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S E C R E T SECTION 01 OF 03 SOFIA 001396 
 
SIPDIS 
 
NOFORN 
SIPDIS 
 
PASS TO EUR/NCE BULGARIA DESK OFFICER MARK TURNER 
 
E.O. 12958: DECL: 12/19/2032 
TAGS: ENRG PGOV PREL BU
SUBJECT: SUBJECT: BULGARIA:  FACING RESURGENT RUSSIAN 
INFLUENCE ON THE EVE OF THE PUTIN VISIT 
 
Classified By: Amb. John Beyrle for reasons 1.4 (b) & (d) 
 
¶1.  (C/NF)  SUMMARY:  Bulgaria is bracing for the January 
17-18 visit of the Russian President, fully expecting Putin 
will bring some deliverables, but many more demandables. 
Together with a few cultural sweeteners, the Russians will 
push a hard line on Kosovo; missile defense, CFE, and U.S. 
temporary deployments under the Defense Cooperation 
Agreement; and energy, especially South Stream.  The 
Bulgarians are intent on holding their ground on issues 
affecting NATO and the EU, but are more wobbly on energy, 
where, despite our concerted work to stiffen their resolve, 
Russian blandishments and pressure are strongest.  Putin,s 
visit is one aspect of a broader Russian effort to regain 
some of the political and economic "market share" it lost 
here over the past ten years.  Membership in NATO and the EU 
allows Bulgaria a stronger basis for resisting Russian 
pressure, but the instinct to accommodate Moscow is still 
strong.  High-level U.S. engagement can act as a brake on 
this instinct, and we need to look at some planned visits by 
Bulgarian leaders to Washington in 2008 as opportunities to 
help Bulgaria define and defend its transatlantic interests. 
END SUMMARY 
 
SOFT POWER . . . 
---------------- 
 
¶2.  (S//NF)  During his January 17-18 visit, Putin is primed 
to sign four agreements:  culture; science and technology; 
nuclear fuel return from Bulgaria,s research reactor (we 
have a parallel agreement under negotiation); and 
anti-organized crime cooperation (sic).  More important, he 
will push on key regional and energy topics -- Kosovo, 
NATO-Russia, and gas and oil projects.  The Russians are 
playing a strong hand.  On the "soft side," Bulgarian popular 
mythology romanticizes Russian intervention in securing 
Bulgaria's 1880,s independence from Ottoman Turkey.  Drawing 
on shared Slavic bonds of culture, language, and religion, 
Russia vies with the EU in popularity rankings -- placing in 
the 60-70 percent range -- whereas the U.S. average is around 
55 percent.  Moscow will also dole out up to 10 million euros 
to celebrate the 130th anniversary of liberation as part of 
the 2008 "Year of Russia" - renovating churches, battle 
sites, monuments, and promoting broader cultural and 
educational exchanges. 
 
. . . AND HARDBALL REALITIES 
---------------------------- 
 
¶3.  (C/NF)  On the "hard side," more tangible and powerful 
forces are at play:  massive dependence on Russian energy, 
Lukoil,s prominence in the economy, legitimate and shady 
Russian business investments, and Bulgarian politicians, 
strong personal and business ties with Moscow.  The 
Bulgarians chafe at and resent Russian big brother 
condescension and increasingly heavy-handed tactics.  These 
are summed up neatly by candid and typically maladroit 
Russian statements (in Sofia and Brussels) that Bulgaria is 
Russia's "bridge" into the EU and its "Trojan horse." 
 
¶4.  (C/NF)  But there are inescapable realities that keep 
resentment from hardening into stronger policies.  Bulgaria 
depends on Russia for 98 percent of its oil and 95 percent of 
its natural gas supplies, according to Bulgargaz officials. 
Bulgaria gets all its nuclear fuel for its reactors from 
Russia.  Huge energy imports have led to a highly unbalanced 
foreign trade deficit, which in 2006 represented 46 percent 
(or 2,992.2 million euros) of Bulgaria's overall trade 
deficit.  Lukoil is Bulgaria's largest single taxpayer, 
accounting for 25 percent of tax revenues and five percent of 
GDP.  Gazprom, Bulgaria's sole natural gas supplier, has a 
hand in three major energy projects including the 
 
SOFIA 00001396  002 OF 003 
 
 
Burgas-Alexandropolous Pipeline (BAP), South Stream, and 
construction of the Belene Nuclear power plant.  In 2006, 
Gazprom/Kremlin pressure forced Bulgaria to renegotiate its 
gas supply and transit agreement, resulting in steadily 
increasing domestic prices.  Gazprom continues to press to 
privatize and take over state-owned Bulgargaz.  In 2006, 
Russian AtomstroyExport won the construction of a 
long-delayed new nuclear power plant at Belene in a 
controversial, non-transparent process involving then 
Minister of Economy and Energy Rumen Ovcharov (who later lost 
his job in a different corruption scandal).  Belene's 
contracted costs have been estimated at 4 billion euro (5.8 
billion USD), making it the most expensive single project in 
Bulgaria. 
 
OLD SCHOOL TIES TO MOSCOW 
------------------------- 
 
¶5.  (S//NF)  Key officials, including President Georgi 
Parvanov, Interior Minister Petkov, Ovcharov (who is now 
Budget Committee Chairman in Parliament) have ties to Russia. 
 Parvanov -- who received major contributions from Lukoil in 
his 2006 re-election bid -- has a good personal relationship 
with Putin, and has visited Russia eight times since assuming 
office in 2002.  Petkov and Ovcharov both are perceived as 
pro-Russian with links to Russian business and possibly 
organized crime.  Ovcharov studied in Moscow and has spent 
much of his career working with Russian energy interests; he 
is widely suspected of enriching himself through the deals he 
has concluded with Gazprom.  The stakes are huge: if 
consummated, the major Russian energy deals in Bulgaria would 
be close to USD 10 billion.  Even a one percent rake-off 
would inject USD 100 million into a weak rule of law 
environment.  The xenophobic Ataka party is widely believed 
to receive considerable funding from Russian sources.  Its 
daily paper serves as a pro-Moscow mouthpiece, regularly 
spewing anti-U.S. and anti-EU rants and routinely criticizing 
the U.S.-Bulgarian joint military bases, Bulgaria's military 
deployments abroad, and U.S.-Bulgarian cooperation in 
general. 
 
TURNING THE SCREWS ON KOSOVO 
---------------------------- 
 
¶6.  (S//NF) Bulgaria supports the Ahtisaari plan and is 
working actively within the EU to maintain (or forge) an EU 
consensus on recognition for a coordinated declaration of 
Kosovo independence, and to act as a bridge between Brussels 
and Belgrade.  Moscow will likely prey upon Bulgaria's fear 
of Serbia's reaction to recognition and Sofia,s economic 
ties to Belgrade to press the Bulgarians to delay 
recognition.  The Bulgarian side is negotiating the 
non-discussion of Kosovo during the Putin visit, with no real 
hope for success.  We expect the predictable Russian hard 
sell, and the Bulgarians to hold their (uneasy) ground. 
 
U.S.-BULGARIAN MILITARY COOPERATION: A SORE SPOT FOR MOSCOW 
--------------------------------------------- -------------- 
 
¶7.  (S/NF) A Russian embassy official told us the Putin visit 
will focus on economic issues because the Russians "do not 
have any political problems with the Bulgarians except for 
U.S. military bases in Bulgaria."  The Russians have publicly 
railed against U.S.-Bulgarian military cooperation, 
particularly temporary U.S. training deployments to Bulgaria 
under the Defense Cooperation Agreement (DCA), and Joint Task 
Force-East infrastructure in Bulgaria and Romania designed to 
support this training.  Bulgarian support for U.S. missile 
defense plans in Eastern Europe has also ruffled feathers. 
Past Russian statements have criticized Bulgaria's hopes to 
be covered by U.S. or NATO missile defense plans.  In 
general, the Russians see U.S.-Bulgarian military cooperation 
 
SOFIA 00001396  003 OF 003 
 
 
and the joint-training facilities in particular as the "sore 
spot" in the relationship, rarely missing a chance to 
mischaracterize the facilities as "U.S. bases" in the media, 
and repeatedly claming the facilities violate CFE.  Here 
again, we expect the Bulgarians will stand firm, although the 
Putin visit has clearly slowed the government,s timetable 
for approving new force deployments we are seeking from them 
in Iraq and Afghanistan. 
 
ENERGY: THE WEAKEST LINK 
------------------------ 
 
¶8.  (C//NF) SOUTH STREAM AND NABUCCO:  The elephant in the 
room is energy.  The Bulgarians do not want to be hurried 
into a premature South Stream deal, but also don,t want to 
be left out as Russia dangles options to other possible 
transit states.  Determined to be an energy hub/corridor and 
anxious for transit fees, the Bulgarians are susceptible to 
pressure and blandishments.  We have argued against speedy 
decisions ("creative delay"), and urged Bulgaria to retain 
international legal and technical counsel.  But it now looks 
almost inevitable that they will sign an IGA on South Stream 
with Putin.  Although likely to be thin on substance, it will 
be loaded with political symbolism that Russia can exploit. 
Although Bulgaria formally supports the EU-backed Nabucco 
pipeline, a South Stream IGA (on the heels of the one with 
Greece) will serve Russian interest in further undermining 
Nabucco.  Privately, the Bulgarians express doubt about the 
seriousness of the EU and its multiple potential investors to 
support Nabucco.  The Bulgarians do not trust the Russians, 
but also have few direct dealings with, and little confidence 
in, the Azeris on alternate guaranteed supplies.  The 
Russians play this grand-master-level energy chess match many 
moves in advance.  The Bulgarians are simply outclassed if 
they do not slow the clock. 
 
FINAL COMMENT 
------------- 
 
¶9.  (S//NF)  As a NATO and EU member, Bulgaria has greater 
strengths than ever to resist pressure from a recrudescent 
Russia. But the old habit to duck when Russia stamps it foot 
is almost an instinct here.  As much as Bulgarians bristle 
privately at Russian power plays, they see themselves as 
vulnerable and 
hesitate to antagonize Moscow.  But there are some important 
exceptions to this rule.  Prime Minister Stanishev, despite 
strong family ties to the USSR, has been willing to stand up 
to Russia/Gazprom in energy negotiations to protect 
Bulgaria's interests, and sees nothing good in the backward 
drift of Russian democracy.  Foreign Minister Kalfin 
repeatedly cites Bulgaria,s NATO and EU membership as a 
strong strategic reality when discussing relations with 
Moscow. But the sheer weight of Russian economic interests 
will sustain Moscow,s influence on business and politics 
here, no matter what Putin accomplishes during his visit, and 
no matter how well Bulgarian leaders play the board.  Our 
strongest lever of influence is Bulgarian recognition that a 
good relationship with the U.S is crucial to their ability to 
protect their interests.  Upcoming visits to the U.S. by FM 
Kalfin (to meet Secretary Rice in January) and Prime Minister 
Stanishev (who is seeking a visit in the spring of 2008) will 
provide low-cost, high-impact opportunities to demonstrate 
our support for some the strongest proponents of the 
trans-atlantic view, and also to help them define how to 
better leverage their strengths against Russian pressure. 
END COMMENT. 
Beyrle