This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L  SOFIA 000557 
 
SIPDIS 
 
 
FOR THE DEPUTY SECRETARY FROM AMBASSADOR PARDEW 
 
E.O. 12958: DECL: 3/25/15 
TAGS: PREL PGOV MARR MOPS ECON LY IZ BU
SUBJECT: SCENESETTER FOR THE DEPUTY SECRETARY'S MEETINGS 
WITH BULGARIAN PRESIDENT, PRIME MINISTER AND FOREIGN 
MINISTER 
 
 
(U) CLASSIFIED BY AMBASSADOR JAMES PARDEW, FOR REASONS 1.5 
(B) AND (D). 
 
------- 
SUMMARY 
------- 
 
¶1. (C) SUMMARY.  Your visit to Sofia comes in the midst of 
a highly politicized review of Bulgaria's military 
participation in Iraq.  With Parliamentary elections 
scheduled for June, the government has clearly decided that 
an Iraq exit strategy must be announced before the campaign 
season begins.  We have repeatedly urged them to avoid a 
specific withdrawal date and instead focus on a strategy 
that links its departure with the political and security 
milestones contained in UNSCR 1546.  Coloring the current 
Iraqi debate is the March 4 death of a Bulgarian soldier, 
likely from American fire, which is still under 
investigation. 
 
¶2. (C) In recent months, Bulgarian officials have become 
more direct in their demands for tangible benefits from 
their Iraqi participation.  They feel under-appreciated as 
an ally and are concerned that our economic/political 
relations have not kept pace with the security side. 
Specifically, the Bulgarians want Iraqi reconstruction 
contracts, a double-taxation treaty to help spur U.S. 
investment, participation in the Visa Waiver Program, 
payment of Iraqi debt and U.S. bases.  They also need our 
help in obtaining the release of five Bulgarian nurses 
unjustly sentenced to death in Libya.  Finally, the Prime 
Minister desperately wants an invitation to the White House 
before the elections. END SUMMARY. 
 
--------------------------------- 
BULGARIA AT A CROSSROADS ON IRAQ 
--------------------------------- 
 
¶3. (C) Iraq is the most important issue we face with 
Bulgaria.  They have contributed an infantry battalion to 
the Polish-led MNF since 2003.  Their fifth contingent is 
still scheduled to deploy this summer, but its fate and 
future contributions are uncertain.  Your meetings with 
Foreign Minister Passy and Prime Minister Saxe Coburg-Gotha 
give you an opportunity to influence their ongoing search 
for an exit strategy.  With President Purvanov, you can 
help ensure that the Socialist head of state does not try 
to undermine whatever choice the government makes. 
Purvanov is not a primary decision maker on this issue, but 
his popularity and visibility give him the ability to play 
the role of spoiler. 
 
¶4. (C) While recognizing that the government will not 
likely be deterred from announcing some kind of exit 
strategy before the June elections, you can urge Bulgaria's 
leaders not to tie themselves to a specific date nor limit 
their future flexibility to respond to changing 
requirements in Iraq.  If the Bulgarians do eventually 
withdraw from the MNF, we should press for a transfer of 
their troops to the NATO training mission rather than 
complete withdrawal. Serving under a NATO flag in Iraq is 
more attractive to many Bulgarians than serving under a 
U.S. or Polish flag.  If you can announce that the U.S. 
military investigation into the apparent friendly-fire 
death of Bulgarian Sergeant Gurdi Gardev is complete, it 
will ease some of the pressure on the government and help 
to put this issue behind us. 
 
---------------------------- 
DELIVERABLES: WHAT THEY WANT 
---------------------------- 
 
¶5. (C) The government's list of potential deliverables 
seeks to show Bulgarian voters that participation in the 
Coalition has brought concrete benefits.  In addition to a 
White House meeting for the PM and assistance with the 
Libyans, Bulgarian leaders may raise Iraqi reconstruction 
contracts for Bulgarian companies, increased U.S. 
investment and trade, repayment of Iraqi debt, negotiation 
of a treaty on the avoidance of double taxation, and 
inclusion in the Visa Waiver Program.  We believe you can 
announce progress on the last two topics while you are 
here: 
 
-- Treaty on Avoidance of Double Taxation:  U.S. Treasury 
has agreed to initiate technical discussions in April on a 
Treaty for the Avoidance of Double Taxation.  If, as 
 
expected, these discussions go well, the USG could announce 
the start of formal negotiations before the Bulgarian 
elections.  This is a high-priority item for both the 
Bulgarian government and U.S. businesses in Bulgaria. 
 
-- Visa Waiver Program:  Bulgarians at all levels chafe at 
our visa requirements.  Passy has on several occasions 
asked to be included in the VWP when Bulgaria joins the EU 
in 2007.  However, Bulgaria's current B1/B2 visa refusal 
rate of about 30 percent must fall below three percent in 
order to qualify.  Bulgaria has formally requested to be 
part of the visa waiver "road map".  We are awaiting 
Department guidance, but post is prepared to organize a 
consular working group with the Bulgarians immediately. 
 
¶6. (C) Other issues the Bulgarians are likely to raise 
include: 
 
-- White House Meeting:  The Prime Minister needs this 
perhaps as much as anything on his list to demonstrate that 
Bulgaria is a close and valued ally of the U.S.  Purvanov 
has also requested a White House meeting, but we do not 
recommend this take place until after the June elections. 
 
-- Killing of Sgt. Gardev:  Initial indications are that a 
Bulgarian soldier was accidentally shot by U.S. forces in 
Iraq on March 4.  We have expressed condolences and said 
that we are waiting for the results of the U.S. military 
investigation.  If the results show that U.S. forces were 
indeed responsible, the Bulgarians expect a formal apology. 
The family has called for compensation. 
 
-- Freedom for the Bulgarian nurses in Libya:  This is an 
issue that touches ordinary Bulgarians in the way that our 
Iranian hostages affected Americans.  There is no issue 
where the U.S. could potentially gain more goodwill from 
Bulgarians across the political spectrum.  With the March 
18 U.S./Bulgaria/EU trilat in Washington, we have taken the 
diplomatic lead on this issue and deserve credit. 
 
-- Iraq reconstruction contracts:  Current Iraq-related 
military purchases from Bulgaria are approximately $10 
million, mostly small arms and ammunition for the Iraqi 
security forces.  The Bulgarians still seek a sizeable 
contract for both the economic and political benefits. 
U.S. support for Bulgarian economic involvement in Iraq 
includes a contracting methodology seminar scheduled for 
mid-April and an Iraqi trade mission to Sofia scheduled for 
late May.  The latter will bring to Sofia Iraqi government 
officials and almost 100 Bulgarian businesses from 
infrastructure, defense, health and finance sectors. 
 
-- Increased trade and investment:  Major U.S. investors in 
Bulgaria include American Standard (kitchen and bathroom 
products) and Advent -- which bought the state telecom BTK 
last year.  The energy company AES recently won the right 
to build an electrical plant.  Despite these and other 
investments, the U.S. remains only the sixth largest source 
of investment in Bulgaria ($532 million). 
 
-- Iraqi debt:  As a percentage of GDP, Bulgaria claims to 
hold more Iraqi debt than any country in the world Q- USD 
1.2 billion  -- much of it accumulated from arms sales 
during the Iran-Iraq war.  Bulgaria is not a member of the 
Paris Club and has not formally accepted the principle of 
80 percent debt reduction. 
 
-- Basing of U.S. Forces:  As part of the global 
repositioning of U.S. forces, the U.S. European Command is 
interested in setting up a forward operating location in 
Bulgaria.  There have been some 30 visits to Bulgaria by 
USG officials to discuss the issue, but the government of 
Bulgaria is awaiting a formal USG decision. 
 
------------- 
PROBLEM AREAS 
------------- 
 
¶7. (C) Despite its strong economic track record, the 
government has been much less successful in curbing 
corruption and organized crime, which are both endemic 
here.  If there is a shortcoming that could hamper 
Bulgaria's political and economic development, this is it. 
Much greater political will is necessary to strengthen the 
rule of law generally and the judicial system in 
particular. 
 
¶8. (C) Protection of intellectual property rights is a 
serious concern, and the Bulgarian IPR regime does not 
properly protect U.S. rights holders.  The USG has also 
been negotiating with Bulgaria to drop their tariff rates 
for U.S. products.  Some, for U.S. distilled spirits, are 
much higher than the rate for similar EU-produced goods. 
The USG is currently reviewing whether to withdraw some of 
Bulgaria's GSP benefits on targeted products. 
 
---------------- 
DOMESTIC CONTEXT 
---------------- 
 
¶9. (U) Membership in the European Union is Bulgaria's top 
foreign policy goal.  The Prime Minister is scheduled to 
sign the EU Accession Treaty on April 25.  Bulgaria should 
join the EU with Romania on January 1, 2007.  The macro- 
economic situation is strong, giving the current government 
an economic record that most politicians would be glad to 
run on.  Annual GDP growth for 2004 is projected at 5.8 
percent, and for 2005 is estimated at between 5 and 5.5 
percent (total estimated 2005 GDP is $27.5 billion). 
Inflation is moderate at 4 percent for 2004, and 
unemployment dropped from over 20 percent four years ago to 
12.7 percent in 2004. 
 
¶10. (U) The current government is also widely recognized as 
having markedly improved Bulgaria's fiscal situation, 
turning chronic budget deficits into small surpluses.  FDI 
for 2004 was $2.6 billion (10 percent of GDP), and all but 
one credit agency has rated Bulgarian debt at above 
investment grade.  Progress is evident everywhere, but 
Bulgaria is starting from a low base:  average per capita 
income is only 29 percent of the EU-25 in terms of 
purchasing power parity.  Other areas of concern are the 
large current account deficit (7.5 percent for 2004) and 
rapidly increasing credit growth (currently 50 percent). 
 
¶11. (C) The Socialists are leading in the polls and have 
made Bulgaria's withdrawal from Iraq a major campaign 
theme.  The most recent opinion poll shows that roughly 
two-thirds of the Bulgarian population favors withdrawal 
from Iraq either immediately or right after the June 
elections.  This, combined with the killing of another 
Bulgarian soldier on March 4, has put the government on the 
defensive exactly three months before the elections.  While 
a Socialist victory would not be a disaster for us, it 
would make protecting a wide range of U.S. interests more 
difficult.  All the more reason, in our view, to invite 
Simeon to the White House. 
 
----------------- 
The Personalities 
----------------- 
 
¶12. (C) While the Prime Minister's approval ratings have 
edged up in recent months he is generally perceived as 
enigmatic and aloof.  He often appears indecisive, but his 
hands-off management style seems to serve him well 
politically; polls show that many Bulgarians do not blame 
him for the government's mistakes and support a second 
mandate.  The President, formerly head of the Socialist 
Party, is Bulgaria's most polished senior politician.  He 
has used his position to strike a balance between 
Bulgaria's responsibility to the Coalition and the 
Socialists' opposition to the widely unpopular deployment 
of Bulgarian troops in Iraq. He has also expanded his 
rather restricted authorities into the power vacuum created 
by the Prime Minister.  Passy is the most strongly and 
consistently pro-American voice in the government, but he 
is currently fighting an uphill battle on Iraq. 
 
Baghdad minimise considered.