Identifier
Created
Classification
Origin
07WARSAW231
2007-02-02 15:23:00
CONFIDENTIAL
Embassy Warsaw
Cable title:  

POLAND: MOE ATTEMPT TO STOP OIL TANKER LOADING

Tags:  ENRG ECON EPET PL RS UR NO 
pdf how-to read a cable
VZCZCXRO6572
RR RUEHDBU RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHWR #0231/01 0331523
ZNY CCCCC ZZH
R 021523Z FEB 07
FM AMEMBASSY WARSAW
TO RUEHC/SECSTATE WASHDC 3049
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHKW/AMCONSUL KRAKOW 1551
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUEHBS/USEU BRUSSELS
C O N F I D E N T I A L SECTION 01 OF 02 WARSAW 000231 

SIPDIS

SIPDIS

STATE FOR EUR/NCE, EUR/ERA, EB/ESC
EUR/NCE FOR DKOSTELANCIK, BPUTNEY
EUR/ERA FOR DLIPPIATT AND LCATIPON
S/P FOR GMANUEL AND SHELLMAN
EB/ESC FOR SGALLOGLY, JLEWANDOWSKI, RGARVERICK
COMMERCE FOR 4232/ITA/MAC/EUR/OECA/MROGERS, JBURGESS,
JKIMBALL
DOE FOR LEKIMOFF

E.O. 12958: DECL: 12/31/2017
TAGS: ENRG ECON EPET PL RS UR NO
SUBJECT: POLAND: MOE ATTEMPT TO STOP OIL TANKER LOADING

WARSAW 00000231 001.2 OF 002


Classified By: Econ Counselor Richard Rorvig, reasons 1.4 b and d

C O N F I D E N T I A L SECTION 01 OF 02 WARSAW 000231

SIPDIS

SIPDIS

STATE FOR EUR/NCE, EUR/ERA, EB/ESC
EUR/NCE FOR DKOSTELANCIK, BPUTNEY
EUR/ERA FOR DLIPPIATT AND LCATIPON
S/P FOR GMANUEL AND SHELLMAN
EB/ESC FOR SGALLOGLY, JLEWANDOWSKI, RGARVERICK
COMMERCE FOR 4232/ITA/MAC/EUR/OECA/MROGERS, JBURGESS,
JKIMBALL
DOE FOR LEKIMOFF

E.O. 12958: DECL: 12/31/2017
TAGS: ENRG ECON EPET PL RS UR NO
SUBJECT: POLAND: MOE ATTEMPT TO STOP OIL TANKER LOADING

WARSAW 00000231 001.2 OF 002


Classified By: Econ Counselor Richard Rorvig, reasons 1.4 b and d


1. (C) Summary: J&S Executives report that Minister of
Economy Wozniak requested that the company not load an oil
tanker during the recent Druzba oil pipeline shutoff, a
request the company denied. J&S currently supplies 50% of
Poland's crude, but is diversifying in Europe, the U.S. and
Canada. The company is changing its name to Mercuria, plans
to float an IPO on the Warsaw Stock Exchange in 2007 and
hired CNN's David Ensor to handle its public relations.
Advice on the feasability of Poland's long-term energy
strategy provided by the company was ignored by the GOP. End
Summary.

--------------
Minister Wozniak Asks J&S Not to Load Tanker
--------------


2. (C) In a 26 January 2007 meeting with Grzegorz
Zambrzycki, CEO of J&S Energy, and Jarek Astramowicz (Amcit,
strictly protect),CEO of J&S Holdings, Zambrzycki told
Econoff that the Polish Ministry of Economy (MoE) asked J&S
on January 10 to stop loading oil onto an outbound ExxonMobil
tanker ship. The request, which came from Minister Wozniak
himself, followed the January 8 Russian shutoff of the Druzba
oil pipeline. Zambrzycki refused to honor the request,
telling the Minister that he did not have the right to
interfere with his company's commercial operations.
According to Zambrzycki, the GOP wanted to control commercial
oil supplies in Poland as an initial measure before resorting
to its strategic oil reserves. Zambrzycki speculated that in
a worst case scenario, the tanker could have been forced to
turn back after it had loaded and departed. (Note: J&S
Energy owns and operates oil storage and terminal facilities
near the Polish port of Szczecin. End Note.)



2. (C) Zambrzycki claimed to have known from the beginning
that the oil dispute between Russia and Belarus would be
quickly settled. Laughing at previous Polish media
allegations that he has a direct telephone line to Russian
President Putin, he explained that he does business with
approximately 30 Russian oil suppliers which Putin does not
control. Zambrzycki said that minutes after the pressure was
turned back on at the Russian end of the pipeline, he
received an SMS message on his cell phone saying "Pressure
Up". Two hours later, oil was flowing again at his end of
the pipeline. Zambrzycki noted that while Putin controls
nearly all of Russia's gas supply, he only controls 18
percent of Russia's oil supply; the rest is controlled by the
independent private companies that J&S purchases from.

--------------
J&S Supplies 50% of Poland's Crude
--------------


3. (C) Altogether, J&S supplies just under 50 percent of
Poland's crude oil. J&S has contracts through 2009 to supply
PKN-Orlen with 6 million tons of oil per year, and Lotos with
2 million tons of oil per year. Zambrzycki said that
PKN-Orlen recently stopped spot orders from J&S. He
expressed some doubts about Russia's long-term capacity to
serve as an oil supplier to Europe. This is not only due to
diminishing supply, but also increasing demand on Russian oil
from China. In the future, Zambrzycki believes that Russia
will be able to pick and choose where it wants to sell its
oil at the highest prices, and that China has cash and pays
its bills on time.

-------------- --------------
J&S Diversification Plans and New Name - Mercuria
-------------- --------------


4. (C) Zambrzycki said that J&S is diversifying its
interests, including three new biodiesel refineries in
Europe, a new oil refinery in Canada, and new oil exploration
in the U.S. J&S has an oil field in California that is
showing huge potential based on initial drillings of 2 of 21
planned wells. Zambrzycki also believes that oil will remain
above 50 dollars per barrel because if it does not, "several
companies stand to lose massive investments into new Canadian

WARSAW 00000231 002.2 OF 002


refineries." Astramowicz noted that J&S will soon change its
name to Mercuria, and is planning an IPO in 2007 on the
Warsaw Stock Exchange. He confirmed that J&S already
completed an audit and chose its investment bank for the IPO.
Zambrzycki also noted that J&S recently hired former CNN
correspondent David Ensor to manage J&S's public relations.
According to Zambrzycki, Ensor's presence already reigned in
journalists at Wprost and Puls Biznesu, which he claimed had
mercilessly slandered J&S with help from the GOP.

--------------
GOP Asks for Advice and Ignores It
--------------


5. (C) Astramowicz said that the GOP asked J&S to privately
advise them on its planned energy security policy.
Astramowicz told the GOP that none of its three main ideas
would work. First, the Norwegians had repeatedly stated that
they do not have enough gas to sell to Poland, so a new
pipeline is unrealistic. Second, Poland will not be able to
find suppliers for a new LNG port, which will sit unused if
it is built at all. Third, extending the Odessa-Brody
pipeline to Plock and re-reversing its flow is not
economically feasible for an investor without massive
government subsidies to offset its financial losses.
Astramowicz further noted that such a move would still not
guarantee the removal of Russia from the oil supply chain.
Astramowicz concluded that the GOP had ignored his advice.


6. (C) Comment: Zambrzycki is a controversial figure in
Poland, and the GOP makes no secret of its dislike for him
and J&S. Minister Wozniak's request that the company not
load an oil tanker during the recent Druzba oil cut-off is
confirmation that the GOP still does not understand the role
that commercial companies can and should play in an economy
and the limits of governmental intervention. We are not
surprised that the GOP ignored J&S's advice on its energy
security strategy as the government continues to ignore
reasonable, commercial-based counsel as it single-mindedly
pursues its objectives. End Comment.
HILLAS