Published by Wikileaks & Bivol.bg
 date: 2/26/2007 15:12 refid: 07SOFIA252 origin: Embassy Sofia classification: SECRET destination: 06SOFIA1691|07SOFIA217 header: VZCZCXRO7921 PP RUEHDBU RUEHFL RUEHKW RUEHLA RUEHROV DE RUEHSF #0252/01 0571512 ZNY SSSSS ZZH P 261512Z FEB 07 FM AMEMBASSY SOFIA TO RUEHC/SECSTATE WASHDC PRIORITY 3281 INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY RHEBAAA/DEPT OF ENERGY WASHINGTON DC PRIORITY RUEHZL/EUROPEAN POLITICAL COLLECTIVE   S E C R E T SECTION 01 OF 02 SOFIA 000252    SIPDIS    SIPDIS    STATE FOR ACTING E / DANIEL SULLIVAN;  STATE PASS TO USTR;  COMMERCE FOR DEPUTY SECRETARY SAMPSON;  ENERGY FOR A/S HARBERT    E.O. 12958: DECL: 02/25/2017  TAGS: ENRG, ECON, PREL, OVIP, BU  SUBJECT: CONTROVERSIAL ECONOMY/ENERGY MINISTER GOES TO THE  U.S. SEEKING INVESTMENT    REF: A) 06 SOFIA 1691 B) SOFIA 217    Classified By: Ambassador John Beyrle for reasons 1.4 (b) and (d)    1.  (S)  Bulgaria's Minister of Economy and Energy Rumen  Ovcharov heads to Washington and several other U.S. cities on  February 27 for an eleven-day road trip to drum up investor  interest in Bulgaria.  His meetings at State, Commerce,  Energy and USTR will give us an opportunity to press for  stronger efforts against corruption and intellectual property  piracy, a streamlined regulatory environment, government  transparency, and diversity of energy supplies.  Ovcharov is  an enigmatic and  controversial figure - linked to corruption and Russian  energy interests, but also to a more liberal economic policy  than many of his Socialist colleagues would support.  He has  the political and mental juice to match the best players at  the table, but keeps his cards close to his chest.  In  face-to-face meetings, he can be both charming and  off-putting.    2.  (S)  Our concerns about Ovcharov's dark side were  sufficient for us to recommend against meetings with his  counterparts at the cabinet level.  "Conflict of interest"  would be the most charitable way to describe his relationship  with the private sector, both Russian and Bulgarian.  However, unlike some ministers in this government, we have no  reports of Ovcharov's involvement in corruption directly  affecting U.S. companies.  To the extent that he has  benefited personally from his government  position, it appears to be primarily due to his cozy  relationship with various Russian energy interests and  Bulgarian middlemen involved in putting together large deals.    3.  (C)  Paradoxically, as the man responsible for attracting  outside investment, Ovcharov understands clearly that  corruption, and the perception that it is widespread, hurts  his country's economy.  The Ambassador stressed to him on  February 23 that corruption - specifically in the Ministries  of Environment and Agriculture, but by extension in the  government as a whole  - is the number one impediment to  increased U.S. investment.  His Washington interlocutors  should emphasize that in order to attract  American investors, Bulgaria needs more than an educated and  low-cost work force.  It needs transparency in business and  government.  It needs courts that will decide legal disputes  fairly and expeditiously, and it needs to promote itself more  effectively with foreign investors.  Even now, Bulgaria is  not a bad place for savvy American investors; the level of  corruption varies from sector to sector, big players have it  easier than small players, and the further you get from  certain government ministries, the more level the playing  field.    4.  (C)  Ovcharov is a key player in several areas of  importance to the U.S.: energy policy, IPR, investor support,  industrial offsets, arms-export licensing, and privatization,  to name a few.  In the energy sphere, Bulgaria is far too  dependent on Russia, but has few other options in the short  term.  Ovcharov knows this, but nevertheless concluded a  23-year deal with Gazprom.  On the surface the terms of the  deal do not seem onerous: benefits include gradual price  increases over seven years to reach market prices and the  removal of a "take-or-pay" clause that burdened Bulgaria with  a high minimum payment under the old contract.  The length of  the commitment, though, and the secrecy with which the deal  has been struck have led many to question what Bulgaria  really gave up for this deal.  The answer is almost certainly  the construction of the new nuclear power plant at Belene on  the Danube, awarded to a Gazprom-owned consortium.    5.  (C)  Washington policy-makers will also want to raise  IPR.  Bulgaria has made tremendous strides in the past year  or so, but there are still holes in enforcement, particularly  against Internet piracy, and the courts.  Ovcharov and some  of his colleagues should be commended for backing efforts to  improve legislation, cooperating on regulatory and police  actions, and getting the word out publicly that piracy is  illegal, wrong, and just plain bad for the economy.  We would  nominate Bulgaria for the Special 301 "Most Improved" award,  if such a thing existed.  Nevertheless the government needs  to show more results arrests and convictions, shut down  several Internet sites, and demonstrate that it will continue  to follow through once it gets off the Watch List.      SOFIA 00000252  002 OF 002      6.  (C)  We were pleased to learn that Ovcharov will meet  with the Assistant Trade Representative.  EC Trade  Commissioner Mandelson apparently asked Ovcharov to meet with  USTR to discuss the Doha round.  While we have no illusions  that Bulgaria will be the key to resolving U.S.-EU trade  differences, Ovcharov's generally liberal outlook on markets  and Bulgaria's newness as a EU Member State give us a perfect  opportunity to start moving them into our corner.    7. (C) Bulgaria is a close NATO ally with troops on the  ground in Iraq, Afghanistan and Kosovo.  Our Defense  Cooperation Agreement, signed by Secretary Rice in 2006, will  allow the deployment of U.S. forces to Bulgarian military  bases.  And, as a new member of the EU, Bulgaria does not  carry all of the antagonistic baggage of our trade  relationship.  It is a potential market for U.S. exporters  looking for a low-cost foothold in the EU, and for U.S.  investors willing to accept low-to-moderate risks, depending  on the sector.  By actively engaging Ovcharov now and  challenging him to improve Bulgaria's image,  Washington policy-makers will help expand our already strong  bilateral relationship, and encourage Bulgaria to address  what is perhaps its greatest remaining weakness: endemic  political corruption and lack of economic transparency.  BEYRLE 

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