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C O N F I D E N T I A L PRAGUE 000005 
 
SIPDIS 
 
E.O. 12958: DECL: 01/06/2020 
TAGS: PGOV PREL ECON ENRG RS AF EZ
SUBJECT: SCENESETTER FOR A/S GORDON: STRATEGIC DIALOGUE IN 
PRAGUE 
 
Classified By: Acting Charge d'Affaires William Lucas, reasons 1.4 (b) 
and (d). 
 
¶1.  (C) Assistant Secretary Gordon:  Your visit to the Czech 
Republic for the Strategic Dialogue comes at an ideal time to 
build on Vice President Biden's October 23 visit, the 
November 6 High Level Defense Group (HLDG), and Under 
Secretary Tauscher's November 16 visit.  While some within 
the Czech Republic were not pleased with President Obama's 
September decision to cancel plans for a missile defense (MD) 
radar site in the Czech Republic, the Czech government 
reacted constructively.  Both sides are working to shape a 
vision for the future of our partnership and to build new 
avenues of cooperation.  The Strategic Dialogue is an 
opportunity for you to flesh out details of what we would 
like to do together. 
 
¶2.  (C) The Czech government and other Czech Atlanticists are 
eager for a meaningful part they can play while we work with 
NATO to develop a new missile defense architecture, and as we 
broaden other aspects of our bilateral security cooperation, 
including in Afghanistan.  Czech Atlanticists' concerns about 
Russia's expanding influence in the region, particularly in 
energy security, drive them to seek tangibly stronger ties 
with the U.S.  The protracted period during which the U.S. 
has been without an ambassador in Prague has bolstered a 
misperception among some Czechs that the new Administration 
places less importance on the bilateral relationship.  At the 
same time, they worry that America's role is diminishing in 
the minds of a younger generation of Czechs. 
 
¶3.  (C) Czech Atlanticists must navigate around others in 
Czech politics and the public who take a more ambivalent view 
of the U.S.  This group, which includes many (but not all) 
within the center-left Social Democrats (CSSD), looks more 
toward Brussels, is more sympathetic to Moscow, and is 
skeptical about Czech involvement in Afghanistan.  Czechs who 
take this approach welcome assurances that the U.S. will work 
multilaterally, including through NATO. 
 
¶4.  (SBU) The Czechs have expressed interest in expanding 
scientific and research and development cooperation.  PM 
Fischer has stated that the Czechs would like this not just 
in the military sphere, but in a broader range of fields. 
The Czechs are appreciative of the upcoming establishment in 
Embassy Prague of the Office of Naval Research (ONR).  The 
Czechs would also like to conclude the Research, Development, 
Testing and Evaluation (RDTE) Agreement; both sides are 
working to finalize legal details. 
 
A Capable Interim Government 
---------------------------- 
 
¶5.  (C) After Prime Minister Mirek Topolanek's government 
fell in March, President Vaclav Klaus appointed an interim 
caretaker government to lead until early elections.  The 
caretaker government, led by former Director of the Czech 
Statistical Office Jan Fischer, assumed leadership in May and 
has a limited mandate until early elections, which were 
supposed to occur in the first half of October.  A decision 
by the Constitutional Court scuttled the October elections, 
and a subsequent agreement by the dominant parties in 
Parliament to hold early elections in November fell apart. 
Now the parliamentary elections will most likely occur in May 
¶2010.  In the meantime, Fischer governs without his own 
parliamentary base, relying heavily on the agreement of the 
country's two leading parties, the center-left CSSD, led by 
Jiri Paroubek, and center-right Civic Democrats (ODS), led by 
ex-PM Topolanek. 
 
¶6.  (C) Despite its limited mandate, PM Fischer's government 
has proven effective and adept, and enjoys strong public 
support.  Swift passage of the foreign military deployment 
bill and an economic austerity package proved Fischer's 
political acumen and bolstered his credibility with the 
public.  His administration has proven capable of making 
tough decisions, although last minute amendments to the 2010 
state budget by the CSSD, which will almost certainly 
increase 2009's record deficit, showed that Fischer is still 
politically beholden to the major parties. 
 
¶7.  (C) The Czech government has remained a steady supporter 
of U.S. and NATO priorities.  Indeed, many key current and 
former Czech leaders would prefer to see more USG engagement 
in Central Europe, and expressed this in a widely circulated 
Open Letter to President Obama in July 2009.  Defense 
Minister Martin Bartak remains fully committed to 
strengthening cooperation with the United States and 
supporting the effort in Afghanistan.  However, many in the 
CSSD, including Paroubek, do not share Bartak's enthusiasm 
for the Afghan mission. 
 
 
Economy 
------- 
 
¶8.  (SBU) The small, open, export-oriented Czech economy is 
now struggling with the effects of the global economic 
downturn.  Although there are signs that the worst of the 
economic slowdown may be over, the economy is expected to 
contract by roughly four to five percent for all of 2009. 
While the IMF expects the Czech economy to grow by 1.3 
percent in 2010, the Czech Ministry of Finance is forecasting 
growth of only 0.8 percent, partly due to recently passed tax 
increases designed to control the ballooning budget deficit. 
The Czech budget deficit was only 1.2 percent of GDP in 2008 
but is expected to exceed 5 percent for the next several 
years, prompting significant cuts in discretionary spending, 
and postponing any chance for rapid adoption of the Euro. 
All ministries have taken significant budget cuts and the 
defense budget has shrunk to less than 1.4 percent of GDP, 
though the MoD is hopeful that its 2011 budget will be more 
generous. 
 
Czech Cooperation in Afghanistan 
-------------------------------- 
 
¶9.  (SBU) The Czechs have approximately 500 military and 
civilian officials in Afghanistan.  The provincial 
reconstruction team (PRT) in Logar Province, launched in 
March 2008, is the flagship of Czech involvement.  Based at 
FOB Shank in Pole-Alam, the Czech PRT grew in strength in 
early 2009 from about 210 to 275 and now includes four 
infantry platoons.  Despite the security challenges (Czechs 
suffered three KIA in the first months of operation), the 
Czech PRT got off to a fast start and generally received high 
marks for its approach to reconstruction and partnerships 
with local government and tribal leaders.  At the heart of 
the Czech PRT is its group of a dozen civilian experts who 
possess specific skills relevant to Logar Province 
(agriculture, aquifer management, public health, education, 
etc.).  Several U.S. specialists (USAID and State Department 
3161 employees) have joined the Logar PRT in the current 
rotation. 
 
¶10.  (C) The Czechs have just deployed a 100-man aviation 
detachment with 3 Mi-17 helicopters to FOB Sharana in Paktika 
Province.  The helicopters began to arrive in Afghanistan 
this month and will provide direct support to ISAF missions 
in country.  In addition to an Operational Mentoring and 
Liaison Team (OMLT) providing helicopter training, the Czechs 
have decided to deploy a ground force OMLT in September of 
¶2010.  While the requirements for the OMLT are still being 
developed with NATO, the Czechs are moving forward with 
activating and training the required forces.  The Czechs have 
requested USG assistance to equip and train the unit.   The 
Czech special forces detachment, which had been deployed in 
its entirety for some time, departed Afghanistan in December 
2009, but is scheduled to return in 2011. 
 
Energy Security 
--------------- 
 
¶11.  (C) The Czechs are very concerned about Central and 
Eastern Europe's energy dependence on Russia.  The Czechs 
themselves are dependent on Russia for 100 percent of their 
nuclear fuel, 70 percent of their natural gas and two-thirds 
of their oil.  The Czechs experienced significant disruptions 
to deliveries of Russian oil in 2008, ostensibly for 
technical reasons, that began shortly after the signing of 
the U.S.-Czech Ballistic Missile Defense Agreement.  In 
January 2009, Russia cut off all gas deliveries through 
Ukraine to Europe, including to the Czech Republic, due to a 
dispute with Ukraine. 
 
¶12.  (C) As a result, the Czechs are strong advocates within 
the EU for greater interconnectivity of internal EU gas and 
electricity networks and increased diversification of 
suppliers and routes.  They are strong supporters of the 
Nabucco pipeline and hosted an EU-Southern Corridor Summit in 
May. 
 
¶13.  (C) They are also planning to significantly increase the 
production of domestic nuclear energy, and the semi-state 
Czech electricity company CEZ has released a tender for up to 
five new nuclear power stations for which Westinghouse is a 
leading contender.  Your visit is another important 
opportunity to encourage the Czech government to support 
Westinghouse's bid as a way to cement closer U.S.-Czech ties 
and help the Czech Republic increase its energy security by 
further diversifying its energy sources and suppliers.  A 
Westinghouse win could be worth as much as USD 27.5 billion 
and create 9,000 new U.S. jobs. 
 
 
Relations with Russia 
--------------------- 
 
¶14.  (C) The Czechs have a multi-faceted relationship with 
Russia which varies according to the issue, as well as the 
fora involved (whether NATO, the EU, or on a bilateral 
basis).  As the July 16 open letter to President Obama from 
Central European leaders illustrates, many in this region 
retain deeply-rooted suspicions of Russian aims.  Yet this is 
not a view shared by all Czechs, some of whom simply view 
Russia with a level of ambivalence and skepticism (with which 
they treat all superpowers). 
 
¶15.  (C) When it comes to security issues, almost all Czech 
politicians, except for the unrepentant Communists, continue 
to view NATO and (to a lesser extent) EU membership as their 
first line of defense and/or collective action.  Many Czechs 
also pay close attention to the country's (and Europe's) 
reliance on Russian energy supplies.  The conflict in Georgia 
in summer 2008, the gas crisis this past winter, and 
President Putin,s recent comments on START have all 
sharpened Czech suspicions of Russia's intentions toward its 
neighbors.  Nonetheless, there are modest (but growing) trade 
ties between Russia and the Czech Republic and all major 
Czech political parties are interested in what they see as 
the potential of Russian markets. 
 
Eastern Partnership 
------------------- 
 
¶16.  (SBU) The Czechs championed the cause of advancing the 
EU's relationship with its Eastern Partners (Armenia, 
Azerbaijan, Belarus, Georgia, Moldova and Ukraine) and held 
the EU's first ever Eastern Partnership Summit in May 2009. 
The Czechs have been keen to foster reform in this region and 
increase exposure to Western ideals.  During the Czech EU 
Presidency last year, the EU committed 600M Euros (through 
2013) to advance this partnership, focusing on accelerating 
the political association and economic integration of these 
partners, while also offering the possibility of visa 
liberalization.  The EU, and the Czechs in particular, would 
like to see the U.S. become more involved in promoting these 
reform principles with Eastern Partners as well.  We are 
scheduled to discuss our possible engagement as a "friend" of 
this partnership at an U.S.-EU meeting on January 25 in 
Brussels. 
 
Western Balkans 
--------------- 
 
¶17.  (SBU) The Czech Republic shares our goals of 
strengthening stability and democracy in the Balkans and 
supports the region's integration with NATO and the EU. 
Indeed, the Balkans (with distinct goals for each of the 
individual nations in the region) were one of the Czech EU 
Presidency's top priorities.  However, the Czechs were not 
able to accomplish as much as they had hoped, especially with 
respect to advancing EU enlargement issues, given the 
challenges within the Western Balkan countries themselves and 
opposition within the EU.  The Czechs have very strong 
relations with most of the Balkan countries, although 
relations with Serbia suffered somewhat following Prague's 
recognition of Kosovo's independence in May 2008.  It is also 
worth noting that Stefan Fule, the former Czech Ambassador to 
NATO and Minister for European Affairs, was just appointed EU 
Commissioner for European Enlargement.  There are currently 
just over 400 Czech troops serving in KFOR in Kosovo. 
 
Middle East 
----------- 
 
¶18.  (SBU) The Czechs generally share much of our perspective 
on the Middle East, although they lack our depth of 
engagement or experience in the region.  In November, the 
Czech Republic was one of 16 nations that voted with the U.S. 
and Israel against U.N. adoption of the Goldstone Report. 
The Czechs share our perspective on Iran, and Prague-based 
Radio Free Europe's Farsi broadcasts are an important source 
of uncensored news for the Iranian people.  The Iranian 
government bitterly resents the broadcasts.  For more than 
ten years the Iranians have refused to upgrade bilateral 
relations from the Charge level. 
Lucas