BULGARIA: PUSHING TRANSPARENCY AT THE SOFIA

C O N F I D E N T I A L SECTION 01 OF 02 SOFIA 000045 SIPDIS E.O. 12958: DECL: 01/25/2019 TAGS: ENRG PREL PGOV BU SUBJECT: BULGARIA: PUSHING TRANSPARENCY AT THE SOFIA ENERGY SUMMIT REF: 08 SOFIA 0664 Classified By: Ambassador Nancy McEldowney for reasons 1.4 (b) and (d). ¶1. (C) Summary: The unprecedented, two-week gas cutoff put a crack in Bulgaria's faith in its Russia-focused energy strategy. The Bulgarians now have a window to tackle issues that have plagued them for years: highly secretive and non-transparent gas supply and transit deals with Gazprom and the mandated use of shady intermediaries to implement them. The Bulgarians are more determined than ever to hold an energy security summit April 24-25 in Sofia. They have lined up (they claim) attendance commitments from 15 of 28 invited heads of state or government, including Putin, the Presidents of Azerbaijan and Turkmenistan, and representatives from most European transit countries. After Hungary's Nabucco Summit and the Czech Presidency's Producers Meeting in May, the Bulgarian summit may be odd man out, but it is not going away. To the extent that we can use the Sofia meeting to spur meaningful action on transit sector transparency, we should engage and participate. A late February expert-level Summit planning meeting offers the opportunity to push our agenda. End Summary. Gas Crisis Aftermath -------------- ¶2. (C) Bulgaria was arguably the most affected by the Russia-Ukraine gas dispute -- a direct result of its ill-founded faith in Russia as a reliable supplier. Though it chafes at Gazprom insistence on secretive transit and supply deals and the use of shady intermediaries, Bulgaria had continued to pursue energy partnership with Russia, as evidenced by its South Stream signing in January 2008. Counting on Russia's reliability, Sofia ignored needed upgrades to gas storage facilities and dawdled on interconnections with its neighbors. The two-week gas cut-off left an already strapped industrial sector reeling, schools closed and homes cold. The Bulgarian public is laying the blame for the crisis not on Russia or Ukraine, but on the Socialist-led government that left the country so exposed. ¶3. (C) While Russia supporters are using the gas crisis to argue for diversification of route (South Stream),(and President Parvanov will discuss the project with Putin in Moscow in early February),what had been a decidedly pro-Russian government tone on energy is changing. Outgoing PM Adviser Valentin Radomirski told Ambassador January 27, "This (the cut-off) has opened our eyes." PM Stanishev vigorously endorsed Nabucco in a January 29 meeting with EU Ambassadors, pointedly omitting any reference to South Stream, even as Russia reportedly signaled it would add volumes to that project. The Bulgarians are pursuing a host of diversification projects, including the negotiation for one bcm of Azeri gas that they would take through a hook-up to TGI, an LNG terminal in Greece, EU-financed interconnections with Greece and Romania, new energy cooperation with Turkey, and an expansion of gas storage facilities. Stanishev travels to Egypt in early February in an attempt to secure additional volumes. Sofia sent a claim for compensation for the gas cut-off to Gazprom (preemptorily denied) and demanded the end to Gazprom-linked intermediaries in the Bulgarian transit sector (also denied). It has also started a dialog with transparency organizations on ways to shine a light on the transit sector. The April 24-25 Energy Security Summit -------------- ¶4. (C) For the Bulgarians, the gas crisis gives the long-planned April 24-25 Sofia Energy Summit new meaning. They have made a public show of inviting 28 heads of state and government, 15 of whom have accepted (they claim), including Putin and the presidents of Azerbaijan, Turkmenistan, Ukraine and Turkey. But the summit organizers lack vision; organization has been clumsy. We have urged them to switch focus and use at least part of the conference to tackle issues that have plagued Bulgaria -- and neighboring transit states -- for years: the pressure to sign secretive, nontransparent energy deals and the use of Gazprom-linked intermediaries to implement those deals. Unification of transit countries on a set of transparency-focused principles would send a message of strength to Russia and give a measure of confidence to both producer and consumer countries that rely on transit country reliability. SOFIA 00000045 002 OF 002 ¶5. (C) To the extent that the Bulgarians take our advice, we should offer engagement. There are several near-term opportunities: --A proposed meeting between the Secretary and Bulgarian FM Kalfin in Washington, or on the margins of the NATO Summit. --A planned late-February expert-level meeting in Sofia to set the Sofia Summit agenda and determine possible outcomes. --The April Summit itself. Our participation in the April Summit should be decided only when the agenda and chances for success are defined. We should use the late-February strategy session (tentatively planned for February 23) to push our agenda and determine whether the summit itself merits our attendance at senior levels. All eyes are watching for who represents the U.S. from Washington given a Putin/Medvedev attendance. McEldowney