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Polish report
by Euro Reporter
2014-09-18 11:20:13
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Avoid a Mutiny in the Ranks

The most urgent task in Polish prime minister-designate Ewa Kopacz's in-tray is to deal with an internal challenge to her leadership that, if mishandled, could bring down the government in eastern Europe's biggest economic power. Kopacz must find a way to persuade Grzegorz Schetyna -- a long-time rival inside the ruling Civic Platform -- to fall back into line, without pushing him into leaving the party before next year’s election. “It’s a low blow, struck at a time when Ewa needs to focus on leading the government,” a senior Civic Platform figure who is close to Kopacz said of Schetyna’s announcement last Tuesday that he will seek the party leadership. Kopacz, the speaker of parliament, was anointed by her center-right party to take over as prime minister from Donald Tusk, who has been appointed as chief of the European Council. She is expected to start her new job next week.

Schetyna tried several times to challenge Tusk but was sidelined. When he lost his job as speaker of parliament, it was Kopacz who replaced him, and later she took his job as the Civic Platform’s first deputy leader. If Schetyna goes ahead with his leadership bid, that would undermine Kopacz, as the prime minister by tradition also heads the party. The worst case scenario, though unlikely, is that Schetyna and his faction quit the party, wiping out the governing coalition's majority and forcing an early election. Resolving this sort of awkward conundrum was Tusk's forte. He clocked up a record seven years in office by using skilful diplomacy to keep warring factions in his own party at bay. Investors poured billions of dollars into Poland after Tusk broke a long cycle of short-lived governments, creating political stability, and they are watching closely - wary of a return to the bad old days.

Kopacz, 57, has a different personality to Tusk. According to people who have worked with her, she is blunt and prone to displays of anger if things do not go her way. “The Prime Minister (Tusk) definitely has more finesse,” said a source who worked with Kopacz in her previous role as health minister. “Ewa can’t charm like that ... she is definitely more direct” said the source, noting that Kopacz had been an effective minister.


Gazprom forces Poland to halt reverse gas supplies to Ukraine

Russian gas monopoly Gazprom has refused to boost deliveries of gas to Polish consumers after Poland’s state oil and gas firm requested an increase in supplies due to cooler weather. As a result, Poland has been obliged to halt reverse supplies of gas to Ukraine. Gazprom did not satisfy a request by the Polish Oil & Gas Company (PGNiG) for an increase in gas supplies, according to the Polish company's official statement. Poland did not receive approximately 20 percent of the requested amount. In turn, Gazprom announced that Poland is being supplied with the same volume of gas as before: 23 million cubic meters daily. However, the company claims it cannot increase supply volumes since it is currently piping gas into underground storage tanks for domestic use. Consequently, on September 10, Poland was obliged to halt reverse supplies of Russian gas to Ukraine. Previously, out of the gas that Poland paid for, PGNiG would sell 4.2 million cubic meters to Ukraine's Naftogaz. The contract's force "Once again Gazprom is demonstrating the strength of its negotiating position," says UFS IC's chief analyst Ilya Balakirev.

"This should tell the EU that the Ukrainian issue must be resolved as soon as possible. It is also a reminder for Ukrainians that they live in a real world and that no reverse gas flows will be able to ensure all of Ukraine's gas needs, especially in the periods when they are most felt, that is, with the arrival of the cold season,” says Balakirev. He added that Europeans are not against selling gas excess when it is surplus to requirements, “but not when Europeans themselves lack them." According to Ivan Kapitonov, Deputy Chair of RANEPA's Government Economy Regulation Faculty, "Gazprom's stabilization of supplies on a level of minimal contractual obligations is a natural step in the context of the continual reverse gas flows to Ukraine." In his view, Ukraine, along with its western partners, utilizes an absence of contractual restrictions on the reselling of gas. "With the coming of autumn the consumption of gas used for heating will increase," adds Kapitonov. "There is nothing that can supplement Russian gas with the growth of EU consumption, nothing - neither now, nor in the near and foreseeable future." In such conditions Gazprom's decision to “stabilize” gas supplies is a legitimate response, one that falls within the framework of contractual obligations, according to Kapitonov. Bypassing maneuvers After Gazprom increased the price of gas for the Ukrainian Naftogaz from $268 to $485 per 1,000 cubic meters, Ukraine renewed its reverse imports from Poland and Hungary. Gazprom believes that these kinds of supplies are illegal, since the gas is resold on Ukrainian territory and is then sent to Ukrainian consumers, that is, the reverse is effectively virtual, which, according to Gazprom, contradicts the terms of its contract with Ukraine. Furthermore, Ukraine's gas debt to Gazprom is more than $5 billion. "The reverse flows can physically be organized only by Ukraine's closest neighbors, and paradoxically, the majority of these countries themselves have a shortage of gas," says Balakirev. "In reality, only northern European countries, such as Germany, have free gas." Therefore, only Poland and Slovakia can actually supply Ukraine with excess gas. Along with the reduction of gas supplies to Poland, at the beginning of September Gazprom began reducing supplies through the Yamal-Europe pipeline to Germany. According to German gas supplier GASCADE, between September 3 and 10 daily supplies were reduced from about 82 million cubic meters to 73 million cubic meters. A representative of Slovensky Plynarensky Priemysel, the key Slovak natural gas supplier, announced that the Slovak company also registered a reduction of supplies from Russia by 10 percent. According to Finam Management's chief expert Dmitry Baranov, the solution to the gas reverse problem is of a juridical nature. Gazprom has already announced on several occasions that it will take legal action if Europe begins reversing Russian gas.


Blueberry production growing faster than demand

Piotr Milewski, CEO of Milbor, which is a manufacturer and exporter of blueberries and juices marketed under the brand Merry Berry, said that he believes that "with the amount of blueberries currently being planted in Poland, prices will only steadily decline, as production is growing a little faster than demand." In his view, the cultivation of blueberries is still a profitable business. "Five years ago, it seemed to us that prices would drop dramatically because there was a lot of new planting and consumption showed no significant increases. In the past few years, however, because of their well-known health benefits, there has been a blueberry boom which has allowed prices to remain stable at satisfactory levels for producers and processors," says Piotr Milewski.

He adds that even looking 10 years ahead, blueberries are bound to remain a profitable business. "This could be even longer if we managed to open up new markets. A few years ago, we sold the fruit solely to England, and we now ship large batches also to the Netherlands, Germany and the Scandinavian countries. We also have inquiries from Arab countries, but this entails logistics difficulties. We would also like to export to Asia, but here we face competition from the United States," says the CEO of Milbor. Milewski explains that consumption in Poland is growing, but the price difference between the domestic and the Western markets is quite large, which has driven their focus almost exclusively on exports. "Only about 5 percent of our production this year has been sold in Poland," he affirms.

The popularity of Polish blueberries in the Western markets is a phenomenon. "Poland, due to its geographical location, produces the fruit by the time Western Europe's season is over. Additionally, Polish agriculture is at a very high level and we are now Europe's second largest blueberry producer, after Spain. We are able to supply large volumes at favourable prices," states Piotr Milewski. Production in Poland is dispersed. Large plantations are located in Pomerania, Podlasie and in the Lublin region, where the cultivation of other berries is also popular. Poland's blueberry season lasts for three months - July, August and possibly September. "The most difficult is August, as it is the peak season. Most of the plantations in Poland are of a variety that becomes productive in late July and early August; then we see a big drop in prices," adds the CEO of Milbor.

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