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DE RUEHSF #0582/01 1311505
ZNR UUUUU ZZH
P 111505Z MAY 07
FM AMEMBASSY SOFIA
TO RUEHC/SECSTATE WASHDC PRIORITY 3671
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS SECTION 01 OF 02 SOFIA 000582 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EUR/NCE MNORDBERG 
 
E.O. 12958: N/A 
TAGS: PGOV KCOR BU
SUBJECT: BULGARIA GRAPPLES WITH GROWING CORRUPTION SCANDAL 
 
¶1. (SBU) SUMMARY: Bulgaria's establishment has been rocked by a 
far-reaching corruption scandal that involves high-ranking 
magistrates and government officials and may potentially lead to 
changes in the Socialist-led government.  The high-profile case 
already forced PM Sergei Stanishev to sideline his powerful Energy 
and Economy Minister, Roumen Ovcharov, and outright fire two deputy 
ministers.  The Chief Prosecutor also took decisive action, ordering 
a prompt investigation in what has become by far the biggest 
corruption scandal in post-communist Bulgaria.  The scandal has 
continued to widen, as more and more unsavory connections between 
business and politics have come into the open.  At this stage, 
observers continue to believe that the government is not at risk, 
but the scandal appears likely to cost Ovcharov his job and may lead 
to a cabinet reshuffle.  Longer term, stresses in the system of 
graft and political corruption are building, the U.S. and EU look 
for deep changes, and we would not be surprised by seismic shifts in 
the political landscape. END SUMMARY. 
 
TALES OF BLACKMAIL AND CORRUPTION 
 
¶2. (SBU) The scandal is centered on two powerful officials with 
strong positions in the ruling Socialist Party (BSP) and its junior 
coalition partner, the ethnic Turkish Movement for Rights and 
Freedoms (MRF):  BSP deputy leader and Economy and Energy Minister 
Ovcharov and the head of the National Investigation Service (NIS) 
Angel Alexandrov, a close associate of MRF leader Ahmed Dogan.  In 
the course of the row, the two have accused each other of crimes 
ranging from blackmail, corruption and embezzlement to outright 
extortion and death threats.  Their interests have intersected in 
two cases of high political sensitivity - the ongoing investigation 
of a corruption case involving the Sofia district heating utility 
and the privatization of the state tobacco monopoly Bulgartabak. 
Alexandrov announced that Ovcharov had blackmailed and threatened 
him, seeking to provide political protection for a powerful 
businessman, Krassimir Georgiev, investigated by NIS for his 
involvement in the Sofia district heating utility scandal.  A 
leading figure in Bulgaria's energy sector, Georgiev has been a 
close friend of Ovcharov since the two studied at the Moscow Energy 
Institute.  Alexandrov also charged Ovcharov with planning the 
"stealth" privatization of Bulgartabak, the state tobacco monopoly 
which the minister supervises, saying Ovcharov wanted to sell the 
decapitalised company to cronies.  The MRF, many of whose voters 
rely on tobacco for their livelihood, opposes the tobacco monopoly 
sell-off. 
 
¶3. (SBU) Ovcharov has dismissed all of Alexandrov's accusations, and 
in turn has charged Alexandrov with trying to siphon funds from 
Bulgartabak using blackmail and undue influence.  Ovcharov said he 
was a victim of a smear campaign, inspired by a Socialist party 
lobby comprising of former communist security service officers whose 
economic influence Ovcharov has curbed.  Ovcharov implied that 
Alexandrov, who worked as investigator under communism, was used as 
a tool by these circles.  Interestingly, Alexandrov's friendship 
with MRF's leader Dogan dates back to the 1980s when Alexandrov was 
Dogan's jailer and/or case officer. 
 
SENSITIVE TIMING 
 
¶4. (SBU) The scandal comes during the campaign for Bulgaria's first 
vote for members of the European Parliament on May 20, in which the 
front-running Socialists face a strong challenge from the 
newly-formed GERB party of popular Sofia Mayor Boiko Borissov.  The 
vote is a key test for the political parties' popularity ahead of 
the more important local elections in the autumn.  Furthermore, 
Bulgaria, which joined the EU January 1, is under close scrutiny 
from the European Commission,  which is due to release in early June 
a crucial report on Sofia's progress in fighting crime and 
high-level corruption. 
 
HEADS START ROLLING AS PM, CHIEF PROSECUTOR STEP IN 
 
¶5. (SBU) PM Stanishev and Chief Prosecutor Boris Velchev have taken 
decisive action, thereby setting this scandal apart from its many 
predecessors.  Velchev immediately launched an investigation into 
the scandal, while Stanishev did not hesitate to act against his 
powerful deputy.  In an unprecedented move, Velchev and Minister of 
Interior Roumen Petkov called on the European Commission to send a 
representative to monitor the handling of the investigation. 
The Commission declined, implying that it risked being manipulated. 
Both Ovcharov and Alexandrov were questioned and placed on forced 
leave of absence until the investigation is completed.  The PM fired 
two deputy ministers - one from BSP and one from the MRF -- for 
their involvement in the scandal.  "It is of utmost importance for 
the prosecution and the executive branch in Bulgaria to give a clear 
signal that there will be no political protection for anyone," said 
Stanishev.  The PM also implied that circles linked to the former 
communist state security could be linked to the case, saying he 
hoped the probe would shed light on informal circles "who had used 
old contacts for blackmail over the past 17 years."  President 
Georgi Parvanov backed  Stanishev's actions, but took a public jab 
 
SOFIA 00000582  002 OF 002 
 
 
at the PM by noting that they came a bit late.  An emergency BSP 
leadership meeting May 9 backed the actions of the PM, who also 
announced he would personally supervise the mega-Ministry of Economy 
and Energy in Ovcharov's absence. 
 
BRUSSELS, MOSCOW DRAGGED INTO THE ROW 
 
¶6. (SBU) Stanishev, however, allowed Ovcharov to accompany him on a 
previously scheduled trip to Moscow May 6-8 before taking a leave of 
absence.  Political circles joked that the reason the PM allowed 
Ovcharov to travel to Russia was to give him the chance to 
immigrate.  Under Ovcharov's stewardship, Bulgaria concluded several 
major deals that reinforced Russia's role in the Bulgarian energy 
sector while reinforcing the perception that he and his cronies 
benefited personally from the deals.  During the visit to Moscow, 
Ovcharov surprisingly announced plans for an expansion of Russian 
gas transit through Bulgaria.  The announcement, made after a 
meeting with Russia Gazprom CEO Aleksey Miller, triggered comments 
in Bulgaria that Ovcharov was trying to obtain the help of his 
Moscow business friends to retain his job. 
 
¶7. (SBU) In the meantime, Sofia's move to invite EU officials to 
supervise the investigation got mixed reactions in Brussels. 
Velchev's invitation, apparently aimed to please Brussels ahead of 
the European Commission report due in June, appears to have 
backfired.  EU officials' reservation towards the invitation showed 
they regarded the move more as a sign of weakness, while some EU 
officials outright said they could not act as arbiters on domestic 
judicial matters.  The most likely explanation is the Commission 
officials feared they would be used as a fig leaf. 
 
POLITICAL TENSION RISES 
 
¶8. (SBU) Over the past few days the scandal began to reveal more and 
more unsavory connections between business and politics as figures 
such as the notorious arms dealer Nikolai Gigov have been 
questioned.  To add to the tension, Sofia public transport workers 
threatened a strike May 15 to demand higher wages, prompting 
memories of the winter of 1997, when a transport strike led to 
nationwide protests that toppled the previous Socialist-led 
government.  In another twist that is seen as hardly coincidental, 
the ministers from the junior coalition partner in the center-left 
coalition -- the National Movement for Simeon II -- walked out from 
a government session May 10 due to a row with the Socialists over a 
planned wage increase. 
¶9. (SBU) COMMENT: In this country where corruption scandals come and 
go with disturbing regularity, it is difficult to predict whether 
this one will follow the familiar life cycle, or whether the 
government will, at last, clean house.  The PM and the Chief 
Prosecutor have demonstrated the political will to fight high-level 
corruption in their own ranks, but it remains to be seen how far 
they are ready to go.  PM Stanishev and President Parvanov benefit 
personally from the departure of the powerful Energy and Economy 
minister, who has been their longstanding rival within the BSP.  But 
his ouster may present Stanishev with new difficulties, as it could 
distort the fragile balance between the BSP's rival lobbies. 
Furthermore, the controversy is likely to drag down Socialists' 
support in the May 20 vote for members of the European Parliament 
and boost the chances of Sofia Mayor Borissov's GERB party, which 
could embolden the charismatic former Interior Ministry General. 
Bulgaria's track record for political unpredictability 
notwithstanding, at this stage the scandal does not appear to pose a 
serious threat to the stability of the ruling coalition, though the 
conspiracy theorists and rumor mongers are predicting so many 
scenarios that even they must be getting dizzy.  END COMMENT 
 
KARAGIANNIS 
[F1]Gotta remove this formatting.