POLISH BUSINESSMEN STAYING ABROAD WHILE KRAUZE

C O N F I D E N T I A L SECTION 01 OF 02 WARSAW 001901

SIPDIS

SIPDIS

DEPT FOR EUR, EUR/NCE, EUR/ERA, EEB/ESC
EUR/NCE FOR LLOCHMAN AND BPUTNEY
EUR/ERA FOR ELUFTMAN AND EMCCONAHA
EEB/ESC FOR SGALLOGLY, JKOPP, AND DMONOSSON
DOE FOR LEKIMOFF AND EROSSI

E.O. 12958: DECL: 09/05/2017
TAGS: ENRG EPET PREL PO ES RS GM
SUBJECT: POLISH BUSINESSMEN STAYING ABROAD WHILE KRAUZE
INVESTIGATION UNFOLDS

REF: WARSAW 1871 AND PREVIOUS

WARSAW 00001901 001.2 OF 002


Classified By: Acting Economic Counselor Laura Griesmer, reasons 1.4 b
and d


1. (C) Summary: David Ensor told us that the Polish
investors in his company, Mercuria Energy, are staying out of
Poland while the GOP investigates Polish businessman Richard
Krauze. Ensor stated that the company is afraid that during
the likely upcoming election campaign that PiS will use a
campaign against rich businessmen to attract poorer voters.
Ensor also asked for information on U.S. policy on the
NordStream pipeline. End Summary.

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Mercuria's Polish Executives Staying Out of Poland
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2. (C) David Ensor, Mercuria Energy Group Executive Vice
President for Communications, the holding company for J&S
Energy in Poland, told Acting Econ Counselor that his company
is following with interest and concern the GOP accusations
and investigation into the activities of businessman Richard
Krauze. Ensor stated that the company's more prominent
shareholders are not spending any time in Poland until the
investigation concludes.


3. (C) Mercuria has information that the Law and Justice
(PiS) party is preparing "bits of theater" that could be used
by the party in the election campaign depending upon how the
party is doing in polling. The company believes that J&S
Energy and its principals are on the PiS target list,
although not at the top of the list. A problem encountered
by a rich oil man or company that would be revealed by the
GOP might help PiS in its campaign, especially playing to the
rich vs. poor theme.

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Who's Got the Storage ?
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4. (C) The most likely target that the GOP could use
against J&S is its lack of oil storage capacity. A law
enacted this April requires companies to contract storage for
76 days of average imports. J&S has been unable to obtain
storage in Poland and recently received a warning from the
Ministry of Economy that it may be declared in violation of
the law and fined - perhaps in the hundreds of millions of
zlotys. Ensor explained that the company has contacted all
GOP-owned and operated oil storage facilities and was told
that no storage is available for J&S. Ministry of Economy
Director of Energy Diversification Wipler recently told J&S
that a company had 150,000 tons of storage available - but
when J&S contacted the company, they were told no capacity
was available. Repeated requests by J&S to build storage in
Poland have been denied, with the explanation that the GOP
wants all oil storage to be state-owned. J&S is unwilling to
build storage without GOP permission as it has been told that
the asset could be nationalized by the GOP. Even if the
company could start building new faciltities tomorrow, it
would be two years before they are available. Ensor
explained that he is preparing a file to rebut any GOP claims
that the company is not complying with its legal
responsibilities and Mercuria will be able to react within
the same news cycle if the issue arises.

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GOP Damaging The Business Climate
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5. (C) Ensor also noted that the GOP is doing real damage
to the Polish economy by the ongoing uncertain political
environment. While small and medium-sized firms are able to
stay under the radar screen and benefit from Poland's strong
economic growth, larger firms in the GOP's spotlight are not
so lucky. International companies are unable to make
long-term plans because of the political uncertainty and
unfriendly business climate and are increasingly chosing to
invest in countries other than Poland.

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Nordstream

WARSAW 00001901 002.2 OF 002


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6. (C) Ensor asked what the USG position on the Nordstream
gas pipeline from Russia to Germany is, especially given
recent Estonian statements opposing the route. Econoff
explained that the U.S. position remains "Happiness is
Multiple Pipelines" and that the U.S. does not oppose
commercial viable pipeline routes. Although Nordstream does
not appear commercially viable to us, the companies are the
ultimate decision-makers. The GOP continues to oppose the
pipeline but there are no direct negotiations between the
company constructing the pipeline and the GOP. Ensor noted
that Mercuria recently purchased an oil terminal in Estonia
but its business has been affected by the cut-off of Russian
oil deliveries to Estonia. Thus, Mercuria is very interested
in trying to understand what the future might hold there.
One eventuality the company is analyzing is whether the
government of Estonia might drop its opposition to the
pipeline in exchange for other concessions from Russia - such
as resuming oil shipments or an overall thawing in the
political and economic relationship.

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Comment
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7. (C) Ensor's comments are the first we have heard that
Polish businessmen are staying out of Poland in the wake of
the detention order for oligarch Krauze - who remains abroad.
The Business Center Club and the Polish Federation of
Employers Lewiatan both published letters yesterday
criticizing the GOP's campaign against Krauze but most
business people remain mum. Ensor's concerns that PiS may
target rich oil oligarchs and/or companies in a Robin Hood
themed campaign could be justified as PiS struggles to
consolidate its position. Such a campaign would appeal to
PiS's support base and those Poles not benefitting from
Poland's economic growth. Using J&S' lack of compliance with
the new oil storage law seems a bit technical as the basis
for a campaign against the company - more likely are
allegations of corruption against the two Ukrainian-Poles who
own the company and have been targeted by this and previous
governments as part of the corrupt elite who gained from
privatization in the 90's.
ASHE