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Identifier
Created
Classification
Origin
06WARSAW325
2006-02-27 14:47:00
CONFIDENTIAL
Embassy Warsaw
Cable title:  

UKRAINIAN PRIME MINISTER FAILS TO CLARIFY GAS

Tags:  PREL PGOV EPET ENRG PL UP 
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						C O N F I D E N T I A L SECTION 01 OF 02 WARSAW 000325 

SIPDIS

EB/ESC FOR SGALLOGLY AND RGARVERICK; USDOC FOR
4232/ITA/MAC/EUR/JBURGESS, MWILSON, JKIMBALL; DOE FOR
LEKIMOFF

E.O. 12958: DECL: 02/24/2016
TAGS: PREL PGOV EPET ENRG PL UP
SUBJECT: UKRAINIAN PRIME MINISTER FAILS TO CLARIFY GAS
DEALS DURING WARSAW VISIT


Classified By: Polcouns Mary T. Curtin, for reasons 1.4 (b) and (d)



1. (C) Energy issues dominated the discussions during the
February 16-17 visit to Poland by Ukrainian Prime Minister
Yuriy Yekhanurov and the separate February 21 visit by
Anatolij Kinach, Secretary of the Ukrainian Office of
National Security and Defense. According to the MFA,
however, the Poles were not satisfied with the Ukrainians'
answers or explanations of the January gas deals with Russia.
On Odessa-Brody, the Poles will pursue discussions with
Ukraine, but there are several outstanding issues that must
be solved. Other issues included Polish support for
Ukrainian integration into European institutions and the
World Trade Organization (WTO), bilateral trade and
cross-border issues, and security cooperation. Polish
President Lech Kaczynski will visit Kiev the first week of
March, and will continue to press Ukraine on the gas deal.
End Summary.



--------------------------


No Convincing Answers
on Gas Deal


--------------------------





2. (C) During his two day visit to Warsaw, Yekhanurov met
with President Lech Kaczynski, Prime Minister Kazimierz
Marcinkiewicz, the speakers of upper and lower houses of
parliaments, business groups, and a think tank. According to
Wojciech Zajaczkowski, MFA Director for Eastern Policy,
Polish political leaders asked Yekhanurov about the nature of
the gas deals made in January and February, but received no
satisfactory answers. Yekhanurov reportedly concentrated on
the circumstances of the deals, complaining of strong
pressure from Russia, and the difficulties of the moment,
including the harshness of the winter and the pressures of
the upcoming elections, and said the Russians effectively
linked these two pressing problems. Yekhanurov avoided
giving any concrete answer about the deals in his various
meetings. He suggested that the "rumors" about the deals
were spread by the ITERA gas conglomerate (a U.S.-registered
company owned, according to Zajaczkowski, by Russians), which
the Poles did not find convincing.



3. (C) Yekhanurov emphasized that Gazprom and Russian
authorities played an important role in constructing the
deals. Zajaczkowski said that Ukrainian National Security
Secretary Kinach, during his separate visit, told the Poles

SIPDIS
that the gas deal "was a very imperfect compromise reached in
extreme circumstances." Both he and Kinach emphasized the
political motivations behind the deals. Zajaczkowski said
that Polish officials believe the deal was shaped by
political maneuvering and corruption on both sides, but that
while "the vectors were in the same direction on the Russian
side," this was not the case on the Ukrainian side. The
Russians benefited because their political goals and corrupt
motives were both satisfied. The Poles believe that
Ukrainian political goals suffered because of corruption.



--------------------------


Odessa-Brody


--------------------------





4. (C) Zajaczkowski said that while, as reported in the
press, there was discussion on moving forward on the
extension of the Odessa-Brody oil pipeline to Plock, there
was still work to be done. He said the Ukrainians are
"insisting" upon pushing forward, but that Poles still have
some questions. Polish Minister of Economy Piotr Wozniak and
his deputy, Piotr Naimski (whom the Prime Minister has
charged with energy security), will continue the discussion,
but Poland has concerns about the financing of the
Brody-Plock extension, which will require $400 to $500
million dollars to construct. Zajaczkowski said the
outstanding questions include, first, a recent feasibility
study, of which Poland's Minister of Economy was critical.
Poland wants to prepare its own assessment of the pipeline
extension before agreeing to go forward. Second is the
question of Russian oil in the pipeline between Brody and
Odessa, and the question of how much time Ukraine needs to
"reverse the reversal" of the flow, in order to return to the
original plan for the flow of oil. Third, Kazakhstan needs
to be brought in to the deal. "Without Kazakhstan," said
Zajaczkowski, "it is hard to imagine the project will ever
work."



--------------------------


Other Issues


--------------------------





5. (C) Yekhanurov and Kinach also discussed European
integration. Zajaczkowski said Prime Minister Marcinkiewicz
repeated Poland's "well-known" view that Ukraine should be
integrated into European institutions, including NATO and the
EU. Yekhanurov also asked for Polish support for Ukraine's
entry into the World Trade Organization (WTO). The
Ukrainians said they would like to look at how Poland set up
its financial market and stock exchange as an example for
their own efforts.



6. (C) On bilateral economic relations, Zajaczkowski said,
the Poles emphasized to the Ukrainians the importance of a
good investment climate, and especially protections for the
rights of investors. According to Zajaczkowski, Ukrainian
Special Economic Zones were abolished last year, with
investors' privileges, but not their obligations, suspended.
He said there were some seventy Polish companies involved,
and that the move had raised concern among Polish investors.



7. (C) Finally, Yekhanurov discussed trans-border and
regional cooperation. A member of Yekhanurov's delegation
had a separate meeting with the Polish Ministry of Interior
and Administration. Kinach, during his visit, also had
meetings regarding cooperation between the two countries'
Security Councils, and regarding defense cooperation, with an
emphasis on NATO.



--------------------------


Kaczynski to Kiev


--------------------------





8. (C) Zajaczkowski said that President Kaczynski will visit
Kiev the first days of March, and that the gas agreements
will be high on his agenda, but that the visit will cover the
full range of bilateral issues, and aim to demonstrate Polish
support for Ukrainian democracy.
ASHE