VZCZCXRO7953
PP RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHSF #0372/01 0731130
ZNY CCCCC ZZH
P 141130Z MAR 06
FM AMEMBASSY SOFIA
TO RUEHGB/AMEMBASSY BAGHDAD PRIORITY 0090
RUEHC/SECSTATE WASHDC PRIORITY 1588
INFO RHEHNSC/NSC WASHINGTON DC PRIORITY
RHMFISS/CDR USCENTCOM MACDILL AFB FL PRIORITY
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEKJCS/JOINT STAFF WASHINGTON DC
RUEKJCS/SECDEF WASHINGTON DC
RHMFISS/CDR USEUCOM VAIHINGEN GE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEAWJA/DEPT OF JUSTICE WASHINGTON DC
REUHTRO/USLO TRIPOLI

C O N F I D E N T I A L SECTION 01 OF 04 SOFIA 000372 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 03/13/2016 
TAGS: PREL MARR ECON KCRM KDEM LY IZ BG
SUBJECT: BULGARIANS DISCUSS IRAQ, JOINT BASES, 
CRIME/CORRUPTION, AND DEMOCRACY PROMOTION 
 
 
Classified By: Ambassador John Beyrle, reasons 1.4(b) and (d). 
 
¶1. (U) This is an action request, please see para 4. 
 
SUMMARY AND ACTION REQUEST 
-------------------------- 
 
¶2. (C) EUR DAS Mark Pekala met March 9-10 with Bulgarian 
officials to discuss, inter alia, Bulgaria's follow-on 
mission in Iraq, ongoing negotiations on the use of Bulgarian 
military bases by U.S. forces, Washington's concern about 
organized crime and corruption, and efforts to promote 
democracy in the Black Sea region.  Pekala's contacts 
included Foreign Minister and deputy Prime Minister Kalfin, 
Interior Minister Petkov and Chief Prosecutor Velchev, as 
well as deputy ministers of defense and finance, the deputy 
governor of the central bank, the AmCham president, and 
members of the parliamentary Defense and Foreign Affairs 
Committees.  Kalfin said Bulgaria's ambassador-designate 
would travel to Baghdad March 14-23 to present his 
credentials and search for new premises.  He also said the 
Bulgarian follow-on mission in Iraq would be ready to deploy 
to Camp Ashraf in mid April. 
 
¶3. (C) On the joint military bases, Pekala's contacts in both 
the government and the center-right opposition expressed 
strong willingness to conclude an agreement, but Kalfin noted 
that there were still sensitive issues to be overcome. 
Newly-appointed Chief Prosecutor Boris Velchev spoke frankly 
about the problems of organized crime and high-level 
corruption, and outlined credibly his intention to confront 
both.  Pekala's counterparts responded positively to his 
message that Bulgaria could play an important role in helping 
to "move the frontiers of freedom eastward" in  the Black Sea 
region.  He also assured Bulgarian officials and MPs that the 
U.S. would continue to work for the release of the Bulgarian 
nurses imprisoned in Libya.  END SUMMARY. 
 
¶4. (C) Action request:  Kalfin asked for USG support for 
ambassador-designate Valeri Ratchev's trip to Baghdad March 
16-23.  We understand that secure transportation and lodging 
have been arranged through CENTCOM channels.  We request that 
the Department seek through Embassy Baghdad and appropriate 
U.S. military channels to support Ratchev's effort to find a 
suitable location in the Green Zone for the Bulgarian 
embassy.  We also request Department support for 
appropriate-level meetings with Embassy Baghdad and U.S. 
military officials to help Ratchev gain a better 
understanding of the context in which he will be working. 
Ratchev is a former army colonel who was most recently the 
deputy commandant of the Bulgarian military academy.  He can 
be reached in Baghdad by satellite phone at 00882 16211 57051. 
 
 
PARTNERS, ALLIES AND FRIENDS 
---------------------------- 
 
¶5. (C) In each of his meetings, DAS Pekala described Bulgaria 
as a good friend, a valued ally and a strong partner.  He 
said that the U.S. strongly supported Bulgaria's entry into 
the European Union on January 1, 2007, because the inclusion 
of Bulgaria and Romania will be good for the countries 
involved, good for the region, good for the U.S., and good 
for Europe.  Pekala outlined the Administration's focus on 
promoting democracy and explained how Bulgaria could play an 
important role in the Black Sea region.  He thanked the 
Bulgarians for the difficult political decisions to re-deploy 
military forces to Iraq, double the size of their contingent 
in ISAF later this year, and negotiate an agreement on the 
presence of U.S. forces in Bulgaria. 
 
¶6. (C) Kalfin noted that these and other decisions, while 
politically difficult because of limited public support, were 
being taken on the basis of Bulgaria's "strategic 
partnership" with the U.S.  He noted that the Bulgarian 
Socialist Party (BSP) had run on a platform of immediate 
withdrawal from Iraq, but Bulgarian soldiers were 
nevertheless currently training with U.S. military police in 
preparation for deployment to Camp Ashraf next month.  Pekala 
agreed and added that the only dark cloud on the horizon was 
the Bulgarian government's perceived inability or 
unwillingness to deal with the problems of corruption and 
 
SOFIA 00000372  002 OF 004 
 
 
organized crime.  The U.S. wanted to bring its economic and 
commercial relationship up to the same level as its political 
and strategic relationship, but the prevalence of organized 
crime and corruption made this more difficult than would 
otherwise be the case. 
 
JOINT BASES 
----------- 
 
¶7. (C) Kalfin professed to have been surprised by what he 
described as the "last-minute" inclusion of five additional 
facilities and a significantly higher troop ceiling in the 
latest U.S. draft of the proposed Defense Cooperation 
Agreement.  He described the resulting problem as mainly one 
of public presentation rather than substance, but said the 
U.S. requests went well beyond the Bulgarian negotiator's 
original mandate and so would require approval by the Council 
of Ministers (COM).  He said that he hoped the COM would 
approve Ambassador Ivanov's new mandate at its next meeting 
on March 16.  "We can finalize the talks within a few days 
after the government decision," Kalfin averred. 
 
¶8. (C) Of the remaining issues, "freedom of action" appeared 
to be the most prominent; Kalfin argued that the agreement 
must include a commitment to "consult with" or "take into 
consideration the views of" the Bulgarian government when 
deploying forces for a combat missions in a third country. 
Pekala noted in this context that any agreement will respect 
Bulgarian law and sovereignty, as well as the principles of 
the UN Charter and the international obligations of both 
countries.  In response to the popular impression that 
"Bulgarians will be on the outside looking in," Pekala said 
any public diplomacy effort must stress that U.S. activities 
on these Bulgarian bases will be transparent to the Bulgarian 
authorities. 
 
¶9. (C) Kalfin said Bulgarian officials understand that the 
joint facilities are not intended ever to host nuclear 
weapons, but the issue is still a sensitive one for the 
Bulgarian public.  Both Kalfin and deputy Defense Minister 
Yankulova stressed the need to work jointly on the public 
affairs aspect of the proposed agreement, and to involve 
Bulgarian NGOs and local-government officials as well. 
Ambassador Beyrle briefly described his meetings the previous 
week in Sliven and Yambol, near the two major facilities 
under discussion.  Officials and residents near the location 
of the proposed joint bases wanted to know "how soon" the 
U.S. could begin deploying forces.  The trick, according to 
Pekala's contacts, will be to expand this support into other 
areas of the country. 
 
¶10. (C) Yankulova acknowledged that the GOB "did not make 
good use of previous opportunities" to explain the basing 
issue to the public, and she argued for an approach using 
popular language and concrete examples of how an agreement 
will benefit Bulgaria.  One of the MPs who had participated 
in FM Kalfin's testimony the previous day put it more 
strongly:  Kalfin's answers to legislators' questions were 
compelling, but the coverage in the next day's media was "a 
disaster" because the testimony was closed and only opponents 
of the agreement spoke to the press afterwards. 
 
CRIME AND CORRUPTION 
-------------------- 
 
¶11. (C) Pekala described the overall bilateral relationship 
as excellent, pointing to a number of "real and practical" 
areas of cooperation.  He noted, however, that one issue 
stands in the way of reaching an even higher level of 
partnership and cooperation: the government's failure to deal 
with the problems of organized crime and corruption. 
Kalfin's response focused on judicial reform, saying that 
constitutional amendments now being undertaken would help. 
Interior Minister Petkov acknowledged the problem, but blamed 
political interference and lack of internal coordination for 
the absence of results.  He cited as evidence of corruption 
the case of recently-murdered Ivan Todorov (AKA, The Doctor), 
information about whom "was stored in the safe of a 
high-ranking official" of the National Service for Combating 
Organized Crime.  In the corruption case involving the 
director of the Bulgarian Red Cross, Petkov said he had 
difficulty finding anyone willing to finalize the 
 
SOFIA 00000372  003 OF 004 
 
 
investigation because of the director's close ties to one of 
the governing coalition partners. 
 
¶12. (C) Petkov also reiterated his request for an agreement 
on exchange of information between the MoI and its U.S. 
law-enforcement counterparts.  While assuring Pekala that the 
current close cooperation with U.S. law enforcement would 
continue, Petkov again expressed concern that without a 
bilateral agreement, some of the information-sharing 
currently undertaken by the MoI could be considered illegal 
under Bulgarian law.  He again raised the possibility of 
creating a regional training center in Sofia focused on 
border control and anti-smuggling efforts, including 
trafficking in persons, drugs, arms, and WMD. 
 
¶13. (C) Petkov said the current case against a member of 
parliament from the National Movement Simeon II (NMSS) was "a 
litmus test" of the Coalition's willingness to take on 
high-level corruption.  Petkov presented the case, involving 
alleged misappropriation of more than USD 10 million when the 
MP was the director of Bulgaria's only nuclear power plant, 
to the Chief Prosecutor on March 6.  Chief Prosecutor Velchev 
confirmed this, and added that he would soon request lifting 
the immunity of "six or seven additional MPs" currently under 
investigation.  In a matter of weeks, Velchev said, he would 
also have the results of the investigations of two senior 
members of the judiciary.  He said he would reassign a number 
of department heads -- senior prosecutors whom he cannot 
legally fire -- in order to replace them with people 
untainted by Velchev's notoriously corrupt predecessor. 
Velchev also indicated that he would soon create a special 
department consisting of hand-picked prosecutors charged with 
handling cases of high-level government corruption.  Velchev 
said that the overall professionalism of the prosecution 
service was better than he had expected before taking office. 
 
 
¶14. (C) Unlike other officials, the recently-appointed Chief 
Prosecutor made no excuses for the lack of progress against 
organized crime.  "Corruption and organized crime are 
related," he said, "organized crime exists because state 
officials are not immune to corruption, and anyone who denies 
this is not doing a service to Bulgaria."  He promised to be 
"very proactive," and said that he would not wait for the 
police to bring cases to him.  Addressing the Ambassador, he 
said he would appreciate learning directly about any cases in 
which Bulgarian officials had solicited bribes from American 
companies. 
 
PROMOTING DEMOCRACY 
------------------- 
 
¶15. (C) Pekala outlined the USG's four-part strategy for the 
expansion of freedom in the Black Sea basin:  democracy 
promotion, with countries on the west side of the Black Sea 
assisting those to the north and east; soft security, 
including law enforcement and border security, emergency 
management, and environmental protection; energy security, 
focused on diversifying the sources of supply and transport; 
and Euro-Atlantic integration, with Bulgaria and Romania 
acted as bridges to NATO and the EU for countries such as 
Georgia, Moldova and Ukraine.  On the Western Balkans, the 
U.S. appreciates Bulgaria's efforts to build confidence 
between Serbs and Kosovars and would welcome bilateral 
consultations. 
 
¶16.  (C) Kalfin said Bulgaria viewed the Black Sea region 
through the lens of NATO; he was somewhat dismissive of the 
"Black Sea Harmony" concept pushed by Turkey and Russia. 
Nevertheless, he took the point that building confidence 
among the Black Sea littoral states was a step-by-step 
process.  On Kosovo, Kalfin said that whatever the outcome of 
the final status talks, "the international community -- not 
just the EU -- must be present for a long time."  In both the 
Western Balkans and the Black Sea region, Kalfin agreed that 
the prospect of eventual NATO and EU membership is a major 
incentive for reform and must be kept open. 
 
ECONOMIC ISSUES 
--------------- 
 
¶17. (C) Pekala told his counterparts that the U.S. would like 
 
SOFIA 00000372  004 OF 004 
 
 
to see many more investments in Bulgaria of the type recently 
announced or agreed to by AES, Hewlett-Packard and Nu Image. 
One incentive will be the completion of negotiations on 
double-taxation treaty (DTT).  Deputy Finance Minister Kadiev 
was optimistic that parliament would pass the necessary 
changes to the bank secrecy law, and the that DTT could be 
completed this year.  The president of the American Chamber 
of Commerce noted, however, that widespread corruption, an 
inefficient and opaque bureaucracy, and an unreformed 
judiciary were drags on U.S. investment.  Large companies 
could factor these risks into their investment decisions, but 
small and medium-sized firms would rather go elsewhere. 
While agreeing with this assessment, Kadiev said that the 
government recognized the need to attract foreign investment, 
which was one of the reasons it had proposed a law that would 
give Bulgaria the second-lowest corporate tax rate in Europe. 
 
 
18 (C) As tax rates fall, Kadiev said he expects compliance 
to increase because the costs inherent in cheating begin to 
outweigh the benefits.  Nevertheless, tax fraud -- especially 
involving value-added tax (VAT) -- continues to be major 
drain on the revenue side.  Organized crime groups are behind 
large-scale schemes involving fraudulent reimbursement of 
hundreds of millions of dollars in VAT every year.  Kadiev 
attributed the problem to a corrupt tax administration, the 
absence of a specialized tax police, the existence of a 
"political umbrella," and the fact that VAT fraud is not a 
criminal offense under Bulgarian law. The Finance Ministry 
loses a comparable amount of money every year from the sale 
of duty-free fuel, liquor and cigarettes along the country's 
borders, again largely to the benefit of organized crime 
figures such as Vasil "The Skull" Bozhkov. 
 
¶19. (C) The deputy governor of the central bank, Tzvetan 
Manchev, noted Bulgaria's low inflation, stable currency and 
falling unemployment.  He said the Bulgaria's current account 
deficit -- currently running at about 14 percent of GDP -- 
was driven by the capital account rather than consumer 
spending.  The central bank would therefore not fight this 
trend, but was concerned about its sustainability.  Manchev 
said he expected the current account deficit to fall in 2007. 
 In the longer term, additional structural reforms are 
needed.  Manchev singled out greater flexibility in the labor 
market, the development of the non-banking financial sector 
(for which Bulgaria could use additional technical 
assistance), and reform of the education and health-care 
sectors. 
 
¶20. (U) This message has been approved by DAS Pekala. 
 
¶21. (U) Tripoli minimize considered. 
Beyrle