Viewing cable 07WARSAW86
Title: POLAND: DAS BRYZA'S MEETING WITH DEPUTY ECONOMICS

IdentifierCreatedReleasedClassificationOrigin
07WARSAW862007-01-12 15:59:00 2011-08-30 01:44:00 CONFIDENTIAL Embassy Warsaw
VZCZCXRO7055
RR RUEHDBU RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHWR #0086/01 0121559
ZNY CCCCC ZZH
R 121559Z JAN 07
FM AMEMBASSY WARSAW
TO RUEHC/SECSTATE WASHDC 2860
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHTA/AMEMBASSY ALMATY KZ
RUEHKB/AMEMBASSY BAKU 0322
RUEHSK/AMEMBASSY MINSK 3432
RUEHMO/AMEMBASSY MOSCOW 2560
RUEHNT/AMEMBASSY TASHKENT 0234
RUEHSI/AMEMBASSY TBILISI 0310
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
C O N F I D E N T I A L SECTION 01 OF 04 WARSAW 000086 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR S/P, EUR/NCE, EUR/ERA, EB/ESC, EUR/CARC, EUR/RUS 
EUR FOR DAS BRYZA 
EUR/NCE FOR DKOSTELANCIK AND BPUTNEY 
EUR/ERA FOR DLIPPEAT AND LCATIPON 
EB/ESC FOR SGALLOGLY, RGARVERICK, AND JLEWANDOWSKI 
S/P FOR SHELLMAN AND GMANUEL 
COMMERCE FOR 4232/ITA/MAC/EUR/OECA/MROGERS, JKIMBALL, 
JBURGESS 
DEPT OF ENERGY FOR LEKIMOFF 
 
E.O. 12958: DECL: 01/12/2017 
TAGS: ENRG ECON PREL RS GG AJ KZ LH LG EN LO PL
SUBJECT: POLAND: DAS BRYZA'S MEETING WITH DEPUTY ECONOMICS 
MIN NAIMSKI 
 
 
Classified By: Charge D'Affaires Ken Hillas for reasons 1.4 b and d 
 
¶1.  (C)  Summary:  EUR DAS Bryza and Polish Deputy Minister 
of Economy Naimski discussed a deal for gas for Azerbaijan 
and Georgia that would relieve both countries of their 
dependence on Russian gas, and exchanged views on the 
political situation in Georgia.  Naimski restated his 
opposition to the Mazeikiu refinery purchase, noting that it 
would have been better for PKN Orlen to invest in upstream 
development, but conceded the strategic benefits of the deal. 
 He asked for USG assistance in arranging a meeting for the 
GOP with ConocoPhillips to discuss its sale of European 
assets to LukOil.  The GOP will work to join its energy grid 
to the Baltics and to participate in the construction of a 
replacement for the Ignalina nuclear power plant. The GOP 
continues to pursue the Odessa-Brody-Gdansk oil pipeline and 
is focusing on oil from Kazakhstan to make it viable.  The 
GOP will make one last try to purchase the Transpetrol 
refinery stake but considers it a lost cause.  The GOP 
continues to pursue a gas deal for a dedicated gas pipeline 
from Norway.  DAS Bryza's meeting with Wojciech Zajaczkowski, 
Director of Eastern Policy at the Ministry of Foreign 
Affairs, will be reported septel.  End Summary. 
 
- - - - - - - - - - - 
Georgia and Azerbaijan 
- - - - - - - - - - - 
 
¶2.  (C)  Bryza began the meeting with Deputy Minister Naimski 
by laying out a scenario in which within 20 days Azerbaijan 
and Georgia could go from being 100% dependent on Russian gas 
to requiring zero Russian gas to get through this winter. 
Bryza informed Naimski that BP has agreed not to re-inject 
gas into Azeri-Chirag-Guneshli (ACG), but instead sell it to 
Azerbaijan, and subsequently to Georgia.  Additionally, 
Turkey agreed not to take the Shah Deniz (SD) gas but to 
would allow Georgia to buy it.  Additionally, Azerbaijan will 
burn mazut to fill remaining energy needs in order to avoid 
relying on any Russian gas this winter.  Bryza noted that 
Azerbaijan and Georgia are resolute in working together to 
rid themselves of dependence on Russian gas. 
 
¶3. (C)  Naimski was pleased with this news, but quickly 
turned the conversation to discuss what would happen to 
Georgia if President Saakashvili was assassinated. 
Acknowledging that the U.S. is doing all it can via personal 
protection to make sure that doesn't happen, Naimski thought 
that a better strategy might be to provide other deterrents. 
He suggested that Saakashvili expand his core group and 
publicly acknowledge that he is preparing a successor, so as 
to make him replaceable, therefore making it less effective 
to kill him.  Naimski also suggested that we begin to take 
Georgia into Western structures now, to show the world that 
we care about Georgia and we're watching what's happening 
closely.  Both sides acknowledged that Russia may begin to 
feel pressure and may instigate disturbances and 
destabilizations in the region that will hurt the West, and 
especially Georgia, with no impact on Russia. 
 
- - - - - - - - - 
Mazeikiu Refinery 
- - - - - - - - - 
 
¶4. (C) Naimski told DAS Bryza that personally he was not 
happy with the Mazeikiu refinery purchase by PKN Orlen 
because it was a large investment in production, and he would 
prefer such investments were made upstream.  He believes that 
the investment is so large it will preclude years worth of 
potential investments by PKN Orlen (PKNO) in upstream 
development.  But, although he personally didn't agree with 
the purchase, once PKNO decided to go through with it, he 
fully supported the Poles in ensuring the transaction was 
completed.  He also believed that it took the Russian cutoff 
 
WARSAW 00000086  002 OF 004 
 
 
of oil to Mazeikiu to wake Hungary up to the fact that Russia 
is being predatory. 
 
- - - - - - - - 
ConocoPhillips 
- - - - - - - - 
 
¶5.  (C)  Naimski requested DAS Bryza's assistance in 
encouraging ConocoPhillips representatives to visit Poland to 
discuss future investments in Poland and the region with the 
GOP.  Naimski discussed the sale of Conoco assets in the 
Czech Republic to LukOil, noting that although the deal is 
relatively minor for Conoco, it is very important politically 
for Poland.  Emphasizing that he was not concerned about the 
sale of gas stations which he was happy to let LukOil 
purchase and control, Naimski instead worried about the 
Kralupy refinery shares as PKNO is also an owner of the 
refinery and should have rights of first refusal.  However, 
the specifics of the deal are unclear to the GOP and give 
them pause since the reported transaction appears to involve 
trading shares rather than selling assets.  The GOP is afraid 
that via an internal trade, others, including PKNO, might be 
priced out of the market.  Naimski proudly emphasized that 
Poland is the only country in the region without Russian 
investments in gas. 
 
- - - - - - - - - - - - - 
Electricity and the Balts 
- - - - - - - - - - - - - 
 
¶6. (C)  As recently announced in Vilnius, Poland will join 
its electric power grid with Lithuania and the other Baltic 
countries.  Naimski said that the discussion now is centered 
on where to place clutches required to block the power from 
the Russia system (which Lithuania is currently connected to) 
to the European system.  The options being considered are on 
Lithuania's border with Poland or with Belarus.  Naimski 
would like the clutches placed on the border with Belarus, 
and then further up the border between the Baltic States and 
Russia, bringing the Baltics into the European system. This 
location would also block Russian electricity exports to the 
region.  However, the deal is currently to place them on 
Lithuania's border with Poland.  Naimski said that the Baltic 
States are not fully supportive of placing the clutches on 
their borders with Russia for fear of angering the government 
of Russia.  DAS Bryza asked if the USG should approach the EC 
on this issue and Naimski responded that Commissioner 
Piebalgs is supportive but an approach would assist the Poles 
and Balts.  He was uncertain of whether EU funds were 
available for the project which he estimated would cost USD $ 
1 billion.  Naimski noted that the GOP has been talking to 
the governments of the Baltics for 17 years about integration 
projects and nothing has happened.  The governments were 
concerned that they couldn't complete strategic integration 
projects and decided energy was a good place to start. 
 
- - - - - - - - - - - - - - - 
Ignalina Nuclear Power Plant 
- - - - - - - - - - - - - - - 
 
¶7.  (C)  Naimski confirmed that Poland is interested in 
cooperating in the construction of the replacement for the 
Ignalina nuclear power plant.  Poland is not opposed to the 
development of nuclear energy although it does not have a 
nuclear plant.  Joining the nuclear project will give the 
Polish industry good experience.  The framework agreement 
signed by the Prime Ministers commits each country to a 25% 
ownership share.  The Ministry of Economy is taking its 
orders from the highest political level on this project. 
 
- - - - - - 
Kazakhstan 
- - - - - - 
 
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¶8. (C) Naimski explained that the GOP understands that the 
government of Kazakhstan, as well as Brussels, are split on 
the issue of export from Kazakhstan.  Kazakhstan's Kulibayev 
and Tokayev do not favor a trans-Caspian oil or gas pipeline 
because of the tricky political situation with Russia.  He 
believes that President Nazarbayev is interested in a 
project, but that Deputy Prime Minister Massimov is pushing 
for LNG to be shipped across the Caspian, something Naimski 
sees as completely economically unfeasible.  However, the 
GOKZ may push the deal even if it's not commercially feasible 
to open another export route and avoid the Caspian 
demarcation dispute.  Brussels exhibits the same dichotomy on 
export from Kazakhstan, with Deputy DG of Relex Rotrades 
supporting LNG while Piebalgs advisor Ruchel advises that the 
countries should focus on a pipeline.  DAS Bryza explained 
that U.S. policy is to show that Azerbaijani gas can be 
exported to the EU, then bring Kazakhstan along.  Naimski 
noted that Kazakhstan sells to Russia, China, and the U.S. 
and wondered if the EU should/could become a 4th partner. 
Bryza assured Naimski that the U.S. would welcome more EU 
involvement in the region.  President Nazarbayev wants an EU 
and Western strategy as the Russians have constrained his 
exports of oil and gas.  The U.S. strongly supported maimal 
EU involvement in the Caspian region.  For example, we are 
coordinating on feasibility studies.  It's been hard to 
convince the Commission but there is now good coordination 
between the U.S. and EU. 
 
- - - - - - - - - - - 
Odessa-Brody Pipeline 
- - - - - - - - - - - 
 
¶9.  (C)  Naimski acknowledged that there is no reasonable way 
to proceed with the Odessa-Brody pipeline without Kazakhstani 
oil which unfortunately is already allotted elsewhere.  The 
only viable option is to persuade ChevronTexaco to use 
Odessa-Brody as an alternative route, but the company doesn't 
seem interested in doing so.  Naimski mused that maybe the 
GOP needs to work to make it a more attractive option for 
Chevron.  Poland recognizes that although it has good 
knowledge of Ukraine, it does not have enough influence on 
its own to balance Russian interests in Ukraine or to 
convince the EU to engage with the Ukraine.  Bryza shared 
with Naimski that U.S. companies are not extremely interested 
in getting involved in Ukraine because they are uncertain 
which way things will go there politically.  ChevronTexaco 
appears to be favoring the Burgos-Alexandropolis and 
Samsun-Ceyhan bypass routes.  Naimski added that there is an 
agreement with Ukraine on the Odessa-Brody project but that 
the Ukraine wants Russian participation in the project. 
Khristenko reportedly told the Ukrainians that he will not 
oppose the project if it does not undermine Russian interests 
in the Druzba system. 
 
¶10. (C)  President Kaczynski will likely go to Kazakhstan in 
early 2007 to discuss the Odessa-Brody project with President 
Nazarbayev.  Naimski believes that there is a chance that 
President Nazarbayev might like to have an alternative for 
his own oil (possibly 8 million tons/year).  And if so, that 
would make Odessa-Brody-Gdansk viable.  When DAS Bryza 
questioned the economics of Odessa-Brody, stating that 
President Nazarbayev would have the same questions, Naimski 
replied that it's possible to make the economics acceptable, 
for example by batching oil or alternately reversing the 
line.  Bryza explained that Chevron seemed to view 
Burgas-Alexandropolis as its preferred Bosporus bypass 
pipeline, with Samsun-Ceyhan as a backup.  He recommended 
that Naimski sharpen his calculations of Odessa-Brodiy,s 
commercial viability, then share them with Chevron. 
 
- - - - - - - - - - - - - - - - 
Transpetrol, Norwegian Gas, LNG 
 
WARSAW 00000086  004 OF 004 
 
 
- - - - - - - - - - - - - - - - 
 
¶11.  (C)  While Naimski noted that he's recently been asking 
the question "who lost Slovakia" he is resigned to the fact 
that the game is over.  The GOP could persuade PKNO to buy a 
claim and spend forever in court but that's not a good 
option.  The GOP will pursue the course of action discussed 
with S/P Advisor Helman but believes it's now a waste of 
time.  On Norwegian gas, Naimski stated that Minister of 
Economy Wozniak is going to Oslo the week of December 18. 
German Chancellor Merkel raised the issue of gas sales to 
Poland with Norwegian PM Stoltenberg as promised and he 
seemed to be supportive.  The GOP is in talks with Statoil 
and ExxonMobil about the purchase of 3BCM.  The GOP believes 
that the mood in Norway is changing and that Norway needs 
Poland's purchase to make the project profitable.  Naimski 
confirmed that building the planned North Baltic gas pipeline 
from Russia to Germany and the hoped-for pipeline from Norway 
to Poland is difficult but technically feasible as the 
pipelines can legally and technically cross in the Baltic. 
Naimski confirmed that PGNiG would announce the location for 
its new LNG port shortly and that the GOP is committed to 
building an LNG terminal to increase its energy security. 
(Note:  PGNiG subsequently announced it will construct a 
terminal in Swinoujscie, on the Polish-German border.  End 
Note.) 
 
- - - - 
COMMENT 
- - - - 
 
¶12.  (C)  Deputy Minister of Economy Naimski's meeting with 
DAS Bryza revealed that the GOP continues to struggle to 
reinforce its energy security but is beginning to recognize 
that some pet projects -- i.e. Transpetrol and Odessa-Brody 
-- may not be feasible or realistic absent leadership by 
private investors. It is clear that the GOP is continuing to 
pursue every possible project to secure its energy 
independence.  The Ministry of Economy has made progress in 
the past year, and if it can construct some of the projects 
it has started, the residents of Poland will be less 
dependent on Russian energy in 5 years.  Particularly 
interesting are the energy grid project with the Baltic 
countries and Polish participation in the Ignalina nuclear 
power plant replacement.  Naimski's analysis that Poland and 
the Baltics have not completed any strategic infrastructure 
linkages is spot-on.  Progress on the energy projects could 
lead to discussions and cooperation on other infrastructure 
which would further link the region and further integrate the 
countries. 
 
¶13.  (U)  DAS Bryza cleared this cable after departing Warsaw. 
 
HILLAS