1. Heat olive oil in a large sauté pan over med-high heat.
2. Add chiles, onion and garlic and cook for 5 minutes.
3. Stir in the tomatoes, sugar, piment d'Espelette and bay leaf.
4. Season with salt and pepper and bring to a boil, stirring occasionally.
5. Reduce heat and simmer for 25 to 30 minutes. Remove and discard bay leaf.