SWEDEN: HOW FM BILDT'S STOCK OPTIONS AFFECT HIS

C O N F I D E N T I A L SECTION 01 OF 02 STOCKHOLM 000032

SIPDIS

SIPDIS

E.O. 12958: DECL: 01/10/2017
TAGS: PGOV PREL PINR SW
SUBJECT: SWEDEN: HOW FM BILDT'S STOCK OPTIONS AFFECT HIS
POLITICAL OPTIONS

Classified By: Polcouns Casey Christensen, reason 1.4 (b) and (d).

Summary and Comment
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1. (SBU) Post-holiday headlines in Sweden have focused on
Foreign Minister Carl Bildt and his recent decision to
exercise options in a publicly traded Swedish company, Vostok
Nafta, whose main holding is shares of the Russian energy
giant Gazprom. Bildt resigned from the board of Vostok Nafta
on becoming Foreign Minister. The options he had been
granted in December 2004 and were set to mature two years
later, on December 6, 2006 -- two months after Bildt joined
the cabinet. Bildt cashed in the options in December,
netting a profit of $685,000. While the existence of the
options was publicly acknowledged when Bildt's became Foreign
Minister in October 2006, the options were exercised while he
was serving, and during a period when the government was
considering how to respond to a proposed trans-Baltic
pipeline to be built by Nordstream, of which Gazprom owns 51
percent; the Nordstream gas line will pass close to Swedish
territory. A prosecutor has subpoenaed documents relating to
the options transaction and has said he could make a decision
as early as next week regarding possible criminal proceedings
related to allegations against Bildt of conflict of interest
and possible "bribery." At the same time, the Parliament's
Constitution Committee, which is chaired by a Social
Democrat, is also taking up the options issue.


2. (c) Comment: Bildt, a former Prime Minister himself, has
been the star of Prime Minister Reinfeldt's cabinet. At this
juncture, his status in the government and his future
prospects (including a rumored bid for Barroso's EU foreign
policy position) will depend on the outcome of the legal and
parliamentary investigations. Sweden does not have a
tradition of politicians coming and going, as Bildt did,
between the private and public sectors. The appointment of
ministers is not subject to parliamentary scrutiny, and
vetting has often been inadequate -- as Reinfeldt discovered
when he lost two ministers to scandals (related to not paying
television licensing fees and not paying taxes on household
help) within his first month in office. Bildt's situation is
different from those affairs, however, in that the stock
options were disclosed and did not become a major issue until
after they were exercised. The first hurdle Bildt will face
is the prosecutor's report, which could come as early as next
week. A government lawyer told us there is no clear Swedish
precedent, and the outcome of the criminal inquiry cannot be
predicted. If the prosecutor's report is favorable to Bildt,
the issue will dissipate. If unfavorable, both the legal and
parliamentary procedures could gain steam. End Summary and
Comment.

Weighing the Options
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3. (u) Sweden,s Foreign Minister and former Prime Minister
Carl Bildt has come under increasing pressure concerning his
former stock options in Vostok Nafta, where he served on the
board of directors before being named Foreign Minister. The
options were exercised in December 2006, giving Bildt a
pre-tax profit of $685,000. Vostock Nafta,s capital
consists predominantly of shares in the Russian gas monopoly
Gazprom.


4. (u) On January 8, Chief Prosecutor Christer van der Kwast
told the leading daily Svenska Dagbladet that he was
conducting a preliminary investigation concerning Foreign
Minister Bildt's stock options in Vostok Nafta, reviewing how
Bildt had declared his holdings. The preliminary
investigation will determine whether there are grounds for a
criminal investigation against the Foreign Minister for
"inappropriate benefits."


5. (u) Van der Kwast told Svenska Dagbladet "I am sure that
I can obtain evidence from the (subpoenaed) documents that
can be the foundation of a decision as to whether there is to
be a criminal investigation or not." Questioned on the
possibility of a criminal investigation Kwast said "...a
possible suspicion is bribery. That there is an impropriety
in a legal sense, an improper benefit to Carl Bildt from the
company in his new capacity as a Government minister."


6. (u) Although the matter attracted noticeable media
attention following Bildt's appointment in October of last
year, the revelation on January 8 that Chief Prosecutor
Christer van der Kwast was conducting a preliminary
investigation catapulted the affair to the top of the
headlines. The Chief Prosecutor indicated on January 9 that
the decision whether to proceed with criminal investigations
may be postponed until next week.


7. (u) One key problem Bildt faces is that a board decision
was required to authorize Bildt to exercise the options after

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he left the company and was serving a Foreign Minister. A
Vostok Nafta said, however, that five former board members
who had earlier left the board were also granted such rights.
Since Vostok Nafta released this information the
opposition's criticism appears to have toned down somewhat.
Peter Eriksson, leader of the Green Party, who called for
Bildt,s resignation on January 7, has taken a less harsh
line in his latest statements.


8. (u) On January 10 the leading daily Svenska Dagbladet
wrote that Bildt participated in a Government decision on
November 9 to allow Peter Gaz, a Gazprom subsidiary, to
continue investigating the possibility of a pipeline in the
Baltic, and that it was unclear whether the conflict of
interests had been properly addressed beforehand. In the
article Bildt,s spokesman says that this decision was a
collective cabinet decision and that it is routine to
consider potential conflicts of interests.
NOBLE