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id: 122637 date: 9/18/2007 13:53 refid: 07SOFIA1122 origin: Embassy Sofia classification: SECRET destination:  header: VZCZCXRO0558 PP RUEHDBU RUEHFL RUEHKW RUEHLA RUEHROV DE RUEHSF #1122/01 2611353 ZNY SSSSS ZZH P 181353Z SEP 07 FM AMEMBASSY SOFIA TO RUEHC/SECSTATE WASHDC PRIORITY 4298 RUEKJCS/SECDEF WASHINGTON DC PRIORITY INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE RHMFISS/HQ USEUCOM RUEHBS/USEU BRUSSELS RUEHNO/USMISSION USNATO 0940    S E C R E T SECTION 01 OF 02 SOFIA 001122    SIPDIS    SIPDIS    E.O. 12958: DECL: 09/17/2017  TAGS: MARR, PREL, BU  SUBJECT: SHIP DEAL WITH FRANCE TO DERAIL BULGARIAN MILITARY  MODERNIZATION?    Classified By: DCM Alex Karagiannis for reasons 1.4(b) and (d).    1. (S) Summary:  Several Bulgarian defense officials  expressed concern over a plan, currently in its final stages,  to purchase four Corvette class ships from France at a cost  of over one billion dollars.  Such a large expenditure for  ships that do not fill an operational need would, according  to our sources, threaten to derail all other priority  modernization projects.  This plan is viable solely because  of political pressure to present a deliverable to President  Sarkozy during his early October visit.  Although at least  one Ministry of Defense official believes that the sale will  go through unless the United States intervenes, Ilko  Dimitrov, the Deputy Head of the Defense Committee in  parliament is confident the deal will be abandoned or at  least delayed by several years.  As the Bulgarians grapple  with military modernization, we and NATO can help keep  Bulgaria focused on priorities, practicalities and fiscal  realism.  End Summary.    Possible new purchase threatens to break the bank(    2. (S) French President Sarkozy's planned early October visit  has ignited a run on possible deliverables, especially given  France's role in freeing the Bulgarian nurses in Libya.  Among the flurry of possible, mega-sized deals is one  involving defense procurement.  In a September 14 meeting,  XXXXXXXXXXXX expressed deep concern over a plan by the  Bulgarian Ministry of Defense to purchase four French  Corvettes.  According to XXXXXXXXXXXX, there is no operational need  for these ships and the purchase is not in line with  Bulgaria's defense modernization priorities.  Although he did  not quote a dollar figure, other sources have estimated that  the deal would cost more than one billion dollars, not  including armaments.  (By comparison, Bulgaria's defense  budget for 2007 is between 640 and 700 million dollars.)  In  addition to the large initial price tag, XXXXXXXXXXXX said he feared  that follow-on costs associated with this purchase would be  significant and would force massive cuts elsewhere in the  armed forces in coming years.    3. (S) According to a different source connected with the  Ministry of Defense, the French shipbuilding company Armaris  will be awarded the contract during French president  Sarkozy's visit.  As an offset, a French shipyard will place  orders for the construction of 15 combat vessel hulls from  the Flotsky Arsenal Ship Repair Yard in Varna.  This source,  like XXXXXXXXXXXX, was not convinced that the strategic  benefits of the purchase were worth the cost.    4. (S) A third source, XXXXXXXXXXXX, also confirmed that this deal is underway and  lamented that it appears to be going forward despite not  being one of the official force goals for Bulgaria.  His  assessment was that such a large naval purchase would have  serious adverse consequences on the modernization efforts of  the other Bulgarian services.    Possible Timelines    5. (S) In addition to political factors outlined above, a  clearly concerned XXXXXXXXXXXX hinted that some highly placed  officials in the Ministry of Defense would stand to benefit  from the deal.  He stopped short of asking the U.S. for any  kind of assistance in this matter, but said he feared that  the deal would go through, unless "powers higher than the  Minister of Defense" were engaged on the matter.    6. (S) Ilko Dimitrov, Deputy Chair of the Defense Committee  in Parliament, differed with XXXXXXXXXXXX on the likelihood  of the deal being concluded.  According to Dimitrov, the  document set to complete the tender with Armaris has been  drawn up and that negotiations with the French are in the  "final stage."  But he believes the project is almost certain  to be abandoned or at least delayed several years.  While the  Bulgarian Navy and certain players within the Ministry of  Defense are still pushing hard for the purchase, the price  tag is simply too large and it will never pass through the  Defense Committee in parliament.  Dimitrov noted that the  French government and Armaris both had strong lobbies in  Bulgaria.  He believes that Sarkozy will push hard for the  project during his visit to Sofia, and that either Prime  Minister Stanishev or President Parvanov will have the  difficult task of explaining why Bulgaria will have to back  out on the project at this late stage.    A military rationale?    SOFIA 00001122  002 OF 002        7. (S) Although nearly all our interlocutors agreed that the  purchase of the French Corvettes was not a strategic  priority, they all admit that design and construction of  Multi-Purpose Corvette (MPC) Class ships is listed as one of  Bulgaria's defense priorities in the 2015 Modernization Plan  approved in 2004.  While the United States supported the  intent of the 2015 plan, we have also focused on its flaws,  namely that Bulgarian planners did not attempt to prioritize  new programs between the military services and did not  balance program costs against a realistic annual budget.  The  2015 plan is a compilation of each service's wish lists for  new procurements.  Within the Ministry of Defense, the plan  is widely seen as defunct, and its imminent reform is a  recurring hope.  Nevertheless, champions of a Corvette  purchase can point to the 2015 plan as justification,  irrespective of its comparative merits.    8. (S) To solve this lack of priority focus and to prevent  similar ones in the future, Dimitrov suggested the  advisability of NATO assistance in crafting a revised  modernization plan to replace the current one.  An impartial  evaluation by NATO of the strategic merits of Bulgaria's  upcoming modernization programs would be key to maintaining a  budgetary balance between the services and to keeping  Bulgarian military modernization on track.    9. (S) Comment:  The juxtaposition of high-level politics and  massive defense sales have stirred the pot here.  While the  Corvette issue has elements of garden-variety inter-service  squabbles over funding, the sheer size of this potential  purchase, has generated friction inside the Ministry of  Defense and beyond.  Bulgaria has a history of reaching large  deals and then backtracking or even canceling them.  From  Dimitrov's comments it sounds as though cooler heads will  prevent this sale from proceeding to conclusion.  We will  pulse -- and encourage -- decision-makers to focus on genuine  NATO priorities and fiscal realities.  To do that we will  work with NATO to help Bulgaria craft a more forward-looking  and more realistic modernization plan.  End Comment.  Beyrle 

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