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PP RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHSF #0310/01 0611027
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P 021027Z MAR 06
FM AMEMBASSY SOFIA
TO RUEHC/SECSTATE WASHDC PRIORITY 1529
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RHEBAAA/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RUEAIIA/CIA WASHINGTON DC PRIORITY
RHEHNSC/NSC WASHINGTON DC PRIORITY

C O N F I D E N T I A L SECTION 01 OF 02 SOFIA 000310 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 02/27/2016 
TAGS: ENRG EPET PREL RU BU
SUBJECT: BULGARIAN ENERGY MINISTER'S MEETINGS IN MOSCOW 
 
REF: A) 05 SOFIA 2063 B) SOFIA 202 C) SOFIA 190 
 
Classified By: Amb. John Beyrle for reasons 1.4 (b) & (d) 
 
¶1. (C) SUMMARY: Economy and Energy Minister Rumen Ovcharov 
called his January 31 - February 1 meetings with Russian 
energy officials constructive and productive, in contrast to 
the bad taste left by Gazprom's heavy-handed approach to PM 
Stanishev in Sofia last December (Ref A.)  Bulgaria and 
Russia have agreed to finalize plans with Greece for the 
Burgas-Alexandropoulis oil pipeline, slated to be announced 
in mid-March in Athens.  They also agreed to further postpone 
renegotiation of the Gazprom contract, while exploring 
expansion of the capacity and reach of the existing gas 
pipeline.  Regarding the proposed Belene nuclear power plant, 
Ovcharov indicated the Russian Atomstroyexport offer was 
clearly superior to the Skoda one, but said details of the 
contractor's participation were not yet settled. END SUMMARY 
 
GAS 
--- 
 
¶2. (C) Ovcharov requested a meeting with Ambassador Beyrle on 
February 24 to discuss his trip to Moscow, a marathon of 
meetings with top Russian oil, gas and nuclear officials 
including Gazprom's Miller and Medvedev, Rosatom and 
Atomstroyexport, UES/Chubays, and a two-hour session with his 
counterpart Viktor Khrishenko.  According to Ovcharov, the 
meeting with Miller and Medvedev was "totally different" in 
tone from Medvedev's finger-waggling performance with PM 
Stanishev in Sofia.  Both sides agreed that there would be no 
changes to the current Gazprom delivery contract before the 
end of this year.  Gazprom is looking now to determine its 
long-term partnerships, and is interested in an agreement 
that would offset a reduction of the currently high transit 
fee with an increased flow of gas through Bulgaria to Serbia, 
Greece, and possibly Italy.  The current structure has 
headroom for an increased gas flow of 20-30 percent, Ovcharov 
said.  The Russians continue to raise the threat of sending 
their gas through other pipelines in Greece and Turkey (Ref 
B), both as leverage against Bulgaria and in order to avoid 
reliance on the route through Ukraine. 
 
¶3. (C) In addition, Ovcharov was told that Russia wants to 
invest in/own local thermo-electric heating plants, as well 
as the current gas pipeline.  The latter cannot be addressed 
until the end of this year because Bulgaria is complying with 
an EU directive to liberalize the sector by carving up parts 
of the current Bulgargaz empire, which includes the pipeline. 
 Ovcharov said the Russians are looking to obtain these 
assets at preferred prices, but the issue has not yet been 
seriously discussed.  He characterized the topic as "an open 
question." 
 
BELENE NUCLEAR PLANT 
-------------------- 
 
¶4. (C) At Rosatom and Atomstroyexport, Ovcharov's hosts said 
that they want a majority stake in the company that will own 
Belene NPP (Ref C.)  The GOB is looking to keep a majority 
for itself, but needs to attract a strategic partner, which 
could well be Russian.  Commenting on the February 1 tender 
to develop the two blocks at Belene, Ovcharov told the 
Ambassador "in confidence" that the Russian Atomstroyexport 
proposal is superior to the Czech Skoda proposal on technical 
grounds.  The Russian proposal is to build a modern, 
double-containment facility, similar to projects being built 
in China; the Skoda proposal, according to Ovcharov, is based 
on 30 year-old technology with only single containment.  In 
addition, Russia is proposing both to provide the nuclear 
fuel for the plant and to take back spent fuel for long term 
storage in Russia.  The Czechs are only offering to provide a 
terminal, said Ovcharov, not the fuel. 
 
¶5. (C) In spite of the deficiencies of the Czech offer and 
the fact that Gazprom Bank owns a majority in both 
Atomstroyexport and Skoda, Ovcharov told us his February 
15-16 trip to the Czech Republic had confirmed that theirs 
was a real offer -- not a stalking horse for the 
Atomstroyexport proposal.  Nonetheless, he said, because of 
the containment the Skoda bid does not even meet the 
technical specs of the Belene tender. 
 
BURGAS-ALEXANDROPOULIS OIL PIPELINE 
----------------------------------- 
 
¶6. (C) Ovcharov told us the Russians will decide soon whether 
they will move forward with plans for the B-A pipeline.  This 
is clearly a Russian state project, with participation of 
 
SOFIA 00000310  002 OF 002 
 
 
Sibneft, TNK-BP and Rosneft very likely, although Chevron's 
later participation is also envisioned.  Ovcharov agreed that 
the viability of B-A is linked to increased output of CPC, 
which he thought Russia was looking at more seriously. 
 
¶7. (C) Maintaining control of the Universal Terminal Burgas 
(UTB) is still the major outstanding issue for the Bulgarians 
in the B-A negotiations.  The GOB wants only one terminal for 
all potential oil pipelines to protect Bulgaria's Black Sea 
tourist industry, and to control the shipment of the oil 
through Bulgarian territory.  The Russians now want a 
majority stake and control over the pipeline, said Ovcharov, 
in spite of last year's tripartite memorandum of 
understanding which calls for an equal three-way split. 
Regardless of the ultimate division of ownership, each side 
will be expected to pay for its own portion of building and 
operating costs.  All this should be resolved in Athens by 
mid-March, Ovcharov hoped, when the  parties expect to give 
the go-ahead to the project. 
 
COMMENT 
------- 
 
¶8. (C) Ovcharov characterized the Russian approach as more 
economic -- related to energy interests -- than as an attempt 
to exert political pressure on Bulgaria.  The tone of 
Ovcharov's discussion with Gazprom were much less 
confrontational this time, but Russia's leverage over 
Bulgaria (which pays about 35 percent under market price per 
gas unit) is unchanged.  Ovcharov agreed with Amb. Beyrle 
that by tying its future even more tightly to Russian oil, 
gas and nuclear fuel, Bulgaria would become further dependent 
on one source for its energy needs, but he said the 
Bulgarians saw very few near term alternatives: "give me a 
better option and I'll take it,"  Ovcharov said ruefully. 
Clearly, though, Russia sees Bulgaria as a reliable partner 
and is comfortable with greater dependence on Bulgaria for 
getting its energy to Western markets.  Russia, it is 
presumed, does not want to put all its eggs in the Turkish 
transit basket, already heavy with the Bosphorous straits, 
Blue Stream, Samsum-Ceyan, and other projects.  For that 
reason, Bulgaria might enjoy a bit of leverage over Russia -- 
in the longer run.  In the near term, Bulgaria's economic 
interest in maintaining the gas subsidies from Russia will 
give Moscow a strong bargaining hand in discussions over the 
B-A pipeline and especially the Belene project -- which 
Ovcharov all but declared in the win category for Russia. 
END COMMENT 
Beyrle