LITHUANIA'S LABOR PARTY: UNDER NEW LEADERSHIP?

C O N F I D E N T I A L VILNIUS 000813

SIPDIS

SIPDIS

E.O. 12958: DECL: 08/28/2016
TAGS: PGOV LH
SUBJECT: LITHUANIA'S LABOR PARTY: UNDER NEW LEADERSHIP?


Classified By: Political/Economic Section Chief Rebecca Dunham for reas
ons 1.4 (b) and (d).


1. (C) Summary: The Labor Party, recently fallen from power
amid scandal, elected former Economy Minister Kestutis
Dauksys its new leader August 26. Dauksys called for changes
to the way Labor runs itself, but continued publicly to link
the party to its disgraced former leader. It seems clear
that Labor is still anathema to most (but not all) other
parties, but it may survive the bad news of the past few
months. Some observers believe that it may be the centrist
Social Liberal Party, not Labor, that will leave the
Lithuanian political scene. End Summary.

Background
--------------


2. (U) Lithuania's scandal-prone Labor Party held its annual
conference August 26. Conference participants elected
Kestutis Dauksys (Ke-STOO-tis Dauk-SHEES) as Labor's new
leader. The party has been in turmoil since its former
leader, Viktor Uspaskich, fled the country amid allegations
of corrupt party financing and tax evasion. His departure
from the scene, and the defection of seven Labor MPs to a new
party, contributed to the collapse of the Brazauskas
government in June.


3. (U) As former Minister of Economy, Dauksys himself may not
be immune from scandal even if he can escape his party's
financing woes. The new Minister of Economy is currently
investigating the improper appointment of tens of people to
positions controlled by the Economy Ministry and looking into
donations by state-owned companies (overseen by the Economy
Ministry) to organizations linked to the Labor Party during
Dauksys's tenure.

The Ballot
--------------


4. (SBU) From a safe haven in Russia, Uspaskich has been
engaged in a fight with Lithuanian prosecutors -- often
played out in the media -- over his role in the party's
scandals. Prosecutors confirmed on August 30 that they had
issued an arrest warrant for him. Uspaskich nevertheless had
an important, if eerie, presence at the conference,
addressing delegates by phone prior to the vote and urging
them to support his former deputy Loreta Grauziniene. 5. (C)
Dauksys beat out acting party chair Grauziniene and party
deputy chair Vydas Gedvilas in the final vote. Grauziniene
is close to Uspaskich, and glossed over the party's problems
in her candidacy speech. Gedvilas, at the other end of the
spectrum, called for wide-ranging efforts to clean up the
party. Tellingly, his suggestion for a way out of the
party's current crisis was met with cries of "what crisis?"
from many delegates. (He finished a distant third.) Dauksys
took the middle road, but also said that it is impossible to
separate Labor from Viktor Uspaskich.

Center Bloc?
--------------


5. (C) The morning of the conference, media reported that
Social Liberal leader Paulauskas had made overtures to Labor,
calling for the formation of a centrist bloc in parliament.
Paulauskas, per local tradition, represented his party and
addressed the conference, calling on delegates to contribute
to responsible politics and to play a role in forming a
centrist bloc. Social Liberal MP Vaclav Stankevic told us
August 28 that Paulauskas had been pushing the idea of a
center-leaning block for some time. He had previously
floated it with both the Conservatives and the Liberal
Movement, neither of which had shown any interest.
Unfortunately, the former Parliament speaker's shopping
around has only called attention to his reduced stature; one
political observer told us that the future of the Social
Liberal party is uncertain.

Reactions
--------------


6. (C) Defense Minister and Social Democrat powerhouse Juozas
Olekas told the Ambassador August 28 that the ramifications
of Dauksys's selection are still unclear. On the one hand,
Dauksys is more acceptable to other parties than his
predecessor; on the other, his public embrace of Uspaskich
repels many political players here. Olekas, who also
addressed the Labor conference, told Labor delegates that he
hoped that "sooner or later" his party would be able to work
with them. Two days later, he seemed to predict the party's
demise, and told the Ambassador that he still sees the strong
possibility that more MPs will defect from Labor in the
Seimas. Andrius Kubilius, leader of the opposition
Conservatives, was even more skeptical about Labor's future.
He acknowledged that Labor and the Social Liberals have
enough MPs to toy with the idea of forming a center block in
parliament, but he said that the Social Liberal party was
"based on being in parliament," and not on values. Thus, he
argued, the party has no future.

Comment
--------------


7. (C) We doubt that Dauksys's election will move Labor
beyond the Uspaskich era. Dauksys has longstanding personal
and business relationship with Uspaskich. When Uspaskich
left his post as Economy Minister under the Brazauskas
government, he handpicked Dauksys to replace him. In our
dealings with him, we found Dauksys to be oblivious to calls
for economic reform -- he even challenged the need for
Lithuania to attract more foreign investment in public
settings. His close association with Uspaskich in the past,
and immediate embrace of the exiled party leader after his
election as party leader, makes us wonder whether the whole
exercise was staged to ensure that Uspaskich retains control
of Labor while giving the party and Dauksys the appearance of
independence.


8. (C) For now, traditional parties inside and outside the
government will avoid working with Labor. For the governing
Social Democrats, the taint of Labor's scandal and trauma
from its unhappy coalition with that party in the last
government is still too fresh, and their support agreement
with the opposition Conservatives prohibits Labor's
participation in the coalition. All this could change,
however, depending on the results of the municipal elections
scheduled for February. If the electoral numbers require it,
the Social Democrats could conceivably reassess their
position and dump their agreement with the Conservatives for
a coalition agreement with 29-MP Labor.


9. (C) Perhaps the most unexpected casualty of the Conference
may be Social Liberal leader Paulauskas. His approach to
Labor, after falling out with the Social Democrats on the
left and being rejected by the Liberal Movement and
Conservatives on the right, suggests his desperation to
return to power, whatever the cost. Even in a country that
still embraces populist politics, he may have gone too far.
CLOUD