SCENESETTER FOR THE PRESIDENT'S PRAGUE VISIT

C O N F I D E N T I A L SECTION 01 OF 05 PRAGUE 000153

SIPDIS

FOR THE PRESIDENT FROM CHARGE D'AFFAIRES MARY THOMPSON-JONES

E.O. 12958: DECL: 03/19/2019
TAGS: OVIP OBAMA PREL PGOV ECON ENRG EUN MARR SENV
EZ, RS, AF
SUBJECT: SCENESETTER FOR THE PRESIDENT'S PRAGUE VISIT

Classified By: Charge d' Affaires, a. i., Mary Thompson-Jones, for reas
ons 1.4 (b) and (d).

Mr. President:


1. (C) Summary/overview: We warmly welcome your visit to
Prague. Twenty years after the Velvet Revolution, ten years
after joining NATO, and five years after joining the European
Union, your visit during the Czech Republic,s EU presidency
symbolizes this country's remarkable journey from communism
to flourishing democracy. You will meet Czech leaders who
remember firsthand, and are still grateful for, U.S. Cold War
opposition to Soviet domination of Europe and our effort in
World War II. But you will also address a younger generation
of Czechs born after the fall of communism. The leadership
here is aging. The giants of the Velvet Revolution are
nearing the end of their era. Vaclav Havel, in fragile
health at 72, has been out of power for six years. Current
President Vaclav Klaus is now 67, and Foreign Minister Karel
Schwarzenberg, now 71, had heart surgery last year. While
these Czech stalwarts believe intrinsically in America,s
role in Europe, the younger generation may well see
transatlanticism as an abstract concept. It is up to us to
articulate and instill that enduring principle in future
leaders. Helping us is the fact that the societal memories
transcend age differences and Czechs remain among our closest
friends and strongest supporters in Europe. Last year,s
admission of the Czech Republic into the Visa Waiver Program,
which opened the U.S. door wider, was seen here as a vote of
confidence that their transition to a prosperous and
democratic nation was complete.


2. (C) Across the spectrum, Czechs are delighted by your
visit, optimistic about the new U.S. administration, eager
for multilateralism, and hoping to be consulted and heard.
They are open to U.S. leadership and a new vision for
transatlantic bonds that work toward common goals.


3. (C) Securing your presence in their capital for an
extraordinary U.S.-EU summit is a signal achievement for the
Czechs' first-ever EU presidency. Czech views of U.S.-EU
issues often mirror our own, and we can quietly seek ways to
strengthen their hand. While the Czechs, as EU president,
must seek EU consensus ahead of advancing their national
viewpoint, a successful Czech EU presidency could pave the
way for a stronger Czech voice within the EU afterward, with
long-term benefits for U.S. interests.


4. (C) Prime Minister Mirek Topolanek's center-right
government is a staunch U.S. ally which has expended
considerable political capital to support the U.S. on missile
defense and in Afghanistan. The PM seeks a clear statement
that, whatever the results of the ongoing policy review, the
U.S. will not abandon missile defense and will continue to
consult with the Czechs as the policy process moves forward.
Pulling back on missile defense, if not managed carefully,
would be a blow to pro-Americanism in the Czech Republic and
would strengthen the perception that other U.S. goals
elsewhere trump U.S. relations with the Czech Republic.
Czech contributions in Afghanistan are notable, given the
country's size. Currently, public support for foreign
involvement is waning and many Czechs see Afghanistan as a
U.S. problem. However, Czechs have historically been among
Europe's most eloquent voices in defense of democracy and
human rights, and remain receptive to the idea that their
actions can make a difference on the world stage. End
summary/overview.

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EU Agenda: Gas, Gaza, Guantanamo
--------------


5. (C) The Czech Republic joined the EU in May 2004, and
assumed its first-ever rotating six-month presidency on
January 1, 2009. The Czechs are especially proud that your
visit comes during their leadership and they consider this a
historic moment in transatlantic relations. The Czech
Republic shares our goals and approaches to key foreign
policy issues. From Cuba to Russia to the Balkans, we have
worked with the Czech Republic closely in the past, and this
close cooperation has continued during the Czech EU
presidency.


6. (C) The Czech presidency's theme is "Europe Without
Borders" and its three priority areas, the "3 E's," are: 1)
Economic Competitiveness (including addressing the challenges
of the global financial crisis); 2) Energy Security and
Sustainability; and 3) Europe in the World (external

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relations). Their first several weeks at the helm of the EU,
however, quickly became consumed by the "2 G's": gas and
Gaza (with Guantanamo referred to as a third "G" in private
conversations with Czech officials). The Czechs' active
shuttle diplomacy facilitated a solution to the
Russia-Ukraine gas dispute, which won praise from their
colleagues.


7. (C) The bigger challenge, however, is to unite the EU
behind an energy security strategy that rests on
diversification of suppliers and routes, including support
for the Nabucco and TGI (Turkey-Greece-Italy) pipelines,
improved outreach to Caspian producers, and increased
interconnectivity of the internal EU gas and electricity
networks. The Czechs are trying to use the gas crisis as a
catalyst to prompt increased EU action and plan to host an
EU-Southern Corridor Summit on May 8. The Czechs are also
using their EU presidency to promote nuclear power as an
important CO2 emission-free option, and, despite Green party
opposition, hope to release a tender for new units, for which
Westinghouse will be one of the leading contenders. The
unpredictability of Russian energy supplies had already hit
the Czech Republic in 2008, when Russian crude oil deliveries
to the Czech Republic declined sharply -- ostensibly for
technical reasons -- following the July 2008 signing of the
U.S.-Czech Ballistic Missile Defense Agreement.

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Climate Change
--------------


8. (C) The Czech EU presidency is pressing the U.S. for
larger reductions in greenhouse gas emissions by 2020 than
the current U.S. proposal calls for (a return to 1990 levels
by 2020) and for strong U.S. investment in a low-carbon
economy. The EU also hopes to create a common cap-and-trade
market with the U.S. rather than a country-by-country carbon
tax system. The Czechs oppose EU committing itself to any
funding figure until the U.S. joins the debate. The Czechs,
and Europe in general, expect to settle climate change issues
first with the U.S. and only then with the developing world,
including China and India, and object to the U.S.
conditioning its own commitments on China,s obligations.
The Czech and other EU member states, respective Environment
and Finance Ministries (as well as DG Environment and DG
Finance) still need to resolve their internal differences,
particularly on levels of financial commitments and financing
mechanisms. The Czechs, official position on climate change
is often muddled by a vocal anti-climate change campaign of
President Klaus, largely a ceremonial political figure who
does not speak for the government but uses his position to
disseminate his private views. Domestically, the Czechs plan
to use funds generated by selling unused Kyoto emission
credit to Japan (about USD 0.5 billion) to fund domestic
energy conservation programs.

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Middle East
--------------


9. (C) PM Topolanek and FM Schwarzenberg traveled to the
Middle East in January and March, in addition to hosting
multiple separate events for EU Foreign Ministers in Brussels
with key Middle East interlocutors. The Czechs also
participated in a recent EU humanitarian assessment mission
to Gaza and discussed the provision of EU assistance (58M
euros for Palestinians in Gaza, the West Bank and refugees in
Lebanon) with Palestinian Authority President Mahmoud Abbas
during his February 23 visit to Prague. The Czech government
is committed to working within the EU and with the United
States to create the conditions for a more lasting solution.
PM Topolanek is likely to emphasize the importance of close
U.S.-EU coordination and reiterate that the Czechs, on behalf
of the EU, stand ready to host future conferences or key
meetings to advance peace in the region.

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Guantanamo
--------------


10. (C) The Czech EU Presidency welcomed the U.S.
administration's executive orders related to the closure of
the Guantanamo detention facility. The Czechs have
facilitated internal EU discussions at the Foreign, Justice,
and Interior Ministerial levels and European Commissioner
Barrot and Czech Interior Minister Langer traveled to the US
to meet with Attorney General Holder and other USG officials
on March 16-17 to discuss EU questions about these detainees.

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Ambassador-at-large for War Crimes Issues Williamson plans
to visit Prague as part of his return trip to key European
capitals on March 25. However, the EU member states consider
this to be a decision for each individual member state, and
while they have discussed establishing an EU framework to
address collective Schengen travel security concerns, they
have not yet taken collective action. Czech officials have
been clear that the Czech Republic, while willing to
facilitate EU discussions on the resettlement of detainees,
does not plan to accept any detainees due to domestic
political reasons.

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Regional Issues: Russia, Afghanistan, and the Balkans
-------------- --------------


11. (C) A key challenge for the Czech Presidency will be to
lead the EU toward a more united transatlantic approach to
Russia. Given their negative historical experience, the
Czechs have been a valuable U.S. ally with regard to Russia,
within the EU as well as NATO. Events including the Georgia
conflict, the gas crisis, and Russia's stance with regard to
missile defense have reinforced Czech skepticism toward
Russia. They generally agree with the U.S. approach of
cooperating wherever possible but resisting Russia's economic
and military pressure against its neighbors. Russia will
host an EU-Russia Summit May 21-22.


12. (SBU) In Afghanistan, in addition to being an active
bilateral contributor (see below),the Czechs they also
advocate greater EU coordination and contributions. FM
Schwarzenberg hosted the EU-Afghanistan Troika Ministerial in
January, where the EU reaffirmed its longstanding commitment
to reconstruction: from 2002 to 2006, the EU contributed
over 1.3B euros to this effort and for 2007 to 2010 has
pledged 610M euros.


13. (SBU) We have a ready and attentive ally in the Czechs
when it comes to advancing stability in the Balkans and EU
enlargement. FM Schwarzenberg and DPM Vondra frequently
focus attention on developments in the region during the
regular monthly meetings of the EU Foreign Ministers.
Unfortunately, Czech efforts to advance EU enlargement with
Balkan countries have met with resistance from some EU member
states. Name issues and ICTY compliance, but also
enlargement fatigue, are behind this resistance. We can
anticipate that the Czechs will strive to keep the Balkan
nations oriented to the West, but progress may be slow.

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A Valued Ally With Domestic Challenges
--------------


14. (C) Our bilateral relations are excellent, with the Czech
Republic's November 2008 entry into the Visa Waiver Program
having removed the one long-standing irritant. PM
Topolanek's commitment to strong transatlantic ties undergird
his government's support for the U.S.-proposed missile
defense radar site. The country has been a steady supporter
of U.S. and NATO military operations and maintains
approximately 1000 troops on foreign missions, despite the
fact that public support for some deployments has slipped.
In Afghanistan, the Czechs have about 500 military and
civilian officials. In 2008, they launched a provincial
reconstruction team (PRT) and deployed a approximately 100
Special Forces troops. They also deployed a handful of
experts to an Operational Mentoring and Liaison Team (OMLT)
in Afghanistan. Over the past several years, they have also
maintained an infantry battalion of 450 troops in Kosovo.
Domestic political constraints may make it difficult for the
Czechs to maintain, let alone increase, their foreign troop
deployment levels.


15. (C) Building on its own recent history, the Czech
Republic is our strongest partner in Europe on Cuba and an
active supporter of Cuba's democratic opposition. Likewise in
Georgia, Belarus, Burma, Iraq and other countries in
transition, the Czech government and NGOs work to support
peaceful transformations. Prague is home to the U.S.-funded
Radio Free Europe/Radio Liberty, and has actively supported
broadcasts to countries in Eastern Europe, Central Asia and
the Middle East.


16. (C) Since assuming office in January 2007, Prime Minister
Topolanek's right-of-center coalition government has
maintained the Czech Republic's traditional transatlantic
orientation despite a tense domestic political situation.
The ruling coalition's shaky majority in the parliament

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depends on the assistance of a few deputies who have crossed
party lines but whose support has been unreliable. The
government will likely face a vote of no-confidence on March
24, a fifth attempt by the opposition to unseat PM Topolanek.
The resurgent parliamentary opposition has been pressing the
government on all fronts, including in matters of foreign and
security policy, the two areas where past governments and
oppositions had worked well together. Consequently,
decisions on everything from foreign deployments to missile
defense have been tainted by the country's domestic politics,
at times to the detriment of the Czech Republic's
international standing and national interest.


17. (SBU) Following several years of strong economic
performance, the small, open, export-oriented Czech economy
is now struggling with the effects of the global economic
downturn. Nevertheless, the conservative, inward-looking
Czech financial system has remained relatively healthy. The
Czech Republic is one of only four OECD countries not to have
had to recapitalize its banks. Both public and private debt
is low, and Czech households have not borrowed in foreign
currency. All major banks, though, are owned by European
banking groups, some of which have significant exposure to
troubled Eastern European economies.


18. (SBU) The Czech real economy, however, is suffering from
a significant decline in external demand for Czech products.
The Czech export to GDP ratio is 80 percent, while over 80
percent of Czech manufacturing is exported, mainly to Western
Europe (31 percent of exports go to Germany alone). The key
automobile sector, which accounts for 20 percent of Czech
manufacturing, has been especially hard hit. After three
years of over six percent real GDP growth (2005-2007),the
Czech economy slowed to 3.1 percent growth in 2008 and is
expected to contract by as much as two to three percent in

2009. Unemployment, which had fallen to a record low of 5
percent in July has risen sharply to 7.4 percent and is
expected to continue to climb. The government has put
forward an economic recovery program, costing almost 2
percent of GDP, and designed to maintain employment and
exports. Because most Czech goods are exported, while most
household goods are imported, the government has done little
to stimulate domestic demand.


19. (SBU) In both the EU and G-20 context, the Czechs have
consistently warned against protectionism and
beggar-thy-neighbor policies, called for evolutionary, rather
than revolutionary, changes to regulation and stressed the
importance of sustainable public finances. While the Czechs
support increased coordination among national regulators,
they are likely to oppose any attempts to implement new
pan-European financial regulations or efforts to erode their
free and open trade and investment regime. The Czech also
oppose any efforts to treat the Central and Eastern European
region as a whole, fearing the consequences to their economy
should international investors put them in the same category
as some of the more troubled economies in the region. That
said, the Czechs see the EU response to the global financial
crisis as a key test of their EU presidency and understand
that a united EU and G-20 is needed to reassure markets.
Thus, they are willing to subsume their own interests in
favor of a wider consensus.

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Missile Defense Dominates Bilateral Agenda
--------------


20. (C) EU membership is one of two pillars of Czech foreign
policy. NATO and strong transatlantic ties form the second
pillar. Given the importance the Czechs assign to their
relationship with the United States, PM Topolanek and his
government have viewed missile defense (MD) as the natural
next step in our growing security partnership. Since the
United States officially presented the MD proposal to the
Czech Republic in January 2007, the Czech government has been
unwavering in its support, despite significant public
opposition driven largely by the Czech historical experience
and concerns about foreign troop presence on the Czech
territory. Russian threats and intransigence with regard to
MD in many ways reinforced the Czech government's
determination to proceed with the project. The Czechs moved
quickly to negotiate and sign the Ballistic Missile Defense
Agreement and the Status of Forces Agreement. The Czech
Senate ratified the agreements in November 2008.
Ratification of the two agreements in the Lower Chamber has
been suspended due to domestic political divisions.


21. (C) The Czechs have been paying very close attention to

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indications from Washington on our MD plans. Given some of
the skeptical statements from the Hill regarding the
reliability and effectiveness of the proposed Polish
interceptors, Deputy Prime Minister Alexandr Vondra, Deputy
Foreign Minister Pojar, and other senior Czech officials have
indicated that the Czech government would be interested in
moving forward with the proposed radar site even if the
United States decides to postpone its decision on the
interceptors. During your bilateral meetings in Prague, we
expect that missile defense will be at the top of the agenda
for Czech officials and the media. In recent meetings, DPM
Vondra and other Czech officials stressed that, no matter
what the U.S. position will be, advance coordination will be
key. The long history of great powers deciding the country's
fate "o nas bez nas" ("about us, without us") means Czechs
are loathe to be taken by surprise. Especially with regard
to Russia, they fear missile defense could be offered as a
bargaining chip, leaving them vulnerable to a triumphant
Russia.
Thompson-Jones