Published by Wikileaks & Bivol.bg 
 id: 240907 date: 12/21/2009 10:57 refid: 09SOFIA711 origin: Embassy Sofia classification: CONFIDENTIAL destination: 09SOFIA696 header: VZCZCXRO1648 OO RUEHDBU RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSL RUEHSR DE RUEHSF #0711/01 3551057 ZNY CCCCC ZZH O 211057Z DEC 09 FM AMEMBASSY SOFIA TO RUEHC/SECSTATE WASHDC IMMEDIATE 6545 INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY RUEAIIA/CIA WASHINGTON DC PRIORITY RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY RHEBAAA/DEPT OF ENERGY WASHINGTON DC PRIORITY RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC PRIORITY  C O N F I D E N T I A L SECTION 01 OF 02 SOFIA 000711    SIPDIS    DEPARTMENT FOR SPE MORNINGSTAR, DOE FOR ELKIND,CUTLER,  EKIMOFF    E.O. 12958: DECL: 12/17/2018  TAGS: ENRG, PREL, PGOV, BG  SUBJECT: BULGARIA:  WAIVERING ON BELENE NPP    REF: SOFIA 696    Classified By: CDA Susan Sutton for reasons 1.4 (b) and (d).    1.  (C) Summary:  In energy meetings with the Russians on  December 10-11, the Bulgarians held their red-lines on the  Burgas-Alexandroupolis oil pipeline, proceeded with South  Stream, and waivered on the Belene Nuclear Power Plant.  While Russian Energy Minister Schmatko appeared to us to have  returned home with more than expected, particularly on  Belene, our contacts tell us that the Russians left seemingly  displeased with a lack of progress on the major projects, and  Russian pressure for forward movement continues.  Another  energy delegation, led by Economy and Energy Minister  Traikov, will head to Moscow December 23 for additional  talks.  If those culminate in the eventual Russian ownership  of Belene, it will represent a dramatic blow to Bulgarian  energy security.  End Summary.    2.  (C) A Russian energy delegation led by Energy Minister  Sergey Schmatko was in Sofia December 10-11 for regular  meetings of the  Bulgarian-Russian Intergovernmental Economic  Commission.  Topping the agenda were three major energy  projects, the South Stream gas pipeline,  Burgas-Alexandroupolis oil pipeline and the Belene Nuclear  Power plant, all of which were agreed to by Bulgaria's last  government.  After taking office in July, the new government  of Boyko Borissov began to re-evaluate Bulgaria's  participation in these projects.  Borissov promised PM Putin  an answer on Bulgaria's intentions by the end of the 2009.  The December energy discussions were designed as a forum to  announce Bulgaria's decisions.    SOUTH STREAM  ------------    3.  (C)  As expected, Bulgaria stated it would proceed with  the South Stream pipeline, seeing it as a European project  offering diversification of route.  Our contacts tell us that  no real progress was made on South Steam during the December  10-11 meetings, causing Minister Schmatko to half-seriously  propose to his Bulgarian counterpart that the two governments  take over project negotiations since the companies involved  -- Gazprom and the Bulgarian Energy Holding -- were making  little progress.  Head of the Bulgarian Energy Holding Galina  Tosheva told us that the shareholders agreement on South  Stream was "80 percent ready" and the Bulgarian-Russian  project company would likely be registered in Sofia in the  first quarter of 2010.   Once the company is registered, a  project feasibility study would be conducted, after which an  investment decision would be made by the Bulgarian side.    BURGAS-ALEXANDROUPOLIS  ----------------------    4.  (C)  The Bulgarians held their ground on BAP, insisting  that the Bulgarian side must do an environmental impact study  of the project before it decides whether to proceed.  The  study is likely to take as long as 18 months.  The new  Bulgarian Government is skeptical of the benefits of this  project in terms of revenues and is exploring whether the  deal can be made more attractive to the Bulgarian side.      BACK-STEPPING ON BELENE  -----------------------    5.  (C)  The real drama of the December talks surrounded the  Belene Nuclear Power Plant.  The new government took office  highly skeptical of the project.  When strategic investor RWE  pulled out on October 28, the project was frozen.  Russian  pressure to restart Belene has been intense, with Moscow  offering to become a majority owne.  Our contacts have given  conflicting read-outsof whatwas discussed and agreed with  the Russias.  Minister Traikov told us December 14 that  Bulgaria may consider offering Russia a majority stake in the  project "initially" but he could not explain exactly what  that would entail.  Deputy Energy Minister Maya Hristova told  us the talk of offering a majority stake to Russia was a  Bulgarian strategy to buy time while Sofia searches for other  strategic investors.  Bulgarian Energy Holding CEO told us  she sees any offer of an ownership stake to Russia as a  national security concern, but she worried she was  increasingly being over-ruled by the Ministry of Economy and  Energy on Belene matters.  Tosheva said BEH would issue a  tender for an independent adviser to help Bulgaria think    SOFIA 00000711  002 OF 002      through the financial aspects of Belene and explore its  options.      6.   (C) Comment:  When RWE pulled out of Belene in October,  the project seemed dead.  Russia has put it on life support,  with both sweeteners and new forms of pressure.  Unsatisfied  with the progress made at the intergovernmental meetings,  according to our energy contacts Moscow has summoned Energy  Minister Traikov for additional Belene talks on December 23.  If Bulgaria agrees to Russian ownership in Belene, energy  security will take a dramatic step backward in Bulgaria and a  huge opportunity to correct the mis-steps of the previous  government will have been lost -- points we have repeatedly  stressed.    SUTTON  

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