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C O N F I D E N T I A L SECTION 01 OF 02 SOFIA 000674    SIPDIS    FOR SPE MORNINGSTAR    E.O. 12958: DECL: 11/23/2019  TAGS: ENRG, PGOV, PREL, BU  SUBJECT: SCENESETTER FOR SPE MORNINGSTAR'S DECEMBER 4 VISIT  TO BULGARIA    Classified By: CDA Susan Sutton for reasons 1.4 (b) and (d).    1.  (C) Summary:  Bulgaria has experienced a profound change  in leadership and outlook since your visit in April.  July  national elections ushered in a reformist center-right  government focused on fighting organized crime and corruption  and putting the country's fiscal house in order.  On energy,  Prime Minister Borissov and his team want to break Sofia's  traditionally-cozy relationship with Moscow and focus on  diversification, transparency, and those projects with clear  economic rationale.  This has not been easy.  The new  government is facing entrenched domestic energy lobbies, weak  institutional capacity and bureaucratic reluctance to carry  out change and, in Russia, an irritated former partner that  still supplies nearly 100 percent of Bulgaria's gas and  nuclear fuel.  PM Borissov seeks U.S. advice and support as  he develops and implements his bold agenda.  An update on  Bulgarian energy issues is being sent via septel.  End  Summary.    2.  (C) When PM Borissov swept to power in July his energy  team immediately began to question Bulgaria's participation  in the large-scale, Russian-proposed energy projects,  including South Stream, the Belene Nuclear Power Plant and  the Burgas-Alexandroupolis pipeline.  In September Borissov  told Russian PM Putin he would announce whether Bulgaria  would proceed with these projects after an evaluation of  whether they were in the Bulgarian national and commercial  interest.  While an announcement is likely to be made in  December, it is clear that Belene is dead, at least for now,  and the present government has little interest in  Burgas-Alexandroupolis.    3.  (C) South Stream is another issue.  Upon taking office,  the new government clearly wanted out of South Stream, seeing  it as a Russian-dominated project with little economic  rationale.  The Russians put on a full court press to  reaffirm Bulgarian participation, including a Putin-Borissov  telcon and meeting and outreach by Russian Energy Minister  Schmatko.  When Borissov sought EU advice, it came in the  form of pro-South Stream lobbying by Berlusconi and a steady  stream of news of additional EU country participants in the  project.  In the face of this pressure (and with no one of  Putin or Berlusconi's stature arguing otherwise) the  Bulgarians began to view South Stream not as a Russian, but a  European project, and this government did not want to be left  out.  We fully expect Bulgaria to continue as a participant  in South Stream, but its participation will be low key.    4.  (C) As one of the most energy-dependent countries in the  region and the one hardest-hit by the January gas crisis,  Bulgaria is also keenly focused on diversification.  Strategies include Nabucco, interconnectors (Bulgaria will  ask your help in securing EU funding for a Bulgarian spur to  the TGI interconnector), and nuclear sector diversification,  including possible participation in new reactor deployment.  It is on the nuclear side that we have can have the most  immediate impact.  U.S. companies are lined up to offer  alternative nuclear fuel supplies and domestic spent fuel  storage capabilities, options that are quick, economical and  high impact in terms of diversification.      YOUR MEETINGS  -------------    5.  (C) You will meet with Bulgaria's senior leadership, the  American business community, and key officials from the  Ministry of Economy and Energy and Bulgarian Energy Holding  tasked with carrying out the new government's energy policy.  Your outreach to the local media will help us answer the  Government's continued request that we express public support  (and political cover) for Borissov's bold energy moves.    Prime Minister Boyko Borissov:  The 50-year-old former mayor  of Sofia is also a former bodyguard with a black belt in  karate and an equally flamboyant personality.  Instinctively  and explicitly pro-U.S., he is a self-described  man-of-the-street.  Your visit is partial answer to  Borissov's September letter to President Obama asking for  U.S. advice and engagement as the new government develops and  implements its bold, new energy policy.    President Georgi Parvanov:  The only representative of the  old regime remaining in office, Parvanov is struggling to  assert influence over a government that sees him as a    SOFIA 00000674  002 OF 002      representative of everything that was wrong with the former  government.  Before Borissov came to power, Parvanov  effectively managed energy policy and brokered an ever-closer  relationship with Russia (although that relationship soured  somewhat after the January gas cut-off).  Parvanov is openly  critical of Borissov's new energy policy, saying it exposes  Bulgaria as an unreliable partner.    Minister of Economy and Energy Traycho Traikov:  The  39-year-old Traikov was a complete unknown when Borissov  named him Economy and Energy Minister (after a long search  that proved nearly impossible to find an energy sector  specialist not beholden to the various Bulgarian energy  lobbies).  A former financial manager in the electrical  distribution sector, Traikov is quiet and keeps his own  counsel.  Although he seemed to lack weight and influence in  his first couple of months in office, he has since displayed  bureaucratic savvy and good instincts.  However, we believe  all important energy decisions are still made by the Prime  Minister with some input from Deputy Prime Minister and  Finance Minister Simeon Dyankov.      OUR MESSAGE  -----------    6.  (C) Your visit is an opportunity to show support for the  new government's energy policy, urge even greater  transparency in the energy sector, and explain U.S. energy  policy for the region, especially as it relates to how we  will work with the EU on issues of diversification and  relations with Russia.  You may wish to emphasize the  following points:    --  Washington supports the Bulgarian Government's commitment  to enhanced energy security, diversification and transparency  in the energy sector;    --  Bulgaria's large-scale energy projects should be judged  on transparency, commercial-viability and diversification,  not on political considerations;    --  If Bulgaria continues its participation in South Stream,  we hope it will rely on its Washington-based legal counsel to  ensure the country's interests are protected;    -- Nabucco and interconnectors are essential to breaking  Gazprom's monopoly supplier position; and    -- American companies are eager to help the Bulgarian nuclear  sector through alternative nuclear fuel supplies and spent  fuel storage capabilities -- these are quick, tangible and  economically-attractive options to increase Bulgaria's energy  security.              SUTTON   

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