Polish Finance Minister Requests Formal Agreement

UNCLAS WARSAW 001395

SIPDIS


SENSITIVE

STATE FOR EUR/NCE TARA ERATH AND MICHAEL SESSUMS
TREASURY FOR OASIA MATTHEW GAERTNER
FRANKFURT FOR TREASURY JIM WALLAR

E.O. 12958: N/A
TAGS: EFIN PREL PL
SUBJECT: Polish Finance Minister Requests Formal Agreement
for Paris Club Debt Repayment

Ref: (A) Warsaw 742 (B) State 16349


1. (SBU) On March 10, the Embassy received a letter from
Finance Minister Gronicki (dated March 1) expressing
appreciation for U.S. acceptance in principle of Poland's
offer to repay its outstanding Paris Club debt early. Per
the Paris Club Secretariat's instructions to Poland to seek
formal agreement bilaterally with individual creditors,
Gronicki requested written confirmation of U.S. willingness
to participate in the early repayment. The letter also
expresses an interest in concluding a bilateral agreement by
March 31. On March 9, Ministry of Finance staff told
Econoff they would send a draft agreement they have prepared
for the USG's review. As of COB March 10, we have not
received this agreement, but will forward it for
Washington's review as soon as we receive it.


2. (SBU) Begin text of letter from Finance Minister Gronicki
to Treasury Secretary Snow:

Warsaw, March 1, 2005

Dear Mr. Snow,

In a letter dated February 18, 2005 the Chairman of the
Paris Club Mr. Jean-Pierre Jouyet informed me that the Paris
Club creditors accepted the Polish proposal to repay ahead
of schedule all remaining obligations resulting from the
1991 Agreed Minutes. Through this letter I also was
reminded that each creditor country is free to decide
whether to participate in this operation, and I was advised
that the practical, terms regarding the proposed prepayment
should be set on a bilateral basis.

It is in this context that I am writing to you to officially
propose the early repayment of Poland's obligations to the
United States resulting from the bilateral agreements of
July 17, 1991 that implemented the 1991 Paris Club Agreed
Minutes. Poland is interested in the prepayment of all
obligations covered by these agreement and we would aim at
concluding this transaction, if only feasible, on March 31,

2005. I was very pleased to learn that Vice President Dick
Cheny had already informed us during his recent visit to
Poland that the United States authorities are willing to
accept our prepayment offer on the terms proposed by the
Paris Club Secretariat and endorsed by all creditor
countries.

I would appreciate if you could confirm this consent by
responding to this letter. I would also be grateful if you
could suggest the most expeditious way for agreeing on the
detailed terms of the proposed transaction and concluding a
formal agreement on the final settlement of Poland's
official obligations to the United States. If requested, we
would be happy to provide you with a preliminary draft of
such an agreement. I believe that the acceptance of our
proposal would provide yet another proof of the excellent
political and economic relations between our countries and
would contribute to a further strengthening of these mutual
ties. Based on some preliminary indications we expect that
the majority of our Paris Club creditors will accept our
offer and I certainly hope that your country will also join
this group.

Poland attaches great importance to the successful
completion of the proposed prepayment of our obligations to
the Paris Club creditors. For our country, the significance
of this transaction goes far beyond the simple debt
management objectives. Poland is currently the only EUI and
OECD member country that has outstanding debts covered by a
Paris Club agreement. We believe that by eliminating these
debts we will not only remove this rather unwelcome
distinction and legacy of the previous regime, but also
contribute to improving our current standing in the markets.
In this process, we should also be able to demonstrate that
we currently enjoy a very broad access to financing from
private capital markets. Al of this could be expected to
influence, at least indirectly, the assessment of our
creditworthiness thus contributing to a possible lowering of
our borrowing costs.

We certainly believe that the decision of your country, and
of other Paris Club creditors, to accept our offer could and
should be motivated not only by such broader political
considerations and the prospect of an earlier reimbursement
of substantial financial resources, but also by the overall


fairness of the proposed financial terms. It is our
understanding that when suggesting these terms the
Secretariat of the Paris Club was guided by the objective of

SIPDIS
ensuring the equal treatment of all creditor countries,
while also taking into account the creditors' initial
commitment to offer Poland the agreed level of debt relief.
From that point of view, the acceptance of the Polish
prepayment offer can thus be seen as a final step in the
implementation of the important political commitment and
financial support offered to our country at the onset of our
transition to market economy. I believe I do not need to
assure you that we are very grateful for this support that
played a vital role in ensuring the successful
transformation of our economy.

Given their interest in this matter I am sending copies of
this letter to the US Eximbank, the Commodity Credit
Corporation, the Agency for International Development and to
the US Ambassador to Poland.

Please accept, Mr. Minister, the assurances of my highest
consideration.

End text of Gronicki letter.

Munter


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2005WARSAW01395 - Classification: UNCLASSIFIED