US embassy cable - 05SOFIA677

C O N F I D E N T I A L  SOFIA 000677 
 
SIPDIS 
 
 
STATE FOR D, PM, EUR/PRA AND EUR/NCE 
 
E.O. 12958: DECL: 04/08/15 
TAGS: MASS, MARR, PREL, PGOV, PL, IZ, BU 
SUBJECT: BULGARIA OFFERS TO PROVIDE DEFENSE ARTICLES TO 
IRAQ AND AFGHANISTAN 
 
REF: (A) SOFIA 628 (B) SOFIA 283 (C) SOFIA 124 (D) SOFIA 27 
(E) 04 SOFIA 2261 (F) 04 SECTO 005 
(G) 04 SECTO 007 (H) USDAO SOFIA 6 811 0045 05 
 
(U) CLASSIFIED BY AMBASSADOR JAMES PARDEW, FOR REASONS 
1.4 (B) AND (D). 
 
1. (C) SUMMARY: In the past year, Bulgarian political 
leaders have aggressively looked for concrete benefits from 
their military participation in Iraq. Most recently, the 
Prime Minister raised the issue with Deputy Secretary 
Zoellick (ref A). Post has noted that contracts and 
subcontracts awarded to Bulgarian firms to rebuild the 
Iraqi and Afghani security forces have often come through 
various U.S. and international brokers diluting their 
political impact inside the country (reftel A) and 
complicating end-user certification/verification. We 
support procurement of military equipment for the security 
forces in Iraq and Afghanistan as a major USG priority and 
encourage government-to-government contracts as a way to 
solidify the GOB's position in Iraq. END SUMMARY. 
 
2. (C) Post has encouraged the Bulgarians to take advantage 
of their commercial competitiveness in the defense sector 
to secure Iraq and Afghan reconstruction contracts and 
subcontracts from U.S. and international vendors, while 
cautioning the GOB that this is a very competitive field. 
To date, roughly 15 million USD in defense contracts for 
Iraq and Afghanistan have been awarded to Bulgarian firms, 
but these contracts have come through various U.S. and 
international contractors and subcontractors, which has 
diluted the political impact of the sales and raised 
concerns about possible diversion. 
 
3. (SBU) Bulgaria has several major defense firms, which 
could successfully complete for contracts and subcontracts 
if awarded on a government-to-government basis. 
These include: 
 
-- Arsenal AD is a privately owned producer of small arms 
and light weapons as well as artillery rounds (with a 
remaining 34 percent state ownership). The company is most 
famous for it production of Kalashnikov-type assault rifles 
and had 25 million USD in exports in 2002.  This firm also 
produces pistols, ammunition for firearms, and mortars. 
The company has acquired the AQAP-110 standard rating and 
has recently won a 5.1 million USD subcontract from 
Alabama-based TAOS Industries for Iraq. 
 
Arsenal AD 
100 Rozova Dolina St. 
Kazanluk, Bulgaria 6100 
Ph. (359) 431-6-33-22 
Fax (359) 431-6-33-32 
Email: arsenal@arsenal-bg.com 
Website: www.arsenal-bg.com 
 
-- Arcus AD is also a privately owned company and producer 
of NATO standard grenades, mortars and small arms.  It has 
doubled its range of products since it was privatized in 
the 1990s and the company's output hit a record 40 million 
USD in 2002. It recently has fulfilled two contracts for 
1000 9mm pistols each (model Arcus -98DA) for the Iraqi 
security forces. 
 
Arcus AD 
219 Vasil Levski St. 
Lyaskovets, Bulgaria 5140 
Tel. (359) 619-2-54-84 
Fax  (359) 619-221-23 
Email: marketing@arcus-bg.com 
Website: www.arcus-bg.com 
 
-- VMZ is a state-owned company and a major producer of 
RPG-7 grenades, large caliber ammunition and various small 
missile systems. The company produces products under ISO 
9001 and AQAP 110 NATO standards. The company was one of 
Bulgaria's largest arms manufacturers before 1989. 
 
VMZ (Vazovski Mashinostroitelni Zavodi) 
1 Ivan Vazov Blvd. 
Sopot, Bulgaria 
Tel. (359) 3134-711 
FaxQ(359) 3134-4005 
Email: office@vmz.bg 
 
-- Opticoelectron Group AD and Optix AD are companies, 
which both produce night-vision goggles and high-quality 
optical rifle sights. Opticoelectron had optics sales over 
5.2 million euros in 2004 
 
Opticoelectron Group AD 
Hi-Tech Industrial Park "Opticoelectron-Panagyurishte" 
Panagyurishte, Bulgaria 4500 
Tel. (359) 357-2254 
Fax Q(359) 357-4115 
Email: oeg@opticoel.com 
Website: www.oe-group.com 
 
Optix AD 
65 Zachary Stoyanov St. 
Panagyurishte, Bulgaria 4500 
Tel. (359) 357-4125 
Fax Q(359) 357-3097 
Email: optix@optixco.com 
 
-- The GOB also has excess stocks of Warsaw Pact-era 
defense articles, which could be refurbished in Bulgarian 
factories and sold. 
 
4. (C) All of these companies and have fulfilled various 
U.S. Military and private contracts successfully. All are 
also located in areas of high unemployment in Bulgaria. 
Direct government-to-government awarded contracts could 
eliminate the risk of diversion and provide a needed 
political symbol of the benefits of being a steadfast ally 
in Iraq and Afghanistan. 
 
5. (C) COMMENT: Government-to-government defense contracts 
in Bulgaria would provide a strong boost to the current 
GOB. With Parliamentary elections coming in June, such 
contracts could reduce the effectiveness of the opposition 
Socialists' claim that Bulgaria has "gotten nothing from 
this war" and perhaps weaken the issue of Iraq in the 
upcoming elections.