[09SOFIA15] BULGARIA: DIGGING OUT OF THE ENERGY HOLE

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Published by Wikileaks & Bivol.bg
 date: 1/12/2009 15:11 refid: 09SOFIA15 origin: Embassy Sofia classification: CONFIDENTIAL destination: 09SOFIA10 header: VZCZCXRO4800 OO RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSR DE RUEHSF #0015/01 0121511 ZNY CCCCC ZZH O 121511Z JAN 09 FM AMEMBASSY SOFIA TO RUEHC/SECSTATE WASHDC IMMEDIATE 5689 INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC PRIORITY RUEAIIA/CIA WASHINGTON DC PRIORITY RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY RHEBAAA/DEPT OF ENERGY WASHINGTON DC PRIORITY RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY  ----------------- header ends ----------------  C O N F I D E N T I A L SECTION 01 OF 02 SOFIA 000015    SIPDIS    E.O. 12958: DECL: 01/11/2019  TAGS: ENRG, ECON, PREL, PGOV, BU  SUBJECT: BULGARIA:  DIGGING OUT OF THE ENERGY HOLE    REF: SOFIA 0010 AND PREVIOUS    Classified By: Ambassador Nancy McEldowney for reasons 1.4 (b) and (d).     1.  (C)  Summary:  The total gas cut-off, now in its seventh  day, has exposed the vulnerabilities and short-sightedness of  Bulgaria's Russia-centric energy policy.  Nearly 100 percent  dependent on Russia for its gas, oil and nuclear fuel,  Bulgaria is clearly under Moscow's thumb.  We are urging  senior government officials to seize this crisis as an  opportunity to dig the country out of its energy hole.  Our  message is four-part:  increase transparency; eliminate  intermediaries; boost diversity of supply; and make Bulgaria  a renewables and efficiency powerhouse.  End Summary.    2.  (C)  Exactly one year ago in Sofia, President Parvanov  and President Putin kicked off "The Year of Russia in  Bulgaria," sealing the two countries' energy partnership with  the signing of a "grand slam" of big-ticket energy deals  including South Stream, Burgas-Alexandroupolis, and the  Belene Nuclear Plant.  At the time, the Socialist-led  government never believed Russia would turn off the spigot.  What a difference a year makes.  We are urging the  Bulgarians, both senior officials and private advisers, to  seize the opportunity offered by the Russia-Ukraine gas  dispute to get out from under Russian energy dominance.  Russian interests and the rent-seekers who feed on  Moscow-linked energy deals will resist, but a window of  opportunity has opened.    3.  (C)  Our message is four-part:    Transparency:  The Bulgarian energy sector is a murky morass  of Russian-connected insiders and parasitic rent-seekers.  Shining a light on the players and deals will allow the  government and public to make market-based deals that are in  the public interest.  At our invitation, on January 14 the  Extractive Industries Transparency Initiative will brief  Bulgarian Energy Holding Officials and NGOs on ways to bring  transparency to this sector.  We are also urging transparency  in the ultra-secret contracts Bulgaria has with Gazprom and  its intermediaries as well as clarity in public procurements  for large energy projects such as the Belene Nuclear Power  Plant.    Intermediaries:  Gazprom has so far insisted on using  Gazprom-owned or affiliated intermediaries to sell gas to  Bulgaria.  They take a cut of the action, increasing consumer  prices and creating tax headaches for Bulgargaz.  They also  protect Gazprom in the event of a cut-off, as the Bulgarians  have come to realize over the past week.  We are urging the  elimination of these unnecessary intermediaries as Bulgargaz  begins negotiations for a new long-term gas supply contract  to replace current supply contracts that are set to expire in  2010 and 2012.    Diversification:  While the Stanishev Government still  supports South Stream, the gas cut-off has reinvigorated  Bulgarian efforts to diversify away from Russian energy  sources.  We are urging Bulgaria to think big.  They will  continue to support Nabucco, pursue a hook-up to the  Turkey-Greece-Italy interconnector, a hook-up to the Romanian  gas transmission network, an LNG terminal in the Aegean, and  an expansion of the Chirin gas storage facility.  Others are  talking about construction of a new, mid-sized oil refinery  to compete with Lukoil's Neftochim refinery and a new oil  storage facility.  We will urge U.S. company involvement as  well as U.S. technical assistance through USTDA and other USG  entities.    Renewables and Efficiency:  The gas cut-off is a wake-up call  for Bulgaria to rely on indigenous, renewable resources  including wind, hydro and solar.  We are encouraging Bulgaria  to double currently-offered incentives to develop and use  renewable energy.  Bulgaria remains the least  energy-efficient economy in the EU.  We are urging the  government to put in place new incentives to make soviet-era  heavy industry and large apartment blocks more energy  efficient.      4.  (C)  Comment:   Our message is simple:  the gas crisis  has given the government the opportunity -- and a brief  window -- to discuss and implement projects and ideas that  were impossible only a month ago.  We are pushing them to  bring real change to the way Bulgaria does energy.  If the  government comes up with the goods - an innovative strategy    SOFIA 00000015  002 OF 002      backed up by political support and financial resources - the  potential benefits are profound.  McEldowney 
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