US embassy cable - 05SOFIA808

C O N F I D E N T I A L  SOFIA 000808 
 
SIPDIS 
 
 
E.O. 12958: DECL: 04/29/2015 
TAGS: PREL, PGOV, ECON, MARR, IZ, BU 
SUBJECT: BULGARIA'S SOCIALIST PARTY: SOCIAL DEMOCRATS OR 
CLOSET COMMUNISTS? 
 
REF: 04 SOFIA 2054 
 
Classified By: Ambassador James Pardew, reasons 1.4(b) and (d). 
 
 1. (C) SUMMARY.  If opinion polls are correct, the Bulgarian 
Socialist Party (BSP) is likely to play a leading role in the 
next government.  Street protests drove the last BSP 
government from power in 1997 amid hyper-inflation and the 
collapse of the banking system.  More than eight years later, 
many still question whether the BSP is truly reformed or has 
sufficient qualified personnel to run the government.   While 
the rhetoric of the party leadership is pro-European and 
pro-NATO, polls show that much of the party rank and file is 
suspicious of both NATO and the United States.  That said, 
the BSP is unlikely to make any abrupt changes in Bulgarian 
foreign and economic policy if the party comes to power. 
They will, however, be more difficult for us to work with 
than the current government, looking to Brussels and European 
Socialists rather than Washington for guidance on most 
issues.  On economic policy, the BSP is hemmed in by an IMF 
stand-by agreement, a currency board and impending membership 
in the European Union.  Political relations with Russia will 
likely become warmer in a BSP government, and Russian 
economic interests may gain ground. END SUMMARY. 
 
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SOCIALISTS AHEAD, BUT HOW FAR? 
------------------------------ 
 
2. (SBU) Polls show the Bulgarian Socialist Party winning 22 
to 27 percent of the popular vote in the June 25 election, 
which under Bulgaria's proportional system will give them at 
least a plurality in the next National Assembly.  If the 
actual vote is toward the high end of this range and overall 
turnout is low, the Socialists could win an absolute majority 
in the 240-seat parliament.  However, at this point in the 
campaign, most observers say the Socialists are unlikely to 
win an absolute majority.  A somewhat more likely outcome is 
for the Socialists to fall short of a majority and seek to 
form a center-left coalition government with one of the two 
parties currently in power:  the National Movement Simeon II 
(NMSS) or the mainly ethnic-Turkish Movement for Rights and 
Freedoms (MRF).  A third possible scenario -- a center-right 
coalition built around the NMSS -- is less likely, but still 
possible if the right does better than current polling 
indicates (septel). 
 
3. (SBU)  The victory of former king Simeon Saxe-Coburg 
Gotha's centrist NMSS in the 2001 election shattered what had 
become a de facto two-party system in Bulgaria pitting 
ex-Communists against anti-Communists.  The latter, 
symbolized by the once-powerful Union of Democratic Forces 
(UDF), is currently riven by infighting that risks making it 
irrelevant in the coming elections.  At the same time, a weak 
party organization and the tendency of the Bulgarian 
electorate to punish the incumbent will make it extremely 
difficult for Simeon to pull off a repeat of his 2001 
performance.  Taken together, uncertainty about voter 
turnout, disarray within the right, and the unpredictable 
nature of support for the ex-king make it difficult to 
foresee the outcome of these elections. 
 
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A BIFURCATED PARTY 
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4. (C) Critics of the BSP assert that the current moderate 
leadership of the party is simply a front for hard-liners and 
former members of the Communist-era security services.  While 
both are certainly present within the BSP, most neutral 
observers believe their influence is exaggerated by the 
party's opponents.  Georgi Purvanov, the previous leader of 
the BSP and now Bulgaria's President, turned the party 
decisively toward the West when he was in charge.  Though no 
longer formally a member, his influence over the party 
continues to be strong.  Purvanov's protege and current party 
chairman, 38 year-old Sergei Stanishev, epitomizes the 
reformist wing of the party.  The economic policies outlined 
in his keynote speech to the annual party congress closely 
mirror current policies:  a more favorable business climate, 
continued economic restructuring, low budget deficits, zero 
taxes on dividends, and maintaining the currency board.  Yet 
even as he laid out his economic policy,  Stanishev 
repeatedly referred to the Congress delegates as "comrades." 
 
5. (C) Stanishev's use of the term "comrade" illustrates the 
bifurcated nature of the Bulgarian Socialist Party.  Many of 
its core supporters are elderly pensioners who have lost 
ground economically since the fall of communism.  Moreover, 
unlike similar parties in Poland and other central European 
countries, the Bulgarian Communist Party never split into 
separate social democratic and communist organizations; it 
simply changed its name.  While the social democrats appear 
to have the upper hand in the BSP, it is still a "big-tent" 
party that must please its hard-line faction, if only by 
addressing them as "comrades."  An equally serious split 
exists between young technocrats and older professional 
politicians, leading many Bulgarians to question the 
competency of the BSP to run a 21st-century government on the 
verge of EU membership.  "The BSP simply does not have enough 
trained personnel to govern alone," is a frequently heard 
refrain. 
 
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IMPACT ON U.S. INTERESTS 
------------------------ 
 
6. (C) Bulgaria is firmly in NATO and on the path to 
membership in the European Union.  The leadership of the BSP 
supports a U.S. military presence in Bulgaria in principle, 
although negotiations of a U.S. presence will be much tougher 
with a BSP-led government.  On the economic side, the 
Socialists have said they will stick to the IMF stand-by 
agreement and maintain the currency board.  In short, 
Bulgaria's general strategic orientation toward the West is 
clear and unlikely to change.  Yet within these broad 
confines, the Socialists -- if elected -- will likely be far 
more difficult for us to work with than the current 
government.  The party's Jurassic minority will oppose U.S. 
interests, but it would be wrong to overestimate their 
influence on the current leadership and especially President 
Purvanov.  Yet even the most reform-minded members of the 
leadership take their cues not from Washington or London, but 
from Brussels, Strasbourg, Berlin and Moscow.  Stanishev 
himself looks almost reflexively to the Socialist 
International and the Party of European Socialists for 
developing his party platform and drafting major policy 
speeches.  There are, unfortunately, few true Atlanticists in 
the BSP. 
 
7. (C) On Iraq, Stanishev has told his electorate that he 
will pull Bulgarian troops out of Iraq as soon as the BSP 
takes power.  However, some of the most powerful insiders in 
the party, including those around Purvanov, dismiss 
Stanishev's promise as pre-election hyperbole.  They say that 
there will be no abrupt pullout after the election.  Instead, 
Purvanov's position -- and that of the current government -- 
that Bulgaria should withdraw its forces at the end of the 
year will prevail.  According to these sources, the BSP 
cannot afford to begin its mandate with an act that would be 
widely perceived as irresponsible.  On the contrary, the BSP 
needs to demonstrate that it is a responsible and predictable 
actor on the international stage. 
 
8. (C) Russia's influence over the BSP is hard to gauge.  Out 
of habit, most BSP leaders probably feel more at home with 
Russians than with Americans.  But this is as much due to the 
limited contact between the BSP and the U.S. prior to the 
reformists' ascent than to any lingering ideological affinity 
for Russia.  We now have excellent contacts within the BSP at 
all levels.  Nevertheless, for historical as well as cultural 
reasons, there are far more Russophiles in Bulgaria than 
there are in, for example, Poland or the Czech Republic.  On 
the political level, relations with Russia would likely 
become warmer. 
 
9. (C) The one area where Russia's influence is likely to 
grow if the BSP takes power is in the economy.  Most 
Bulgarian companies with Russian business ties are aligned 
with the BSP, especially in the energy sector.  The Bulgarian 
subsidiary of LukOil -- which pays some 20 percent of all the 
taxes collected in Bulgaria -- is reportedly a BSP sponsor. 
Similarly, Risk Engineering, the leading Bulgarian firm in 
the nuclear power sector, is closely tied in with Russian 
business interests.  Beyond this, there are a whole series of 
"Red businesses" whose owners became wealthy by stripping the 
assets of state-owned industries during the previous 
Socialist government, and who still owe a debt of gratitude 
to the BSP. 
 
10. (C) A Socialist government will not resolve corruption 
issues in Bulgaria and could make matters worse as old habits 
die hard.  However, pressure from the European Union will 
almost certainly lead to some kind of judicial reform, 
regardless of who wins the election.  The Socialist have made 
judicial reform and the fight against organized crime a 
center-piece of their campaign, but it is difficult to judge 
their sincerity.  In any case, we doubt there will be a 
dramatic change in either direction under a BSP-led 
government. 
 
11. (C) The Socialists appear to have learned from the 
economic mistakes of the Videnov government, when street 
protests drove the Socialists from power after they ran the 
economy into the ground.  Under a BSP-led government, there 
would likely be a greater emphasis on social welfare and 
state-sector solutions to social problems, but still within 
the confines of stable fiscal and monetary policies. 
Privatization of the few remaining state-owned companies 
might slow, but fiscal reality should prevail in the long run 
-- the government simply cannot afford to keep money-losing 
companies on the books forever.  Stanishev has emphasized to 
us that the BSP can not afford another failed government. 
 
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COMMENT 
------- 
 
12. (C) If the Socialists come to power, a radical shift in 
the direction of the country is unlikely, although promotion 
of U.S. policy in Bulgaria will become far more difficult 
with a BSP-led government.  The U.S. can influence the 
outcome of the current election campaign only at the margins. 
 We are funding a get-out-the-vote campaign by the National 
Democratic Institute (NDI), which many believe will primarily 
assist the center-right.  We are also looking for ways to 
demonstrate that the current government's close relations 
with the U.S. have paid off (reftel), and thereby help 
improve its results on election day.  Regardless of these 
efforts, the NMSS may well be the underdog on election day. 
However, if the Socialists end up forming a coalition 
government with the NMSS -- a scenario that many Bulgarians 
believe is likely --  the participation of the ex-king's 
party will have a moderating effect on the any BSP-led 
government.  Beyond this, we will continue to engage the 
moderates around Stanishev and the President and try, to the 
extent we can, to isolate the hard-liners within the BSP.