VZCZCXRO8098
PP RUEHDBU RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHSF #1560/01 3181004
ZNY CCCCC ZZH
P 141004Z NOV 06
FM AMEMBASSY SOFIA
TO RUEHC/SECSTATE WASHDC PRIORITY 2821
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RUEAIIA/CIA WASHINGTON DC PRIORITY
RHEBAAA/DEPT OF ENERGY WASHINGTON DC PRIORITY

C O N F I D E N T I A L SECTION 01 OF 02 SOFIA 001560 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 11/07/2016 
TAGS: ECON ENRG PGOV RU BU
SUBJECT: B-A OIL PIPELINE: SIGNS OF PROGRESS; BULGARIA AND 
GREECE SEEK CHEVRON PARTICIPATION 
 
REF: SOFIA 1481 
 
Classified By: AMB. JOHN BEYRLE FOR REASONS 1.4 B & D 
 
¶1. (C) SUMMARY Greek and Bulgarian officials described to EUR 
DAS Matt Bryza progress on the Burgas-Alexandropoulis (B-A) 
oil pipeline during his November 3 visit to Sofia.  The Greek 
consortium plans to transfer most of its shares to 
international private sector participants, including Chevron, 
and the Bulgarians will likely follow suit.  In addition, the 
pipeline's legal headquarters will be in Luxembourg, which 
creates a much more international project than the previous 
perception of a solely Russian-controlled venture.  The 
Bulgarians and Greeks eagerly seek Chevron's participation, 
and the active involvement of the USG.    END SUMMARY 
 
¶2. (C) EUR DAS Matt Bryza and Ambassador Beyrle met in Sofia 
on November 3 with President Parvanov, PM Stanishev, Minister 
of Economy and Energy Ovcharov, Minister of Regional 
Development Gagauzov, Greek Minister of Economic Development 
Sioufas and Turkish Minister of Energy Guler, to discuss 
regional energy issues, including the Burgas-Alexandropoulis 
oil pipeline. 
 
B-A MOVING AHEAD WITH PRIVATE PARTNERS 
-------------------------------------- 
¶3. (C) The B-A pipeline is making progress in key areas, 
despite the lack of an overall political agreement between 
the three parties - Russia, Greece and Bulgaria.  Greek 
Minister of Economic Development (including energy) Sioufas 
who was coincidentally in Sofia, was keen to tell Bryza that 
the pipeline will be an international one, not Russian, whose 
legal headquarters will be in Luxembourg and therefore 
subject to EU law and regulation.  Sioufas also described 
forward motion on the Greek consortium for B-A, where private 
companies will assume the majority of the Greek share of the 
three-country project, which means private funding as well as 
additional expertise and pressure on politicians to make it 
happen.  Bulgaria will likely follow the Greek model and 
apportion equal shares to private companies Chevron and 
TNK-BP, and Kazakhstani state oil company Kazmunaigaz.  Since 
the Bulgarian public is sensitive to foreign ownership, the 
Greek model could give the GOB cover, said Gagauzov.  The 
three countries plan to establish the international project 
company by the end of the year. 
 
¶4. (C) President Parvanov confirmed that in the September 4 
meeting in Athens, President Putin had explicitly endorsed 
"broad participation" in the B-A project, which all present 
clearly understood as a green light for foreign players like 
Chevron or TNK-BP to take part in the deal on the Greek and 
Bulgarian sides.  Sioufas suggested Bulgaria should engage in 
separate talks with Chevron, TNK-BP and 
Kazmunaigaz - something Bulgaria is anxious to do.  Bulgarian 
Minister of Regional Development Gagauzov requested USG help 
in setting up a meeting for the GOB with Chevron's London and 
Moscow teams.  Sioufas was eager for Bryza and Beyrle to 
convey to Chevron the progress to date and Greece's 
willingness to work out specifics.  President Parvanov called 
for increased U.S. presence in the B-A project, saying that 
without U.S. government intervention and support, the project 
will suffer more delays.  Bryza stressed that private 
companies must take the lead in determining the commercial 
viability of the project, but offered to cooperate with both 
Chevron and the GOB to help the parties advance their own 
discussions. 
 
¶5. (C) Russia,s desire for its state oil pipeline monopoly, 
Transneft, to operate the pipeline raised concerns among the 
Greek and Bulgarian officials.  Bryza asked how Greece and 
Bulgaria planned to protect their national interests if 
Russian state-owned oil companies acquire majority ownership 
shares of the project and Transneft becomes the pipeline 
operator.  Sioufas replied that Greece and Bulgaria would 
insist that companies from their countries be sub-contractors 
and that minority rights be guaranteed, and that 
international oil companies (like Chevron) provide the oil 
throughput required to secure financing.   Sioufas also said 
Bulgarian and Greek companies might be co-operators of the 
pipeline, along with Transneft.  Bulgarian officials 
indicated that the GOB will ensure its rights are protected 
by setting up international partners for the Universal 
Terminal Burgas (UTB), while maintaining some GOB and 
ownership of the terminal, said Gagauzov, whose ministry is 
officially in charge of Bulgaria's pipeline activities. 
Bryza picked up on this international theme and described B-A 
as a potential example of Western companies, NATO and EU 
member states, and Russia working together on a major energy 
project, provided that Bulgaria and Greece structured the 
 
SOFIA 00001560  002.3 OF 002 
 
 
deal appropriately. 
 
¶6. (C) PM Stanishev relayed his frustration that regional 
energy projects took so long to develop.  He pointed to the 
ten-year AMBO discussions which have led nowhere, but felt 
both AMBO and the Belene nuclear project must be pursued in 
order to keep options open for Bulgaria's overall energy 
security.  He also mentioned that Bulgaria wanted to maintain 
control over the UTB (pumping station) in order to 
provide flexibility to build a second oil pipeline in the 
future and to keep some control in their own hands. 
Ambassador Beyrle stressed that these hands need to be 
transparent ones.  Bulgaria will seek funding from the World 
Bank and others for the UTB. 
 
TURKEY LOOKING FOR U.S. SUPPORT FOR SAMSUN-CEYAN 
--------------------------------------------- --- 
¶7. (C) Guler made a strong pitch for U.S. involvement on the 
Samsun-Ceyan (S-C) oil pipeline, which would compete with 
Burgas-Alexandroupolis for the next major increment of 
Caspian oil that will be shipped around the Turkish Straits. 
At one point, Guler asked Bryza directly if the U.S. 
"affirmatively supported" S-C.  He described the pros of the 
route as having no environmental concerns, unlike the B-A 
route, and the existence of a harbor in Ceyan vs. the lack of 
harbors or loading/unloading facilities in Burgas and 
Alexandropoulis.  Guler questioned whether it would be 
feasible for the USG to "sponsor" both pipelines, and clearly 
pressed Bryza in favor of S-C, pointing to Turkish experience 
with BTC.  Bryza reiterated what he has told Guler many times 
in the past, namely, that the U.S. believes commercial 
considerations will determine whether B-A or S-C is built 
first, that the U.S. wishes the GOT and other developers of 
S-C success in proving the project's commercial viability, 
and that eventually, there might be sufficient Caspian oil 
available to realize both projects. 
 
AMBO 
---- 
¶8. (C) Some GOB officials feel the AMBO project (Burgas to 
Vlore, Albania via Macedonia) is a step ahead of B-A in 
organizational planning, with routes mapped out and a 
fund-raising plan.  But the GOB does not 
see any chances of immediate progress without attention from 
the big oil companies that can provide the throughput 
required to secure financing.  Gagauzov, whose ministry 
supports both B-A and AMBO, does not feel it is feasible to 
have both pipelines starting at the same time, but thinks 
they could co-exist in the future. 
 
BELENE 
------ 
¶9. (C) Bulgaria decided to go with the Russian 
Atomstroyexport bid, PM Stanishev said, because their 
design is newer, which he equated with being more secure. 
Stanishev also pointed to "great interest" from France on the 
Framatome (Siemens/Areva) Instrumentation and Control portion 
of the Russian bid, and stressed the need for German and 
French support for EU licensing reasons.  He also mentioned 
Russian pressure "behind the scenes."  When Amb. Beyrle 
pitched Westinghouse's proven track record and better prices, 
the PM said the GOB was considering how to combine the two 
competing bids, and said Minister Ovcharov was trying to 
include as many partners as possible.  Stanishev was aware of 
Westinghouse's good works at Kozloduy Nuclear Power Plant. 
In a nod to the controversy swirling around Bulgaria's 
agreement to close four of six reactors at Kozloduy in order 
to enter the EU, Parvanov noted that Bulgaria makes up for 
around 50 percent of the electricity shortage in the region, 
but will only have enough for its own use once Kozloduy units 
3 and 4 are closed on December 31. 
 
COMMENT 
------- 
¶10. (C) It is clear that Bulgaria and Greece, separately and 
together, are trying to come up with practical solutions to 
make the B-A pipeline work.  We take it as a step toward 
commercial viability that the Bulgarian and Greek Governments 
are now planning to sell their shares in B-A to private 
investors, and to ensure that the venture will be subject to 
European laws and regulations.  Now might be a good time for 
Chevron to reach out to the Governments of Bulgaria and 
Greece, and for the USG - in Washington, Brussels and the 
three capitals - to prepare for active diplomacy aimed at 
aligning our 
geo-political interests with commercial realities. 
 
This cable was cleared with DAS Bryza. 
BEYRLE