FM KUBIS: SLOVAKIA FOCUSED ON REGAINING MANAGEMENT

C O N F I D E N T I A L BRATISLAVA 000618 SIPDIS SIPDIS E.O. 12958: DECL: 07/27/2016 TAGS: ENRG ECON EPET PREL PGOV LO RS SUBJECT: FM KUBIS: SLOVAKIA FOCUSED ON REGAINING MANAGEMENT CONTROL OF TRANSPETROL REF: BRATISLAVA 000613 Classified By: DCM Lawrence Silverman for reasons 1.4 (b) and (d) ¶1. (C) At their July 28 meeting, Ambassador Vallee and Minister of Foreign Affairs Jan Kubis discussed next steps for the Slovak government in the Transpetrol situation. Ambassador Vallee emphasized that the impending sale of Yukos shares in Transpetrol needs to be carried out in a transparent manner that reflects market forces, and questioned whether GOS approval of a possible deal between Yukos and Gazprom would meet that criteria. The Ambassador expressed concern that, in his July 27 meeting with Minister of Economy Lubomir Jahnatek, the new Minister had shown considerable trepidation about offending Russian business interests (see reftel). The Ambassador stressed that Slovakia maintains significant leverage due to its veto authority over Yukos sales, the Russian court's lack of jurisdiction over Yukos Finance, and other factors. ¶2. (C) In response, Kubis emphasized that Slovakia's top priority in this process would be regaining management control of Transpetrol. Currently Slovakia owns 51 percent of Transpetrol shares, but Yukos holds management control. He said that Yukos Finance had shown no willingness to sell back its shares to Slovakia, so the GOS had to look for the next best solution. (Comment: We are not sure of the basis for this belief. Though his opinion was firm, Kubis admitted at the same time that he is not an energy expert. End Comment.) Kubis lamented that Slovakia's veto authority over any possible sale of Yukos shares runs out on May 1, 2007, so it would be necessary to finalize a solution before then. While concerned about the loss of veto power next year, Kubis did not, however, fully share Jahnatek's view that Slovakia absolutely needed to strike a deal before Yukos liquidation proceedings begin in early August. ¶3. (C) Minister Kubis said that he thought Gazprom could be convinced to grant management authority to the GOS as part of a deal, and believed that the Russians would fulfill their contractual obligations. Kubis added that a sale to the Polish firm PERN or another firm is still a viable option if Slovakia would gain management control of Transpetrol in the process. The Minister noted that the EU wanted Slovakia to buy back its shares from Yukos, but said that it was not realistic to expect Slovakia to stand up to Russia on energy contracts when all other EU members had failed to do so. VALLEE