reception and other small slights) and claimed that
Bulgaria had stuck to its guns on the South Stream
cooperation agreement. He had initialed it and the
Bulgarian Energy Holding would sign it in about two weeks
after the Bulgargaz board reviewed and approved the text
(which he characterized as a procedural step). Stanishev
stressed that during PutinQs January 2008 visit to Sofia,
the Bulgarians had achieved a good deal on South Stream,
with 50-50 ownership for that part of the pipeline
traversing Bulgaria, and had set a benchmark that other
countries (Hungary, Greece, but not Serbia) had followed.
He had argued then and continues to insist now on Russian
commitments on volumes (70bcm in transit) and transit
fees. It was only by securing these elements during his
April 27 trip that he had initialed the deal. He admitted
that discussions with Putin had been a game of nerves.
(Another member of the Bulgarian delegation who has
frequently participated in bilateral meetings told us
confidentially that he had found Putin both more relaxed
and self confident and also more despotic than previously.)


3. (C) Ambassador made the case that the agreement be made
public; Stanishev noted "we will do our best," while
conceding the Russians are unenthusiastic. When the
Ambassador probed further, he slid past whether there would
be new gas or additional volumes for South Stream and the
sources of financing of the pipeline crossing Bulgaria.
Taking up Bulgaria's push for compensation for the January
gas cutoff, he blandly stated that Gazprom has the stronger
legal position; as for eliminating intermediaries, that was
an uphill battle.


4. (C) On Nabucco, after initially tepid remarks, he
reverted to the standard line supporting the project,
stressing that both Nabucco and South Stream are Bulgarian
priorities. He agreed with the Ambassador that the key is
the Turkey-Azerbaijan relationship, but skipped over the
point that all partners had to weigh in with Ankara and
Baku and not simply look to the United States to hammer out
a deal. Stanishev suggested that Nabucco partners Greece
and Turkey are focusing more on the Greece-Turkey-Italy
interconnector. He was pleased that the EU has committed
200 million euros for Nabucco, but took a swipe at the EU
for its lengthy decision-making on financing and support.
He stressed Bulgaria is interested in interconnectors, and
especially on expanding its domestic the storage facility
at Chiren.


5. (C) Stanishev briefly took up the Belene nuclear
reactor, acknowledging that financing issues are very
tough. Bulgaria wants commercial not Russian government
financing and is encouraging discussion between the
Bulgarian electricity company, RWE and Russia. Bulgaria
would not agree to "any conditions" for financing -- a
clear reference to Russian pressure, though he quickly
added that given international economic conditions, all
major projects face difficulties in raising capital -- a
hint that Belene is not on schedule. He took on board the
point that American company Direct Petroleum had promising
prospects in a gas find in central Bulgaria but that the
Bulgarian bureaucracy was moving sluggishly on partnership
issues between the Bulgarian Energy Holding and the U.S.
firm, forcing the firm to look at other, including Russian,
partners.

SOFIA 00000221 002 OF 002



McEldowney