VZCZCXRO6569
OO RUEHDBU RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHWR #1147/01 1360853
ZNY CCCCC ZZH
O 160853Z MAY 07
FM AMEMBASSY WARSAW
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4261
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEHAH/AMEMBASSY ASHGABAT PRIORITY 0238
RUEHTA/AMEMBASSY ASTANA PRIORITY 0003
RUEHKB/AMEMBASSY BAKU PRIORITY 0329
RUEHKV/AMEMBASSY KYIV PRIORITY 0070
RUEHMO/AMEMBASSY MOSCOW PRIORITY 2659
RUEHSI/AMEMBASSY TBILISI PRIORITY 0316
RUEHKW/AMCONSUL KRAKOW PRIORITY 1699
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RHEBAAA/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY

C O N F I D E N T I A L SECTION 01 OF 06 WARSAW 001147 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EUR, EUR/NCE, EUR/ERA, S/P, EEB/ESC 
EUR FOR MBRYZA, MPEKALA 
EUR/NCE FOR DKOSTELANCIK, BPUTNEY 
EUR/ERA FOR LCATIPON AND DLIPPEATT 
S/P FOR GMANUEL 
EEB/ESC FOR RGARVERICK AND JLEWANDOWSKI 
STATE PASS TDA 
COMMERCE FOR 4232/ITA/MAC/EUR/OECA/MROGERS, JBURGESS, 
JKIMBALL 
ENERGY FOR LEKIMOFF 
TREASURY FOR MGAERTNER 
TDA FOR DSTEIN 
 
E.O. 12958: DECL: 05/14/2017 
TAGS: ENRG EPET ECON PREL PO KZ UR LI AJ GG RS
NO, LO, ES, TX, DN 
SUBJECT: POLAND'S NAIMSKI TELLS DAS BRYZA KRAKOW SUMMIT 
POSITIVE 
 
WARSAW 00001147  001.2 OF 006 
 
 
Classified By: DCM K. Hillas, reasons 1.4 b, d 
 
¶1.  (C)  Summary:  Poland's Deputy Minister of Economy Piotr 
Naimski told visiting DAS Bryza that the Krakow Summit had 
four important results: The governments reached a political 
decision that a Caspian-Odessa-Brody-Plock-Gdansk (COBPG) oil 
pipeline should be constructed and that an Intergovernmental 
Agreement (IGA be negotiated);  the governments will create a 
permanent working group at the Ministerial level; a "New 
Sarmatia" company will be formed by state-owned oil companies 
from the countries to promote the COBPG pipeline; the next 
summit will be held in Vilnius in October to which other 
interested countries will be invited.  A joint communique was 
issued by the Presidents of Poland, Lithuania, Azerbaijan, 
Georgia, and Ukraine and the Kazakhstani Vice Minister of 
Energy.  Naimski noted that the Summit and cooperation was 
intended to extend beyond the COBPG pipeline to other 
regional energy projects.  The Presidents are developing an 
overall strategic vision that if they share influence on the 
strategic level rather than only on specific projects they 
will have a better chance of success.  The Presidents agreed 
that they must continue to honor Russian contracts but 
diversify to assist the Caspian countries in their 
development.  During the Summit press conference, 
Azerbaijan's President Aliyev announced that Azerbaijan will 
produce enough oil by 2012 to cover the needs of the first 
phase of COBPG project.  Naimski believes this makes it 
possibile to start the project with Azerbaijani oil, then 
work on future stages with Kazakhstani oil.  End Summary. 
 
----------------------------------- 
Attendance - Kazakhstan Represented 
----------------------------------- 
¶2.  (C)  Deputy Minister of Energy Piotr Naimski told 
visiting DAS Bryza that the Krakow Energy Summit May 11 and 
12 was a success.  The meetings went very well with a spirit 
of understanding between the participants that something 
solid on transportation of Caspian resources to Europe must 
be done.  Partipants included: 
Azerbaijan - President Aliyev, Natik Aliyev, Vagif Sadiksov, 
Nowruz Mammadov 
Georgia - President Saakashvili, Nika Gilari, Mrs. Shasidze 
Lithuania - President Adamkus, Mr. Navickas 
Ukraine - President Yushchenko, Minister Kluyev 
Kazakhstan - Vice Minister of Energy and Mineral Resources 
for oil & gas issues Kinov 
Naimski stated that Kazakhstan's Kinov was designated by 
President Nazarbayev to represent him in the meetings, and 
fully participated in all meetings, decisions and 
discussions, not hesitating to take the floor.  The GOP was 
pleased that Kinov attended, recognizing that President 
Nazarbayev is in a difficult position with respect to Russia. 
 Kinov's attendance and participation is a clar sign to 
Poland that Nazarbayev wants to be flexible and diversify his 
activities and was a signal that Kazakhstan is open for 
further cooperation with Poland.  Naimski said that the 
Kazakhstani delegation indicated it felt uncomfortable about 
Russian pressure to conclude this agreement, and indicated a 
continuing interest in trans-Caspian shipments of oil and gas 
to Azerbaijan.  Naimski compared the situation to the 
Baku-Tbilisi-Ceyhan (BTC) project, where Kazakhstan initially 
did not sign the documents, then did at the last minute.  He 
believes Kazakhstan may join a trans-Caspian gas export 
project when there's something to join. 
 
------------------------- 
Decisions Taken in Krakow 
 
WARSAW 00001147  002.2 OF 006 
 
 
------------------------- 
¶3.  (C)  The Presidents signed a joint communique - written 
only in English - emailed to EUR/NCE.  In additions, the 
Presidents agreed that an oil pipeline from the Caspian to 
Odessa-Brody-Plock and Gdansk (COBPG) should be started. 
They agreed to establish a permanent working group of Energy 
Ministers or Ministers of Economy to work jointly at the 
technical level.  A company named "New Sarmatia" will be 
formed by the national oil companies of the countries. 
(Note:  The existing pipeline consortium between Poland and 
Ukraine is named Sarmatia.  End Note.)  Naimski stated that 
this company will include Lithuania through its major 
investor, Polish-based PKN Orlen.  Finally, the Presidents 
agreed to continue the discussions with a goal of having 
concrete results before their next meeting in Vilnius in 
October, to which other countries will be invited - likely 
including the U.S.  The Presidents agreed to keep the meeting 
low key and did not discuss or comment during the press 
conference on the competing meetings in Ashgabat and Astana 
with President Putin. 
 
-------------------------- 
A Broader Strategic Vision 
-------------------------- 
¶4.  (C)  Naimski noted that the Krakow Summit did not merely 
address the proposed COBPG pipeline project, but was inteded 
to discuss other joint projects and a wider policy toward the 
Caspian region.  The Presidents discussed developing an 
overall energy strategy including both oil and gas for the 
region, which is based on the fact that if they work on the 
strategic level and not just on specific projects they can 
share their influence.  They believe that the developing 
countries of Turkmenistan and Azerbaijan will develop faster 
and better if they have other options available than purely 
Russian to sell and transport their resources.  While 
countries like Poland and Lithuania will continue to use 
Russian resources and honor contracts with Russia, it will be 
better for them to develop alternatives - such as from the 
Caspian. 
 
--------------------------------------------- -------- 
Caspian-Odessa-Brody-Plock-Gdansk Pipeline Next Steps 
--------------------------------------------- -------- 
¶5.  (C)  During the press conference, Azerbaijani President 
Aliyev stated that Azerbaijan will have sufficient volumes in 
2012 to fill the first phase of the COBPG pipeline - a real 
boost to the GOPs plans, said Naimksi.  Naimski estimated 
that Azerbaijan could commit 8 million tons/year to the 
project, which would make the first phase feasible.  To 
implement the project, the new company will prepare a real 
feasability study which will include ways of attracting 
commercial partners to the project in the next stage.  "New 
Sarmatia" will be started by the state-owned national oil 
companies but the participants recognize that not all oil is 
under government control.  An intergovernmental agreement 
(IGA) will be negotiated in parallel with company formation. 
Construction will be started by the six national companies, 
but then transferred to the commercial companies in the next 
phase.  DAS Bryza noted that there are serious questions in 
the industry that operating expenses make the pipeline too 
expensive compared to other options.  Naimski responded that 
the GOP does not agree with the Kazakhstani contention that 
the pipeline will be $25 more expensive than transporting oil 
through Russia to Primorsk, that's why the project needs a 
real feasability study.  Naimski noted that noone in Ukraine 
will accept losing money on the project if the pipeline is 
reversed and that the Brody-Odessa transit revenues must be 
 
WARSAW 00001147  003.2 OF 006 
 
 
covered by the revenue stream of the reversed flow line. 
 
--------------------------------------------- ------ 
Naimski on the Astana and Ashgabat Meeting Outcomes 
--------------------------------------------- ------ 
¶6.  (C)  Naimski shared with DAS Bryza the preliminary 
information the GOP had received on the Astana and Ashgabat 
meetings over the weekend between Presidents Putin, 
Nazarbayev and Berdimuhammedov.  The GOP heard that President 
Nazarbayev did not want to visit Ashgabat with President 
Putin so there were separate meetings in Astana and Ashgabat. 
 The GOP also heard that in Astana the Russians and 
Kazakhstanis reached agreement on CPC expansion, but the next 
day the Kazakhstanis said CPC expansion was still on the 
table.  Putin then went to Ashgabat, with Nazarbayev 
following the next day.  In Ashgabat the parties agreed to 
build a 10 BCM gas pipeline from Turkmenistan to Kazakhstan 
that will join the existing system into Russia.  Naimski 
noted that the existing gas pipeline theoretically transits 
90 to 99 BCM per year but is so old is now able to only carry 
80 BCM.  The announcement of the new line basically takes 
capacity back up to where it was.  The GOP considers the 
announcement as purely political.  DAS Bryza asked Naimski 
and the GOP to continue to reach out to Turkmenistan's 
Berdimuhammedov who is isolated and under intense pressure 
from Russia.  Naimski replied that the GOP will continue to 
reach out to Turkmenistan, apparently on Saturday 
Berdimuhammedov said something about keeping other possible 
gas routes on the table - a good sign to the GOP.  DAS Bryza 
emphasized that maintaining the political momentum is 
critical, although it may be difficult with Turkmenistan.  We 
need to get Berdimuhammedov to say that he is going to send 
gas across the Caspian to support critical gas pipeline 
projects. 
 
¶7.  (C)  DAS Bryza explained that Petronas controls a psa in 
Turkmenistan for an offshore gas field close to the 
Azeri-Chirag-Guneshli field in Azerbaijan that BP believes 
has a similar geological structure to Shah Deniz.  The 
Azerbaijanis plan to visit Ashgabat by the end of the month 
to discuss potential cooperation in developing the field with 
the Turkmens.  Azerbaijan is planning a joint Georgian, 
Azerbaijani, Turkmen summit in early June with a focus on 
hooking up the Petronas field to Azeri infrastructure and 
moving gas West.  BP is potentially interested in cooperating 
with Petronas. 
 
-- 
EU 
-- 
¶8.  (C)  The governments of Poland and Lithuania mentioned EU 
politics, policy, and strategy at the Summit but did not 
discuss them in detail as Presidents Kaczynski and Adamkus 
were representing their countries, not the EU.  The 
discussion in Vilnius will include more EU policy and focus, 
promised Naimski.  The GOP would like support from the EU for 
what it's doing.  Asked if EU Commissioner Piebalgs will 
express his support for the initiative, Naimski replied that 
he wants to be supportive.  The GOP hopes that they will be 
able to provide their engagement strategy with the Caspian 
region to the EU as input into a broader EU strategy toward 
their Eastern neighbors. 
 
-------------------------------------- 
Hungary, Nabucco and Who's Got the Gas 
-------------------------------------- 
¶9.  (C)  DAS Bryza explained that he met with Hungarian Prime 
 
WARSAW 00001147  004.2 OF 006 
 
 
Minister Gyurcsany and his advisors about the competing 
Nabucco and Blue Stream gas pipeline proposals.  It seemed 
that the Hungarians were coming up with excuses not to do the 
Nabucco project but their arguments against it made no sense 
or were false.  DAS Bryza hoped he had convinced the 
Hungarian PM that Azerbaijan has sufficient gas for the 
pipeline and that signing a long-term gas supply contract 
with Russia when no other alternative is available is 
tactically unwise.  Bryza believed the Hungarians now 
understood the need to send clear signals of support in 
principle for Nabucco as a means to supply Caspian gas to 
Central Europe; otherwise, the entire project may unravel. 
The PM also stated that he wants to participate in the LNG 
project in Croatia as well as developing regional gas storage 
projects in Hungary and Serbia without Gazprom control. 
Naimski asked if there is enough gas from Azerbaijan to fill 
Nabucco.  The GOP is concerned that Nabucco could end up with 
Russian gas from Blue Stream and that Hungary is acting as a 
Russian hand in Nabucco.  Bryza replied that the USG supports 
Nabucco only as a way to transport Caspian gas to Europe, 
that Azerbaijan has sufficient gas only for Nabucco's first 
phase, and that trans-Caspian and/or Iraqi gas would be 
needed for Nabucco's later phases. 
 
¶10.  (C)  DAS Bryza noted that the USG is trying to do 
concrete things to support Nabucco.  The USG is working with 
Turkey which now seems to oppose the expansion of Blue Stream 
- which recently led to Russian refusal to support the 
Samsun-Ceyhan oil pipeline.  Bryza added that the USG shares 
the GOP's concern about the need to work with the Hungarian 
government on Nabucco.  For example, the USG is talking to 
MOL about diversification away from Russian sources, the 
regional LNG facility in Croatia, and gas storage.  Naimski 
asked where the gas for Nabucco would come from.  Bryza 
replied that OMV says is needs 8.5 to 10 BCM to make the 
project feasable, with 8.5 being the minimum.  They 
supposedly have a deal with Azerbaijan for 5.0 BCM so only 
need 3.5 BCM more.  It would be bad to get the gas from 
Russia unless the company could structure the deal so that 
Russia is only involved in the first phase - very difficult. 
BP's top gas marketing person for Europe  believed that 
Nabucco's developers might slow the project down to meet 
Azerbaijan's gas development plans.  Azerbaijan could produce 
50 BCM in 2015 - 20 BCM for Azerbaijani and Georgian use, 
leaving 30 BCM available for sale.  Nabucco's Vienna office 
wants to do the project now, but believes using Iranian gas 
is too politically risky.  They are talking to the Russians 
but the USG has no details on the discussions. 
 
----------------------------- 
Scandinavian Pipeline and LNG 
----------------------------- 
¶11.  (C)  Congratulating Deputy Minister Naimski on 
purchasing ExxonMobil's shares in Norwegian fields, DAS Bryza 
asked Naimski to explain Poland's plans to construct a gas 
pipeline from Norway to Poland via Denmark.  Naimski 
cautioned that the deal is not completed yet and asked that 
the USG keep the details confidential until it is finalized 
and announced.  Polish gas company POGC is in talks with 
Energinet and Gasco to join a consortium to build a pipeline 
from Radvik, Denmark, South of Copenhagen to Niehoze, Poland. 
 The line would then connect to the Norwegian system.  The 
GOP is now negotiating and booking capacity for the proposed 
3 BCM pipeline.  POGC is in discussions with Statoil about 
moving 3 BCM of gas from its new fields in Northern Norway 
through Denmark to Poland.  Naimski noted that purchasing the 
fields positively changed the tenor of negotiations with the 
 
WARSAW 00001147  005.2 OF 006 
 
 
Norwegians as previously the Norwegians didn't believe the 
Poles would complete the project.  The new pipeline should be 
operational in 2012 or 2013.  The proposed LNG port project 
in Swinojuscie is also moving forward and should be completed 
in the same time-frame. 
 
--------------------------------------------- -------- 
Nord-Stream and Cooperation with the Baltic Countries 
--------------------------------------------- -------- 
¶12.  (C)  Das Bryza asked Naimski whether he believes the 
proposed Nord-Stream pipeline from Russia to Germany will be 
completed.  Naimski stated that while some observors think 
the project will be abandoned, he does not believe it will be 
because too many interests are involved.  DAS Bryza 
encouraged Naimski to participate in a regional conference 
being organized by the U.S. Ambassador in Latvia.  The USG 
would like Poland to act as a regional leader in the Baltics 
and Scandinavia and encourage a dialogue and regional 
projects on nuclear power, electric bridges and 
interconnections, gas storage, pipelines and LNG.  Naimski 
responded that Poland is in discussions with Estonia, Latvia, 
and Lithuania on all levels on wide range of projects. 
Poland would like to participate with Lithuania, Estonia, and 
Latvia on the new Ignalina nuclear power plant but wants the 
project to be built directly by the governments rather than 
private companies.  The percentage ownership of each country 
is not important to the GOP, but is a problem for the others. 
 The GOP believes the new Ignalina plant is a necessary part 
of the electric bridge project between the Balts and Poland, 
and that investment in this project should remain under the 
control of national governments.  President Adamkus is also 
in talks with Sweden about an electric cable from Lithuania 
to Sweden - similar to an existing cable between Sweden and 
Poland.  The GOP doesn't know Estonia and Latvian officials 
as well as the Lithuanians.  Naimski is concerned that the 
Lithuanian and perhaps the Latvian governments do not have 
full control over companies doing business in the energy 
sector.  DAS Bryza noted that the Latvians share that concern 
and some companies are working with Gazprom - not because 
they want to but because they are afraid and feel they have 
no other options.  It would be helpful if the GOP could be a 
leader in the region.  Naimski replied that the Latvians are 
also afraid of the Poles because of their relative sizes. 
The Latvians are interested in regional gas storage, but the 
only possible supply is Russia.  There is only enough gas 
available from Norway for current consumption of the Baltics, 
there is no additional gas for storage.  The GOP and 
Lithuania are creating a working group on gas to look at 
long-term options.  DAS Bryza encouraged Naimski to bring in 
Latvia to assist them in exploring all of their options and 
building a wall around Gazprom's investments. 
 
------- 
Comment 
------- 
¶13.  (C)  Despite press reports questioning the success of 
the Krakow Energy Summit because of the conflicting energy 
meetings in Ashgabat and Astana, the GOP is pleased with the 
results from Krakow.  Not only did the governments agree to 
support the development of an oil pipeline from the Caspian 
to Odessa-Brody and Poland, a major GOP goal, they also 
agreed to a joint working group and further cooperation in 
the energy sector.  An important first step forward is 
achieving a shared strategic vision for moving Caspian energy 
resources to Central Europe, which will encourage development 
in the Caspian and support USG interests in the region.  It 
is noteworthy that the Poles did not play up the anti-Russian 
 
WARSAW 00001147  006.2 OF 006 
 
 
card and agreed with their neighbors that they should focus 
on what the Summit achieved rather than negative rhetoric. 
We should support the Polish, Ukrainian, Lithuanian, 
Azerbaijani, Kazakhstani, and Georgian efforts to continue 
this dialogue, as well as encourage them to reach out to 
their neighbors, especially in the Baltics and Turkmenistan. 
Naimski's efforts to secure gas imports from Norway seem to 
be bearing fruit, despite the doubts of many outside experts. 
 
¶14.  (U)  DAS Bryza cleared this cable after departing post. 
ASHE