Fact box: Population: 38 million (9 in Europe, after Ukraine and before Romania)

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Analyst Briefing – Poland



  • Population: 38 million (9 in Europe, after Ukraine and before Romania)

  • GDP (2009): $430 billion (greater than Sweden but less than Belgium)

  • Troops in Afghanistan: 2.600

  • Troops in Iraq (maximum figure, the troops were withdrawn in 2008): 2,400


Depends who you ask. Poland is an extremely split country, mainly between European oriented West and conservative East. Eastern Poles are more socially conservative, agrarian and anti-Russian. This is part of Poland that has existed under Russian Empire for most of its modern history. But unlike the Russophile Ukrainians, they do not see that period as a positive. They also want Poland to keep socialist economic system, especially a robust welfare state and are therefore hostile to privatizations of state enterprises and EU accession. They are represented strongly by the Law and Justice party, PiS.

Western Poland thinks that Poland can recreate a powerful sphere of influence in Central Europe by integrating economically in Europe, pushing Warsaw to become a financial capital of Central Europe. In their mind, Poland can maintain independence between Germany and Russia by bettering its economy and becoming an important EU member state with power of its own and a sphere of influence amongst the Visegrad 4 (Poland, Czech Republic, Slovakia and Hungary). In a way, this side of Poland is even more nationalistic as their program is about recreating the sphere of influence Poland had in the 17th Century.

Both sides have cooled off on Polish alliance with the U.S., although they both want to pursue it they do not see it as a silver bullet solution to the country’s strategic problems. most Poles do not differentiate between their relationship with the U.S. now and the relationship with France-UK in the interwar era. For Poles, there are no sure thing alliances. This was only further reinforced by Obama’s decision on the Bush-era BMD program.


All Poles see Poland as a former great European power. They will remind you that it was King Sobieski who saved Vienna – and thus Christendom – from the Turks on September 11, 1683 in the largest cavalry charge in history (until Desert Storm I). As thanks for saving Christianity, Austria, Prussia and Russia partitioned Poland in successive periods less than 100 years after Sobieski’s charge. A powerful, and independent, Poland is therefore a key to recreating its influence in the Baltic and Central European regions.

Bottom line is that Poles do not trust anyone, especially their neighbors. However, unlike Central/Eastern European states used to subservience (think Czech Republic or Bulgaria), Poles look at the period of their history when Poland stretched from the Baltic to (nearly) the Black Sea as a reality. In Polish minds, Smolensk and Kyiv are Polish cities, and Baltic people are bastardized Poles who have illusions of ethnic difference. Poles will tell you that Lithuanians invented their language during the Romantic period of the 19th Century.



Prime Minister: Donald Tusk

Prime Minister since 2007, Tusk is understood to be a supreme political organizer, not an ideological politician. He holds together Civic Platform (in Polish: Platforma Obywatelska – PO) with an iron grip. It is important to understand that PO is a conglomeration of minor parties and political splinter groups that unified in 2001. This means that it is not a completely ideologically coherent. It requires Tusk to balance a number of different viewpoints in his cabinet, from old school Polish “Solidarity” conservatism (represented by current President Bronislaw Komorowski) and more “modern”, centrist pro-EU sentiments, especially liberal on economy. Where does Tusk fall himself? It is not clear. He definitely is more pro-EU than most politicians in Poland, but not to a point that he is willing to make Warsaw subservient. He is pro-EU to the extent that he feels the EU can be vehicle of Polish rise to prominence. Tusk considered running for President in 2010, but chose to remain the PM so that he can hold the PO together from his post as Chairman of the Party and PM. This was a key strategic move by Tusk, since it means he gives greater credence to his role as the organizer than the titular post of the President. Tusk has run for President against Lech Kaczynski in 2005 and lost handily (Kaczynski got 1.2 million more votes). This may have also influenced his decision to not challenge Kaczynski again.

Has a very good relationship with Vladimir Putin, he also has good relationship with Angela Merkel. Has managed to build strong relations with the two leaders despite considerable problems that his government has had with, especially early in his term.

Ethnically he is a Kashubian, Slavs who inhabited Pomerania region between Poland and Germany. They have been considered German by the Germans and Poles by the Polish. They were screwed over by both at various periods in history. Only around 50,000 remain in Poland. Poles consider them to be collaborators with the Nazis, even though that is not strictly true, but the implication is important to keep in mind. Most conservative nationalist Poles will tell you that they think Tusk is a “German man”. In an interview with Haaretz Tusk compared the Kashubians to Jews, saying that they were “like the Jews, people who were born and live in border areas and were suspected by the Nazis and by the Communists of being disloyal”. Note that he is fluent in German and speaks it far better than English. All this contributes to a very interesting perception of Tusk among Poles and why Tusk probably figured he needed someone with more “earthy Polish” qualities to run against PiS candidate in 2010, which is why he settled on Komorowski.

He is not knee-jerk pro-U.S politician by any means. He campaigned in 2007 against the BMD and later took a rather skeptical view towards it. He relented in 2008 to accept it as a policy, but was not overly concerned when Obama decided to “scrap” the Bush-era version of the BMD. He also withdrew Polish troops from Iraq in 2008 after getting elected.

Final point, Lech Walesa is considered a Tusk ally. Tusk has defended Walesa and demanded that he be cleared of any potential charges of collaboration with Soviets. Tusk sees Walesa as an important symbolic asset. Whoever has Walesa on their side can claim to be genuine Polish nationalist.

President: Bronislaw Komorowski

Bronislaw Komorowski has deep roots in the Polish dissident movements, he is old enough to have participated in opposition to the Communist rule. He comes from Polish aristocracy that held land in what is now Lithuania. He has often told Lithuanians that he considers himself a Lithuanian. He is from a more socially conservative line of PO, but is loyal to Tusk. He was Marshall of the Sejm from 2007 to 2010. He has the requisite “earthy” Conservatism that made him the perfect candidate against Jaroslaw Kaczynski.

In previous governments he was the Minister of Defense (2000-2001). He was also instrumental in the early 1990s in setting up the WSI – (Military Information Service, formerly the Communist Military Intelligence that essentially ran the country from 1981 to 1989 under Jaruzelski’s Dictatorship). He did so in his role as a vice civil minister of defense from 1990 to 1993. WSI, even during early 2000s, had inordinate power in politics and business. Military intelligence was very heavily involved in state owned enterprises and especially construction. Some of its siloviki still have those links in business, particularly construction.

Komoowski was the only member of either PO or PiS to have voted against the dissolution of WSI in 2006. Why? (Following is definitely RUMINT from PiS sources of mine, so careful how you use it): There are rumors that he had killed someone during a hunting accident in the 1980s or that he had out-of-wedlock children – a no-no in super Catholic Poland – and that his close links with WSI allowed him to hush it up. However, it is far more likely that his involvement with one of the WSI controlled companies he was a shareholder in some company that the organization established. Overall, he is rumored to have been “sucked-in” by the very WSI he helped reform in the early 1990s and that he became their main political protector, gaining considerable financial benefits in return.

Note that the PiS government, when WSI was disbanded in 2006, argued that many military intelligence operatives had even until 2006 maintained their links with former Moscow based bosses. This was in part one of the reasons why PiS pushed for WSI dissolution.

Foreign Minister: Radoslaw Sikorski

He was involved in Solidarity as student and fled the country with the imposition of martial law, getting UK citizenship via asylum. Drinking buddy at Oxford of current UK PM David Cameron. From 1990 onwards he was a financial adviser to Rupert Murdoch on investments in Poland. He was resident fellow at American Enterprise Institute from 2002 to 2005, and also Minister of Defense of Poland from 2005 onwards, only to resign over conflicts with PM Jaroslaw Kaczynski. He left PiS at that time and joined Tusk’s PO.

He is considered the most pro-American of Tusk’s Cabinet members, was considered a neo-con at AEI. PiS members say he speaks English better than Polish. He is married to the American journalist Anne Applebaum. Rumors by the conservative right are also that he was an MI6 spy after Oxford, since his journalism took him to Afghanistan in the mid 1980s. He is a clear supporter of BMD (both under PiS and currently) and is considered rabidly anti-Russian by Lauren’s Kremlin sources.

Deputy Prime Minister / Econ Minister: Waldemar Pawlak

Former PM of Poland (1992 and from 1993-1995) he is the Chairman of the Polish People’s Party (PSL in Polish). He is a key parliamentary ally of Tusk. However, his PSL is currently not projected to even get into the Sejm in the next elections. His performance during Presidential elections in 2010 was also disastrous (only got 1.75% of votes).

The PSL is an agrarian party, so Pawlak is also of the more conservative members of the government. He holds the deputy PM post because his PSL – even though the smallest party in Sejm – gives Tusk his majority to govern.

He is an instrumental figure at this moment because as Econ minister he is in charge of the negotiations with Russia for the new natural gas deal. He has during these negotiations stressed that Russian-Polish relations are improving and that the European Commission is meddling in the negotiations process.

He has also engaged in sniping with Sikorski. Apparently it was the foreign ministry that forwarded the proposed Russian-Polish natural gas deal to Brussels that brought EU involvement in the first place. There is therefore an ongoing battle between economic and foreign ministry.

PiS people will tell you that he represents the “Russian agricultural lobby” in Poland. The farmers want to retain export links to nearby Russia and Pawlak is therefore seen as probably the most pro-Russian member of the government, despite his Polish nationalism. Certainly his statements and rhetoric during the natural gas negotiations could be considered as pro-Russian. He has staked his political future on successfully negotiating the natural gas deal.

He has according to our Next Hundred Years publisher been interviewed with George’s book in the background of his office.

Defense Minister: Bogdan Klich

One of the first Polish representatives at the European Parliament. Arrested during the Polish military dictatorship in 1981, has dissident roots. He is considered to be pro-US as well, has stood in opposition to Tusk on some issues, such as how long Polish troops would serve in Afghanistan (wants them to stay until 2013).

However, he was also instrumental in talks with Robert Gates recently when he brought a wish-list that the U.S. simply cannot fulfill. This was in our analysis a move to put U.S. commitment to Poland to the test (see STRATFOR analysis on the issue attached below).

He is considered by PiS and government’s opposition as a loyal Tuskiate. He has no real military experience and is considered to be ignorant of military issues. Has been in charge of defense reforms to create a professional military, which has not been going very well due to lack of funding.

PiS (opposition) Chairman: Jaroslaw Kaczynski

Brother of former President Lech Kaczynski who died in the Presidential plane crash. He was the PM from 2006 to 2007. He was PiS candidate for presidential elections in 2010 – stepped in for his dead brother -- and did surprisingly well against Komorowski, campaigning as a centrist.

However, he is not centrist. He is considered to be even more conservative than his late-brother. He is ruling PiS with an iron fist. He is like Tusk considered to be a supreme political organizer, even if his image as a politician is rough around the edges.

He has taken his defeat in the Presidential elections as a sign that “centrism” is not the way to go for PiS. He has therefore turned on Centrists in PiS, Pawel Poncyliusz and Joanna Kluzik-Rostowska – who attempted to run his campaign in a Centrist manner -- and is expected to push for a greater ideological coherence of PiS ahead of the 2011 parliamentary elections (expected in October).

PiS will always do well in parliament. It represents the population in Poland that our confederation partner has called “losers of the transition”. These people do not like the EU, do not like the reforms that the EU has forced on Poland and are very much suspicious of both Russia and Germany.

Central Bank President: Marek Belka

Former prime minister of Poland (2004-2005) and former head of IMF’s European Department. He was appointed by Komorowski because the previous Central Bank president died in the Smolensk plane disaster. He is more pro euro adoption than the last National Bank President who was a PiS appointee, however he is also willing to go slow towards euro in light of Poland’s solid economic performance.


CIVIC PLATFORM (Platforma Obywatelska – PO)

  • Socially conservative (there are no socially liberal parties, PO comes close, but it is still considered socially conservative by European standards – anti-abortion, anti-stem cell, etc.)

  • Pro-EU, sees Polish EU membership as an opportunity to make Poland a leading European power.

  • Pragmatic towards Russia, Tusk has been working on improving relations since day-1 in power.

  • Pragmatic towards Germany, Tusk has defused some very touchy issues – such as the status of Germans deported from Poland post-WWII.

  • Looking to privatize a number of state owned enterprises.

  • In favor of euro accession, but willing to see where the current Polish mini economic miracle takes Warsaw with the Zloty.

  • Without any real challenger on its side of the political spectrum.

LAW AND JUSTICE (Prawo I Sprawiedliwosc – PiS)

  • Socially conservative.

  • Pro EU to a point. Sees EU as a useful tool against Russia, but not willing to commit Warsaw to EU because it opens it to competition. Against a “federal” EU and against Franco-German axis in Europe.

  • Anti-market reforms, committed to Polish social welfare state and believes in state led economy.

  • Prominently anti-Russian, anti-German.

  • Sees U.S. alliance as far more of a necessary foreign policy than PO.

  • Rose to prominence in 2005 as an anti-corruption party that sought to also uncover Communist era collaborators (referred to as “lustration”). Lech Kaczynski is the former mayor of Warsaw and former Justice Minister and was its main public figure.

  • Many of its top politicians died in the Presidential plane crash near Smolensk.

DEMOCRATIC LEFT ALLIANCE (Sojusz Lewicy Demokratyczne -- SLD)

  • Roots in the former communist regime.

  • Third largest party in the Sejm.

  • Ruled Poland in the early 2000s, PM Leszek Miller brought it into the EU.

  • Destroyed by corruption scandals – Rwing-gate – in 2004. It has not recovered since. Fiscally left electorate has apparently swung to PiS, while socially/politically liberal urbanites have swung to PO.

POLISH PEOPLE’S PARTY (Polskie Stronnictwo Ludowe, PSL)

  • Sometimes referred to as Polish Peasants Party, socially conservative agrarian party. Waldemar Pawlak is the leader. Currently the smallest of the four parties in Sejm, its polling is showing that it won’t even cross the threshold in 2011.

  • It largely shares geographic constituency of PiS, but is more connected to farmers in the East, rather than urbanite conservatives of PiS.

  • Has been stalling privatization efforts of PO as part of the governing coalition, it believes in state intervention.


  • Was between 2005 and 2007 member of the PiS conservative government. Did well in 2005 elections, did not pass 5 percent threshold in 2007 – argument being that PiS has taken their votes.

  • Very socially conservative, left wing populist.

  • Sexual scandal in 2006 – party leaders awarding government posts for sexual favors – has diminished its popularity with its conservative electorate.


  • It was part of PiS led governing coalition between 2005 and 2007.

  • Right wing, ultra socially conservative party.

  • Considered anti-Semitic, made a name for itself by rejecting Polish participation in the Jedwabne pogrom – murder of 300 Polish Jews by Poles in German occupied Poland.

  • Was one of the major parties in mid-2000, but has also lost votes to PiS in last few years.


April 10, 2010 -- Smolensk Air Disaster

Polish Presidential plane crash near Smolensk. Along with the President, a lot of other government members were also killed including president of National Bank and one of the left-wing candidates for Presidential elections. PiS was also decimated, with most of its main experienced politicians on the flight.

Opened an opportunity for the Russian “charm offensive” which was going on already as STRATFOR has argued and led to early presidential elections during which PO capitalized on Lech Kaczynski’s death to take over Polish Presidency.

The actual investigation into the crash has been controversial, with Poles accusing the Russians of delaying handing over all documents. The Russians have only recently given Poles all the documents. Polish investigative committee will have the results of its investigation ready by January 2011.

June 23, 2010 – Weimar Triangle Meeting

Russia participated for the first time in the meeting of French, German and Polish foreign ministers – known as the Weimar Triangle meeting. This was a critical meeting at which Germany proposed to France and Poland the Russian-EU Security and Political Committee, a new forum for Russia and the EU to discuss security issues. Transdniestria was put up as a potential example of cooperation.

July 4, 2010 (second round) – Polish Presidential Elections

Bronislaw Komorowski won the early elections held because of the death of Lech Kaczynski (would have been held later in 2010). The main issues that were dealt with during the elections were government’s performance during the 2010 spring flooding – one of the worst in Polish recent history – response of the government to the global financial crisis – mainly PO and PiS were competing to see who would take the credit for how Poland had stayed away from the crisis – and the government’s handling of the Smolensk disaster.

September 2, 2010 – Visit by Sergei Lavrov to Poland

Lavrov’s visit was an important way for Poland and Russia to display improving relations. He talked with Sikorski and Tusk, discussing everything from the ongoing Smolensk air disaster investigation, Russian bid to get on the EU visa-free list, Kaliningrad, the Russian-Polish commission to investigate troubled historical events (important part of the ongoing effort by Moscow to reduce tensions over issues like Katyn) and the natural gas deal negotiations.


End of November – Medvedev comes to Poland

Important visit that is supposed to coincide with successful end of Polish-Russian natural gas negotiations and also to follow the NATO-Russia council meeting after the NATO Lisbon summit on November 19-20.

November 21, 2010 – Local Elections

The local elections are always important in Poland because they determine a number of mayorships and key local positions. A lot of the local administrations determine how EU money – which Poland gets a lot of – is distributed. Furthermore, this will be a key event to understand where PiS stands. This election comes a year before the Parliamentary elections, so it will be a key test for the two parties to see how they do.

June 1, 2011 – Polish EU Presidency

Polish presidency will come after the Hungarian, which makes 2011 an important year for Central European EU Presidencies. Poland intends to make the following issues central during its Presidency:

  • The EU budgetary period 2014-2020. France and Germany want to reduce the number of funds that goes to new member states. Poland is going to use its presidency to set the budget debate since 2012 is going to be an important year for negotiations.

  • EU defense initiative. Poland intends to ally with France in boosting EU defense capabilities. The details are sketchy, but Warsaw wants the EU to have more teeth in military affairs and it wants to be at the forefront of that evolution. This was added to its program right after Obama pulled out the Bush era BMD in September 2009.

  • EU Energy Integration. Poland intends to get EU to fund even more energy initiatives, intention is to work close with Sweden here.

October 2011 – Polish Parliamentary Elections

Key moment for Tusk and his party. If they can hold off PiS at this point, it means 4 years of Tusk dominated Poland in 2010s baring crises and controversies.


POLAND/US Relations:

Poland and the U.S. generally have a good relationship. The relationship has “matured”, as Sikorski pointed out recently, indicating that it is no longer as overwhelmingly Atlanticist in nature as during PiS leadership. Key issues:

  • Patriot missile deployments. This is not permanent deployment. It is a single, non-armed, battery that will be rotated on 3 month deployments until May 2011.

  • BMD. Poland is expected to be a host for the advanced ground based SM-3 interceptors by 2018.

  • Poland is the only EU member state, along with Bulgarians and Romanians, that needs visas for travel to the U.S. This is a very embarrassing issue for all Polish governments, since the alliance with the U.S. – including deployments in Iraq and Afghanistan – were supposed to bring benefits, such as visa-free travel to the U.S.

  • Poland has made it clear during the negotiations for the NATO Strategic Concept that it does not want Russia to be part of the NATO BMD. Poland has argued that the U.S. should not try to involve Russia in the negotiations over the BMD.

  • Poland is committed to the mission to Afghanistan, but the issue has thus far been how long. Defense minister Klich has said until 2013, but we have also had other government officials say not beyond 2012.

POLAND/EU Relations:

The current Polish government is considered pro-EU. Tusk and his cabinet see the EU as a vehicle through which Poland can again become a major EU member state. Key issues in the relationship:

  • The upcoming 2014-2020 EU budget period. Poland wants to maintain if not increase the amount of money it gets from the EU. Germany and France don’t want to give that to Poland or any other new member states. This is going to be a key issue of contention coming up.

  • Poland wants the EU to recognize its efforts to reform its pension system, which cost a lot of state funds, and therefore give Poland a pass on part of its state debt. This is something that Warsaw is fighting for right now with the Commission. The Commission is not budging.

  • Poland is opposed to the German-French agreement on budget deficit rules. Warsaw is not so concerned about the particulars of the deal, it is more concerned that Paris and Berlin decided on it behind closed doors.

  • Poland wants the EU to become more committed to coordinating military affairs. It has sought French help on this.


Tusk has improved relations with Berlin since coming to office. He has especially managed to diffuse the key point of contention between Warsaw and Berlin, the issue of German expellees. The issue rose to prominence when prominent CDU politician and president of the Federation of Expellees, Erika Steinbach began criticizing Poland for not recognizing expellee rights. When she was appointed to the board of the German Center against Expulsions – in February 2009 -- the Poles went up in arms. This is a serious emotional issue between the two countries. Tusk has largely been able to diffuse it by ignoring it, but it also appears that Merkel has helped by telling Steinbach to keep quiet.

Poland is wary of the developing Russian-German relationship. The negotiations for the new natural gas deal with Russia, for example, were so cordial between Warsaw and Moscow because Poland feels that the new Nordstream pipeline will allow Russia to avoid Poland and ship natural gas directly to Germany. Poland therefore moved to guarantee that it would receive Russian gas well into the future.

Nonetheless, Tusk has also moved Poland significantly towards Germany and France by reinstituting the Weimar Triangle meeting concept. Warsaw does not want to be isolated as it was during PiS rule. Tusk has therefore made it a point to have a very good relationship with Merkel. He has also brought Poland on board with German initiated eurozone rescue fund – the European Financial Stability Fund (EFSF) – even though Poland is not in the eurozone.

An important point about German-Polish relations is that Germany has become the overwhelming largest investor in the country. It also invests immensely in Polish think tanks and political organizations. During my trip to Poland last year, it was obvious that most think tanks and policy institutes were receiving money from Germany, whereas in the past it was the U.S. that invested in Poland. Only my PiS contacts and their policy institutes did not receive funding from Germany. The U.S. has essentially had a “mission accomplished” attitude towards Central Europe since it got into NATO and the EU. There has been very little effort to follow that up with investment in the region, either business or intellectual/policy oriented. Germans have wholeheartedly filled the void.


Poland and Sweden have very good relations. They feel that they are both middle powers, extremely suspicious of Russia and opposed to German-French domination of EU foreign policy. They cooperated on setting up the Eastern Partnership agenda, purpose of which is to slowly start weaning countries like Belarus and Ukraine from the Russian sphere of influence. Although Polish enthusiasm for Eastern Partnership has soured, they are still very much committed towards their relationship with Sweden. Many Poles see Sweden as a model to follow, particularly its strong defense industry and military independence.

POLAND/RUSSIA Relations/Tensions:

Since Tusk has come to power, the relations between Warsaw and Moscow have significantly improved. In one of his first acts in the office, Tusk managed to get Moscow to reverse its ban on Polish meat imports, a key issue for Warsaw and especially for Deputy Prime Minister Pawlak whose party base is agrarian.

Putin and Tusk have a good personal relationship. The relations between the two countries started to turn when Putin made a visit to Gdansk in September 2009 to commemorate the 70 years since the start of WWII for Poland. Since then, Russia has also made a point to recognize Soviet crimes in Katyn, with Putin attending a Tusk ceremony in Katyn forest a few days before Kaczynski’s plane crashed there. The crash, as is well noted, then led to a considerable charm offensive.

Russia has also relatively muted its opposition to the Patriot missile deployment in Poland, and has sought to treat Warsaw as one of the big European states, attending the Weimar meeting during which Germany presented the Berlin-Moscow proposal for a EU-Russia Political and Security Committee to France and Poland.

Both countries have also concluded a new natural gas agreement that enhances the amount of natural gas Poland gets from Russia, deal that will last until 2037. The deal was negotiated relatively calmly and even though it was not concluded in time – by Oct. 20 – Russia made sure that it kept pumping gas to Russia regardless.

Poland has also stopped supporting Ukrainian and Georgian EU/NATO membership, at least vocally. They have also muted their participation in Eastern Partnership, which used to be the EU’s main thrust eastward. Warsaw is also pushing for a NATO BMD system that minimizes Russian participation, which goes against German and French demand that Russia be brought to the table on this issue.

POLAND/LITHUANIA Relations/Tensions:

Poland sees Lithuanians as long lost cousins, whereas Lithuanians are as paranoid about Polish cultural domination as about Russian geopolitical domination. Polish minority in Lithuania wants to use Polish letters in Lithuanian passports and Vilnius has not allowed that. This irks Poles. Poles don’t really consider Lithuanians to be a true ethnic group, but rather as Poles who were turned into Lithuanians in the 19th Century by nationalist Lithuanian activist. Furthermore, the Poles view the Lithuanian-Polish Commonwealth as something that was beneficial for both groups – and will therefore refer fondly to it in joint meetings -- whereas the Lithuanians remember it less fondly, as a period of domination by Polish landed elites. These attitudes have soured the relations between the two. The main issue now is the PKN Orlen ownership of the large Mazeikiu refinery in Lithuania. Poland believes that it did Lithuania a favor by purchasing the refinery and thus preventing Russia from owning a key piece of Lithuanian infrastructure. However, the Lithuanians have refused to give PKN Orlen access to a key oil import terminal, nor to fix a strategic piece of railroad that leads from the refinery to Latvia. PKN Orlen is losing a ton of money and has threatened to sell, even to Russians. This is a hot topic issue right now and one that has destroyed relations between Lithuania and Poland. It came to a point where Deputy Prime Minister Pawlak called the Lithuanian relations Poland’s worst relations with a European country.


The following is a list of major issues ongoing right now in Poland that you should be aware of in case they are brought up in your meetings. The collection of non-STRATFOR (and some STRATFOR) reading below is focused so as to inform about these issues.


Poland is in the midst of an IPO craze. The state intends to sell a 64 percent stake in the Warsaw Stock Exchange (WSE) as well as other state owned enterprises in a bid to raise $8.8 billion to cover the budget deficit gap. The purpose of the IPOs is threefold. First is obviously to raise cash. Second, is to wean the state off of its reliance on state enterprises and allow PO to therefore vet any old political-business links that they were not privy to setting up in the 1990s. Tusk is a newcomer and he is using privatizations to weed out potential old establishment links between business and government. Third, to illustrate that Poland is an attractive emerging market location and that it is as committed as ever to free market capitalism.

I think this is an interesting story geopolitically for two reasons. First, it is interesting who buys the IPOs. That is difficult to discern since the information is not public, plus many investment houses intend to buy IPOs and then resell them to customers. But this could help us gauge the level of interest in Polish businesses by Germany, U.S. and Russia. Second, Poland is choosing IPOs instead of auction style privatization to illustrate its commitment to free market principles at the time when most Europeans are locking down into a much more state driven capitalist model. This is Warsaw trying to show that it is not worried about the recession – which never hit Poland in the first place – and going forward with its decades long commitment to presenting itself as an investor friendly locale (it was Poland that invented “shock therapy” reforms, not Russia, under deputy prime minister / finance minister Leszek Balcerowicz in 1989.


Poland has not experienced a recession in either 2008 (grew 5 percent) or 2009 (grew 1.7 percent) and it is expected to grow 3.3 percent in 2010 (only Germany will have higher growth in the EU at 3.4 percent). The short argument for why this has happened is because Poland is a relatively “closed economy”. It has a domestic market of nearly 40 million consumers – no other Central European state comes even close – and exports account for 40 percent of GDP (in Czech, Slovakia and Hungary it is over 70 percent). Bottom line is that Poland is not as reliant on Germany and Western Europe for growth. It can engender growth via its own internal market.

Furthermore, when the Zlotty crashed initially in the early days of the crisis – during the Central European crisis in late 2008 / early 2009 – Polish consumers were not really affected. Even though the Zloty fell more than the forint, leu or any other Central European currency, Polish consumers had not been dependant on foreign currency for lending. Only about 30 percent of all household and 25 percent of all corporate loans were foreign denominated. This even though Polish banking system is 70 percent foreign owned. Poland had very strong capital controls that prevented overreliance on foreign lending.

Bottom line is that the Zloty crash did not really affect the economy in the early going and later Polish isolation allowed it to avoid following the eurozone down the tubes. Furthermore, as the euro started weakening, investors saw Poland as a safe haven and a bright spot among the emerging market economies. This has now allowed the government to try to capitalize on the “story” that Poland avoided the recession by doing privatization via IPOs. You will certainly hear many stories of how Poland has avoided the recession and how well its economy is doing.

However, unemployment is at 12 percent and Tusk’s government is seen imposing austerity measures to trim the budget deficit at the expense of the “common people”. This is a story that PiS intends to use to get back to power.

We should also note that Poland is not in any hurry to adopt the euro. By EU law Poland is supposed to eventually adopt the euro, however its performance during the recession and since has convinced even the pro-euro Tusk to consider waiting a bit on euro entry (see the WSJ blog entry on the “vagueness” of Polish gov’t stance towards the euro). The government has set out the Strategic Guidelines for National Euro changeover this week, but it intends to present details of how the actual changeover would happen only at the end of 2011. This illustrates that Poland under Tusk is committed to a wait and see approach on the euro and has realized that there are benefits to staying out of the eurozone after the 2010 sovereign debt crisis.


The upcoming WSE IPO is a very prominent theme in Warsaw today. Poles see the WSE as a potential NYSE of Central Europe. Our confederation partners have told me that NYSE is supposedly interested in getting in on the IPO. German Deutsche Borse was interested in getting it last year, but apparently the government wanted WSE to retain a degree of independence that the Germans were not willing to provide.

From our confed partner:

A couple of more things about the "geopolitical" nature of the Warsaw Stock Exchange and its position. Firstly, it is fighting for relevance. It is doing really well, for a small bourse, but just like everything else about Poland, it wants to be seen as an important European and then global, player. Poles want the WSE's WiG20 to be mentioned on CNN, et al, in the financial updates when they talk about the LSE, the CAC 40, the DAX, etc. It is, quite frankly, a long way from that.

But there is no dominant bourse between Scandinavia and the Mediterranean and Frankfurt and Moscow, and the WSE aims to be it. Its biggest challenger is the Vienna Stock Exchange, which has been eating up local stock exchanges in the region: Prague, Budapest and Ljubljana. The WSE wins in terms of number of companies, big IPOs and turnover (I believe), Vienna wins in terms of capitalization, when all of its bourses are taken together as a group (which is how it is marketing itself).

This has been a really fun story to cover - the rivalry between Warsaw and Vienna, and it is definitely heating up. With the WSE's privatization, it is moving closer to getting out of gov't control (though not completely after this upcoming IPO, but perhaps later). That will be a big factor in it making more regional takeovers, as both Prague and Ljubljana rebuffed the WSE on the grounds that it was state-owned.

I find this competition fascinating because the competition between Warsaw and Vienna for control of Central European investments in the 21st Century is not unlike the competition between the two in the 17th Century for political domination of the same region.

ENERGY MATTERS – Poland-Russia natural gas deal

The Polish government has been negotiating a natural gas deal with Russia for the past two years. It managed to conclude a deal in February 2010 that would extend gas supplies to 11 bcm from current 7bcm and last until 2037. The deal was nearly complete, but the Ministry of Foreign Affairs then forwarded the draft to Brussels – to the chagrin of Economic Minister Pawlak – for review. Brussels stated that the deal did not comply with EU’s unbundling regulation. Brussels wants the Yamal-Europe pipeline, which carries Russian gas to Poland and then on to Germany, to be overseen by an independent regulator, GAZ-SYSTEMA, and not a joint Gazprom-PGNiG venture called EuRoPol GAZ.

The solution seems to have been found by which GAZ-SYSTEMA will only have the ability to oversee any excess capacity of Yamal-Europe pipeline. At the moment, there is no such spare capacity. It is unclea yet if Brussels will accept this change.

Bottom line of the negotiations – see our diary on the topic I included below – is that Brussels is trying to draw a line in the sand with these negotiations. It wants to get its unbundling regulation – which seeks to separate producers from transportation assets – implemented in a key deal in Central Europe so that it can begin eroding Gazprom monopoly in Central/Eastern Europe. However, Poland just wants natural gas.

Poland is expecting that its natural gas needs are going to skyrocket. The EU is forcing it to abandon its coal dependency because of environmental regulation. As such, Poland is going to have to turn to natural gas for electricity generation. It needs a steady supply of natural gas from Russia and wants to lock terms down before NordStream pipeline comes online and starts taking Russian gas directly to Poland. EU’s meddling – even though it is aimed at reducing Gazprom monopoly – has therefore been highly unwelcome from Poles’ perspective. The involvement of the EU has actually brought Russia and Poland closer together on this issue.

The other important issue is the building of the 2.5-4 bcm a year LNG facility at Swinoujscie. The LNG facility is close to the German border and has been opposed by the German government on environmental grounds. The construction is supposed to start in late 2010 and complete by 2013.

The other issue that is very exciting to Poles is the possibility that Poland becomes a natural gas producer, and even exported, due to the introduction of fracing technologies (see STRATFOR analysis below on the topic). Poles are very excited about this opportunity and feel that it will lead to energy independence. However, the introduction of technology is still far out in the future, which is why Poland wanted to get its supplies from Gazprom locked down first.


Poland is supposed to co-host the 2012 European football championship with Ukraine. The preparation for the championship has been a disaster in Ukraine, and in Poland the stadium building has been surrounded by corruption and scandals. When the decision was awarded to Ukraine and Poland it was motivated by the Orange Revolution and the pro-EU government in Ukraine. It was meant as a reward for Yuschenko and his pro-West government. Now it is an embarrassment to both the EU and Poland.



% of Total












% of Total











Crude Oil Imports

% of Total











Russian Natural Gas as % of Total Consumption

2008 Gas Consumption (bcm)


2008 Gas Imports Russia (bcm)


% of Consumption from Russia




Coal Consumption in 2008


Coal Production in 2008


Coal as % of Total Energy


Investments from specific countries and regions 2009



Value in EUR mn




































STRATFOR has very strong brand recognition in Poland. George’s visit to the country in 2009 and his book are very well known, and if they are not well known people generally associate George’s name and that of STRATFOR in positive light. I met several Polish government officials during my trip to the country in late September 2009 and they all knew of STRATFOR. Most were not clear exactly what STRATFOR was and many associated us with a shadowy intelligence network in the U.S. That has its downsides and upsides.

We are often in the media and usually in the positive light. With our partnership with the WBJ we have also been given prominent coverage recently in the Polish English language media, including our videos.

NON-STRATFOR PUBLICATIONS (I have steered these towards recent important foreign media articles on current events in Poland)

  • Wall Street Journal article detailing the Russian-Polish natural gas deal.

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