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C O N F I D E N T I A L SECTION 01 OF 03 SOFIA 001561    SIPDIS    CODEL    STATE FOR H, PASS TO SENATOR HAGEL    E.O. 12958: DECL: 08/30/2015  TAGS: PGOV, OVIP, PREL, OREP, ENRG, MARR, EINV, LY, BU  SUBJECT: SENATOR HAGEL MEETS NEW BULGARIAN GOVERNMENT    REF: SOFIA 1460    Classified By: AMB. BEYRLE FOR REASONS 1.4 B&D    ACTION REQUEST PARA 9    1. (C) SUMMARY:  Senator Hagel was the first Washington  official to meet the new government after the June elections.   He stressed energy and investment issues, Bulgaria's  strategic importance as an ally in the region that extends  eastward, and Bulgaria's need to improve its investment  climate by addressing government corruption and regulatory  roadblocks.  Bulgarian officials stressed their desire for  increased U.S. investment.  They also proclaimed Bulgaria a  loyal partner of the U.S. in NATO, Afghanistan and Iraq, and  said they were looking at ways to continue participation in  Iraq after their end-of-year withdrawal.  END SUMMARY    BULGARIAN GOVERNMENT MEETING PARTICIPANTS    2. (U) President Georgi Purvanov  Minister of Defense Veselin Bliznakov  Minister of Economy and Energy Rumen Ovcharov  Speaker of Parliament Georgi Pirinski  MP and Deputy Foreign Minister-designate Gergana Grancharova  Deputy Foreign Minister Lyubomir Kyuchukov  Member of Parliament, Foreign Affairs Committee, Christian  Vigenin    -------------------------  POLITICAL-MILITARY ISSUES  -------------------------    BULGARIAN-AMERICAN RELATIONS    3. (C) Purvanov stressed that relations between Bulgaria and  the U.S. are the best in history.  Bulgaria is a serious and  predictable strategic partner which is firmly with the U.S.  in the Global War on Terrorism (GWOT).  Purvanov - whose  position was not up for election in the June ballot -  believes this support will continue in the new  administration.  He pointed to the continuity of foreign  policy under the new government as proof of the strength of  the relationship.  Bliznakov said his goal is to stabilize  and strengthen Bulgaria's relationship with NATO countries -  particularly the U.S.  Purvanov and Pirinski were grateful  for the prompt and generous assistance the USG provided for  flood-stricken areas.    4. (C) Senator Hagel described the purpose of his visit to  Bulgaria and the region, explaining the strategic importance  to the U.S. of the "arc" of countries from Bulgaria and  Romania across the Black Sea and Caspian Sea to the Caucuses  and Urals.  Grancharova said it was important to get  congressional members to Bulgaria.  She pointed to the need  to prove to the Bulgarian public the benefits of the  relationship with the U.S.  The public mainly sees the "bad  news" out of Iraq and the relatively small amount of  U.S.-origin foreign direct investment.  Pirinski described  his visit to the U.S. in September as an opportunity to meet  Senator Lugar and prepare for the visit of Purvanov.    GWOT: IRAQ/AFGHANISTAN    5. (C) Purvanov looks forward to meeting President Bush in  October, where he hopes the two can discuss the format under  which Bulgaria can continue to participate in the coalition  in Iraq.  He said Bulgaria has an idea of how to reinforce  its presence in Iraq, but did not elaborate.  Bliznakov said  Bulgaria takes its Iraq commitment very seriously and will  stay until the end of the year.  All withdrawal preparations  will be coordinated with the U.S. and other partners.  The  GOB is discussing alternate ways to participate in future  missions in Iraq in order to preserve stability, Bliznakov  said.  The military is also preparing for 2006 when Bulgaria  will assume responsibility for the airport in Kabul.  Ten  percent of the Ministry of Defense budget is allocated to  participation in missions abroad.  Bliznakov reiterated  Bulgaria's commitment in the war on terror, and supports the  U.S. goal of addressing terrorism in the regions that foment  it.  He said there is currently no threat of fundamentalism  in Bulgaria, but the MOD will create an interagency team on  the issue.  The only potential threat here is due to  Bulgaria's profile as a participant in anti-terror operations  worldwide, said Bliznakov.    U.S. BASES    6. (C) The U.S. and Bulgaria will now have to step up  negotiations on the U.S. presence here, which were slowed by  the elections, Purvanov said.  He pointed to a clear  political will in parliament and in the country across all  major parties in support of the bases, but noted some details  would have to be ironed out.  Vigenin, the Socialist  parliamentarian, said Bulgarian officials need to work with  voters to convince them of the benefits of the basing.  Local  residents already support the plan, but that view does not  extend across the country.  Vigenin said almost all parties  in parliament understand the need for a strategic partnership  with the U.S., the only opposition on this issue comes from  the extreme nationalist group Ataka.    DEFENSE ISSUES    7. (C) Bulgaria will strive to be an active member of the  NATO alliance, and will strike a balance between its own  self-interest and the needs of the allies, said Bliznakov.  He said Bulgaria after NATO entry was a stabilizing factor in  the Balkans, and the country is helping prepare regional  states for eventual NATO membership.  8. (C) According to Purvanov, Bulgaria wants to play a  stabilizing role in the Balkans.  He hopes the U.S. and  Bulgaria can cooperate to modernize the military so Bulgaria  can be a more reliable NATO partner.  Bliznakov said Bulgaria  will expand upon its current military achievements  domestically and in operations abroad, and modernize its  forces.  He thanked the U.S. for the military assistance we  provide.  Bliznakov outlined a plan through 2015 for  modernizing the military.  Some of the highest 11 priority  areas - out of 35 -  have already begun.  Problems are  primarily due to lack of resources, not will.  Ovcharov  called for increased cooperation between U.S. and Bulgarian  defense companies, including the need for offsets.    9. (C) Minister Bliznakov requested a meeting with the  Secretary of Defense at the Berlin Defense Ministerial    SIPDIS  September 13-14.  (Post comment: We strongly support this  request believing that such a meeting could influence  Bulgaria's decision to take on a new mission in Iraq and/or  increase its military presence in Afghanistan.)    BULGARIAN MEDICS IN LIBYA    10. (C) Purvanov extended his personal gratitude to the Bush  Administration for its consistent support of the imprisoned  medics in Libya.  He said this issue is a more painful one  for Bulgarians than Iraq or Balkan problems, and mentioned  that settlement of the issue would go a long way to "calming  the situation here."  Pirinski said Bulgaria is concerned  about the upcoming November 15 court decision regarding the  death sentence of the medics.    ---------------  ECONOMIC ISSUES  ---------------    AMERICAN BUSINESS COMMUNITY    11. (SBU) Senator Hagel met with members of the American  Chamber of Commerce to learn about U.S. business issues.  The  businessmen see the environment improving and noted both an  increase in business activity and a decrease in the amount of  corruption and regulatory inefficiencies.  However, they  stressed that Bulgaria has a long way to go to become a  transparent destination for U.S. capital.  Government  corruption - primarily at the mid-to-lower levels - is still  "prevalent."  Deliberate slow-downs and selective enforcement  of the regulatory framework have worked against some  investors, presumably at the behest of competitors.  Investors feel the business climate overall will improve with  accession to the EU, but are concerned about Bulgaria's  capacity to absorb large amounts of assistance.  MFA  officials agreed on the need for Bulgaria to improve its  ability to absorb the EU funds.  The energy sector is a major  opportunity for investors, including possibilities in the  nuclear sector with the new plant at Belene, and with the two  pipeline projects, AMBO and Bourgas-Alexandropolous.  AmCham  officials also raised the continued importance of a Double  Taxation Treaty to assist U.S. investors.    U.S. INVESTMENTS    12. (C) Purvanov stressed the need to increase the level of  bilateral trade between our countries, saying he was not  satisfied with the current $760 million, or the $560 million  in U.S. direct investment.  He said this amount was smaller  than neighboring countries with much smaller economies.  Senator Hagel agreed with the importance to both countries of  increased U.S. investment here, but stressed to all GOB  officials the concerns of American investors regarding  government corruption.  He also raised the need for the  regulatory authorities to transparently and fairly manage  their sectors so as not to impede U.S. investors considering  Bulgaria as a destination.  13. (C) Purvanov agreed the criticism was warranted and  elaborated on the issue, saying Bulgaria had to improve the  efficiency of the judiciary and Bulgaria's administrative  capacity.  He and Ovcharov pointed to constitutional changes  and legislation that will improve the judiciary and  investment regimes.  But Purvanov stressed that the  implementation phase is where real efforts will be needed.    14. (C) Ovcharov said the government needed to start more  public-private partnerships similar to those in the U.S. and  improve conditions for small and medium-sized enterprises.  Purvanov said both the finalization of a Double Taxation  Treaty with the USG and a roadmap for facilitating Bulgaria's  inclusion in the visa waiver program would help improve  investment.  Senator Hagel raised the privatization of the  Bulgarian film studios with the officials.  Kyuchukov said  the government would not reverse the process, but the deal  could be challenged in the courts.    15. (C) Ovcharov said he wants to see more investment by U.S.  companies in the fields of information technology, automotive  technology, defense industries, mining, agriculture  (particularly organic), the chemical and pharmaceutical  industries, wine and energy.  He said existing U.S. projects  are good ones and should continue to be supported by the GOB,  despite some minor problems.    ENERGY    16. (C) Senator Hagel noted the success of current U.S.  investments in the energy sector and suggested an increase in  the fields of nuclear, geo-thermal and hydro development.  He  said the U.S. would like to work closely with Bulgaria to  further develop its energy sector and strengthen the economy.   Purvanov stressed the desire to continue building nuclear  power so as to increase its electricity exports in the  region.  Ovcharov said the government must promote  investments, particularly in energy infrastructure projects  such as the Nabucco gas pipeline and the  Burgas-Alexandropolous and AMBO oil pipelines.    BULGARIA'S EU ACCESSION    17. (C) Pirinski said parliament is focused on passing  legislation necessary for entry in the areas of Justice and  Home Affairs, agriculture, environment, trade and commercial  law, the latter to improve investment climate, intellectual  property rights.    18. (C) EMBASSY COMMENT: Bulgarian officials were clearly  pleased to welcome Senator Hagel as their first Washington  visitor after the elections.  They took pains to stress the  continuity of the close relationship that the previous  government had worked hard to develop.  GOB officials laid  out what they wished to accomplish in the short-to-medium  term - from EU accession to improved foreign investment and  continued participation in the GWOT.  Senator Hagel's  meetings began what will be a period of intensive engagement  with Bulgaria and its new government.  The Senator's visit  will be followed by a series of high-level introductory calls  by the new U.S. Ambassador, a possible meeting between MOD  Bliznakov and SecDef Rumsfeld at the informal NATO Defense  Ministerial, FM Kalfin's possible meetings on the margins of  UNGA, and Finance Minister Oresharski's planned bilats during  the World Bank/IMF meeting.  This period of intensive  engagement will culminate with the meeting between the two  Presidents in Washington on October 17.  END COMMENT    THIS CABLE WAS CLEARED BY SENATOR HAGEL'S PARTY  BEYRLE  

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