POLAND'S COMMENTS ON RUSSIA-UKRAINE GAS

C O N F I D E N T I A L SECTION 01 OF 03 WARSAW 000180 SIPDIS STATE FOR EUR A/S DFRIED, DAS MPEKALA, DAS MBRYZA EUR/NCE FOR DKOSTELANCIK, MSESSUMS EB/ESC FOR SGALLOGLY, RGARVERICK E.O. 12958: DECL: 02/02/2016 TAGS: ENRG ECON PINR PREL UP RS PO AU EU CZ SUBJECT: POLAND'S COMMENTS ON RUSSIA-UKRAINE GAS NEGOTIATIONS REF: STATE 17066 Classified By: Economic Counselor Ricard Rorvig, reasons 1.4(b),(d) ¶1. (U) This cable contains an action request - see para 2. Summary and Action Request -------------- ¶2. (C) Poland's Ministry of Economy and MFA expressed support for the U.S. proposal on an approach to Ukraine but seek clarification on several questions. Poland requests further information, (through intelligence channels),on U.S. concerns about RUE. The GOP also requests information on the timing and aims of the approach, cautioning that any approach before the upcoming elections could adversely affect the Yushenko government. The GOP also requested a definition of what the U.S. means by support for the government of Ukraine, noting that offering only political support would not be effective. The Poles are keen to work closely with us on this issue and want to stay in close touch. The MFA asked to be advised of reactions in European capitals to our demarche. End Summary. Ministry of Energy - Political Support Insufficient -------------- -------------- ¶3. (C) Minister of Economy Deputy Minister Piotr Naimski told visiting EUR/ERA Director Peter Chase, DCM and Econoff that RosUkrenergo (RUE) supplies part of Poland's gas needs, thus Poland is in a dangerous position when discussing potential Russian gas cutoffs to Ukraine. Responding to the demarche, Naimski asked if there is a joint demarche on the GOU, at what level it would be, and what the timing would be. He said that political support of the EU and U.S. is important but not sufficient in assisting Ukraine to stand up to Russian pressure. Either the U.S. and/or EU should be forthcoming with either financial support for Ukraine or that EU Member States should be willing to take lower gas deliveries from pipelines transiting Ukraine so that Ukraine can stand up to Russian pressure. Putting money into Russian coffers via financial support to Kiev under Russian pressure is not optimal. Naimski said the ideal solution for Ukraine would be an alternative source of gas, but that is technically impossible. What the EU Might or Might Not Do -------------- ¶4. (C) Naimski agrees that Ukraine should pay a market price for gas, noting that Poland and other Western European countries do so. However, he believes there should be a transition to market prices. Other countries could assist Ukraine by taking lower deliveries by utilizing their stored gas or tapping alternative sources of supply from North Africa and Norway. He thinks we need to persuade the EU to make a strong statement if there is another gas shutoff, although the Commission would be unlikely to make such a statement as it is too conservative and not political. Austria, as the Presidency, could make a statement but would first have to consult with other Member States. If the EU acts in the Ukrainian gas crisis it would be the first time that the EU acted on an energy supply issue outside it's borders. Put Pressure Back on the Russians -------------- ¶5. (C) Naimski said that it appears that Russia is trying to put the pressue on Ukraine in Western Europe by blaiming Ukraine for stealing gas. He'd like us to develop a joint strategy that puts the pressure back on Russia to supply gas. He thinks that it comes down to a political decision in Berlin, Paris, and Rome to confront Putin although he is skeptical of this. Austria will also need to be involved as it receives most of its gas from Russia. In Naimski's opinion, the major EU Member States want to avoid a crisis atmosphere and a confrontation with Russia. The DCM recommended that the Polish Ambassador in Kiev coordinate with Ambassador Herbst on the gas issue. Why Now? -------------- ¶6. (C) On February 3, MFA North America's desk Director Ambassador Henryk Szlajfer called in DCM to discuss the demarche, stating that the MFA senior leadership had just finished discussing the issue and had a number of questions for the U.S. DCM and Amb. Szlajfer agreed that the gas crisis appears to be over as Ukraine reports that all contracts were signed on February 2. Nevertheless, Poland would like to continue to work with the U.S. on energy security and the Ukrainian gas situation. Szlajfer requested more information, if necessary through intelligence channels, on any new information on RUE that may have prompted our demarche to EU capitals now. He noted that Polish and U.S. services had long known that individuals associated with RUE had criminal ties, and questioned what new information led to the increased concern in the U.S. What is the Timing and Aims of Joint Approach? -------------- - ¶7. (C) Szlajfer asked how quickly the U.S. planned to approach the GOU on the contract, and what the aim of the demarche might be. Szlajfer cautioned that any joint approach now was likely to have political implications in the run-up to Ukraine's March elections. Even a simple request for further information on the contract and the actual ownership of RUE could lead to the perception in Ukraine that friendly governments are criticizing Yushenko's leadership in the critical pre-election period. It would not be possible to keep an approach a secret. Szlajfer suggested that any request be done very carefully, and that the timing, whether pre or post-election be carefully considered in view of the upcoming elections. DCM commented that a conversation between the Polish Ambassador in Kiew and the U.S. Ambassador would be valuable on these issues. What is Support? -------------- ¶8. (C) The MFA would also like a definition of what the U.S. means when it requests that Poland "consider registering your support for Ukraine should it decide to renounce this deal,..." and what support the U.S. might offer in such an eventuality. The DCM emphasized that at this point the U.S. was only requesting that Poland make the same approach to Ukraine, although the Ukrainians would no doubt want to discuss possible support. Szlajfer stressed that a definition of what support Ukraine might expect should be discussed now, if there is to be any chance for the contract to be cancelled. He reiterated Naimski's point that support must go beyond political support and be tangible in order to assist the GOU in what otherwise would be a very difficult situation. Finally, Szlajfer requested that the U.S. keep the GOP fully informed of responses from other EU capitals. Note and Comment -------------- ¶9. (C) During the February 2 meeting, Naimski reported to us that state gas company PGNiG received a call that day from the Ukrainian gas operator warning them that the gas supply from RosUkrEnergo (RUE) would be cut on February 4. Poland normally receives 12.6 mcm/day and would receive only 6.3 mcm/day. Naimski believed such a cut was related to a break-down of discussions between the governments of the Ukraine and Russia on gas supply. Naimski was extremely concerned about a potential cut-off and did not realize that Ukraine had signed the agreement with RUE earlier in the day. Subsequent reports from the U.S. and the press that the agreements were signed have not diminished, however, Poland's interest in continuing a dialogue on energy security with the U.S. and Ukraine. ASHE