VZCZCXRO9497
RR RUEHAG RUEHDBU RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHSF #1119/01 2601612
ZNY CCCCC ZZH
R 171612Z SEP 07
FM AMEMBASSY SOFIA
TO RUEHC/SECSTATE WASHDC 4292
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC

C O N F I D E N T I A L SECTION 01 OF 03 SOFIA 001119 
 
SIPDIS 
 
SIPDIS 
 
EUR FOR DAS BRYZA 
 
E.O. 12958: DECL: 09/17/2017 
TAGS: BU ECON ENRG KZ LY PGOV PREL RS TX AZ
SUBJECT: FM KALFIN ON ENERGY ISSUES, KOSOVO 
 
REF: SOFIA 1100 
 
Classified By: Ambassador John Beyrle for reasons 1.4 (b) and (d). 
 
¶1.  (C)  SUMMARY:  On September 13 Foreign Minister Kalfin 
discussed energy issues with Amb Beyrle on the heels of his 
recent trip to Central Asia.  On the Burgas-Alexandropolous 
pipeline (BAP), Kalfin said a coordinated effort by the other 
players, and inclusion of additional shareholders such as 
Chevron, might succeed in softening Russia's hard line.  On 
the Trans Caspian Pipeline (TCP), Kalfin said Nazarbayev was 
interested, but doubted Turkmenistan's ability to meet its 
commitments to supply gas.  The Turkmen told Kalfin they are 
ready to supply gas if there are concrete proposals.  Kalfin 
added that the Turkmen seem to be changing their policy of 
selling gas at the border to a "formula" that includes 
transit and the final price.  On Nabucco, Kalfin said the 
Russians and European experts argued that Azerbaijan did not 
have enough gas to start the project. 
 
¶2.  (C)  On Kosovo, Kalfin said we have to think about damage 
control for the worst-case scenario, which would be a 
unilateral declaration of independence and the Kosovo Serbs 
breaking away.  Finally, in their first meeting since Libya's 
release of the Bulgarian medics, Kalfin reiterated Bulgaria's 
thanks for the "decisive" U.S. support throughout the ordeal, 
emphasizing that the Bulgarian public now understands better 
the importance of good relations with the EU and U.S.  END 
SUMMARY. 
 
Kazakhstan 
---------- 
 
¶3.  (C)  Kalfin briefed on his recent trip to Kazakhstan, 
Turkmenistan and Tajikistan, his first time in the region. 
He contrasted his reception in Central Asia where he was 
"treated like a brother" to Russia's attitude of "now you are 
against us."   President Nazarbayev told him Kazakhstan is 
trying to build a new cultural identity based on moderate 
Islam.  Kazakhstan accepts active Iranian and Chinese 
interest in the economy.  China is interested mainly in 
resources and investing in projects.  Iran is also spending 
money in Kazakhstan. 
 
¶4.  (C)  On the Burgas-Alexandropolous pipeline (BAP), 
Nazarbayev told Kalfin he had asked Putin to let others in on 
Russia's 51 percent, but Putin refused.  New Kazakhstani 
Foreign Minister Marat Tazhen said, "Russia won't be 
convinced," but added that if the others held firm to a 
common position it might be possible.  On the Trans Caspian 
Pipeline (TCP), Nazarbayev said that he was "very interested" 
but did not understand the Turkmen position.  He said they 
signed treaties with Russia and China, "promising everybody 
everything," and wondered if they would have enough gas to 
meet all of their commitments.  He said Azerbaijan was 
receptive and believed that sooner or later the project would 
be realized.  He added that he expected Kazakh gas flow to 
peak in 2014-15. 
 
Turkmenistan 
------------ 
 
¶5.  (C)  Kalfin met with Turkmenistan President 
Berdimuhamedov for an hour and a half.  The Turkmen may be 
changing their policy of selling gas at the border to a 
"formula" that includes transit and the final price.  They 
regard the formula as a "big invention" and have begun 
applying it to sales to China.  The "formula" was not 
realistic in terms of the market, Kalfin commented, but at 
least now they were trying to think more in market terms. 
Berdimuhamedov told him that Putin was pressing the Turkmen 
to renew their gas agreement (although it is in effect until 
2009) and offered his own formula.  The Turkmen replied they 
would consider Putin's offer when the current agreement 
expires in 2009.  Berdimuhamedov noted that Nabucco and South 
Stream would be transporting "our gas, not Russia's."  He 
said Russia was developing oil and gas infrastructure 
beneficial to itself using others' resources. 
 
¶6.  (C)  Berdimuhamedov said Turkmenistan is ready to supply 
gas now for TCP if there are concrete proposals, though there 
are still "some issues" with Azerbaijan.  Kalfin said 
Turkmenistan is exporting gas to Iran at low prices because 
of the Turkmen population in Iran, which makes no economic 
sense.  Not surprisingly, Ahmedinajad asked Turkmenistan for 
more gas.  Ashgabat now sees that the Iranians are 
re-exporting the gas and may be reconsidering that policy.  
On bilateral relations, Berdimuhamedov told Kalfin that 
Bulgarian workers in Turkmenistan are favorably remembered 
from the past and that he would offer Bulgaria an offshore 
concession if Bulgaria wanted one.  Kalfin said he was not 
sure of Bulgaria's abilities to work a concession.  The 
Ambassador said the issue of TCP was clearly on the table 
again, and the U.S. is interested in seeing it revived.  A 
Kazakh-Azeri-Turkmen summit on energy would promote progress 
on TCP and other projects and would send a signal to Russia. 
 
 
Burgas-Alexandropolous 
---------------------- 
 
¶7.  (C)  Kalfin said Bulgaria was considering ways to press 
Russia to take less than a 51 percent share in BAP.  Despite 
gains from transit, taxes and employment, the project could 
still lose money.  Kalfin floated that perhaps coordinated 
effort to press Russia would work, but he did not know 
Nazarbayev's position, especially since the Greeks were also 
talking to the Kazakhs.  Bulgaria was interested in 
additional shareholders in the project, such as Chevron.  The 
Ambassador noted Chevron's interest is tied to CPC expansion; 
he had suggested to Minister of Regional Development Gagauzov 
(reftel) to talk with Chevron.  Kalfin said if BAP is 
successful, it could only be with CPC oil. 
 
¶8.  (C)  The Ambassador noted that a Bosporus bypass was 
needed, but speculated that when Putin leaves office the 
Russian commitment to BAP may not be as strong.   Kalfin said 
BAP was part of Putin's larger vision to expand Russian 
influence; he was clearly pushing to get projects done by the 
end of his term in March.  The Ambassador replied that there 
was no need to move fast just for Russia's sake, and 
recommended that Bulgaria continue consulting with its 
international lawyers on BAP. 
 
Nabucco 
------- 
 
¶9.  (C)  Kalfin said the Russians continue to argue that 
there will not be enough Azeri gas to start the project and 
that European experts were saying the same, although Iran 
could provide enough gas.  The Ambassador said that the 
Russians were pushing disinformation, and recommended that 
Bulgaria talk directly to Azerbaijan.  He noted that South 
Stream was a ploy against Nabucco and added that more 
pressure was needed to move Nabucco along.  Kalfin said there 
was new Dutch coordinator for Nabucco, Van Acken, which 
should help the process. 
 
Kosovo 
------ 
 
¶10.  (C)  The Ambassador said Washington was still 
considering Bulgaria's offer to host a Troika meeting, 
although others with easier flight connections also offered. 
We were urging the Kosovars to do a better job in their next 
round of presentations in the Troika meetings.  Negotiations 
may have a slim chance but we have to stick with them, and 
with the Ahtissari plan.  It is too early to start making 
fallback plans -- it could get back to the parties and 
undermine their incentive -- but we can start thinking about 
them.  Kalfin noted that Russian influence had practically 
disappeared from the Balkans and Kosovo is one way to for it 
to return.  The Europeans should recognize this and 
understand that Kosovo is a European, not a Russian issue. 
Kalfin said we have to think about the worst case, which 
would be the Kosovo Serbs breaking away, and how that would 
affect the whole region.  Perhaps a weak federation, such as 
Montenegro and Serbia, would be a solution.  If there is no 
agreement, Kalfin said, we have to think of damage control 
for the worst case. 
 
Comment 
------- 
 
¶11.  (C)  FM Kalfin's comments echo what we heard earlier 
(reftel) from the Regional Development Minister: the 
Bulgarians are having second thoughts about their (and 
Greece's) cave-in last year ceding a majority stake to Russia 
in BAP, but they still have no clear view of how to alter the 
terms to better promote their interests.  With a new Minister 
of Energy (Petar Dimitrov) less susceptible to Russian 
pressure than his predecessor, and with Kalfin actively 
seeking to build direct links with the Kazakhs, Azeris and 
Turkmen, the Bulgarians are at least creating the right 
preconditions that might allow them to loosen the 
Gazprom-Transneft stranglehold on their country.  We will 
continue working to schedule a Dimitrov visit to Washington 
as soon as feasible.  In parallel, we need to encourage 
senior officials here (a) to move forward with BAP on a 
timetable that serves the interests of Bulgaria, not Moscow; 
and (b) to look long and hard at any proposed terms for a 
South Stream project to avoid making the same mistake twice. 
END COMMENT. 
Beyrle