Putin focuses on economic issues but fails to strike pipeline deals

"This is the beginning of the spring of our relations" Marian Malinowski was part of much closer, and fruitful, period of Polish business relations with Russia. "We exported as much as 20% of our output, and most of that was headed east," Malinowski said of the early 1990s, when he ran the Moscow office of domestic candy producer Jutrzenka. Malinowski, now an export specialist with the Bydgoszcz-based company, said all that changed in 1998 as Russia's ruble crashed and Jutrzenka was forced to close shop in Moscow. The crisis cost roughly 150,000 Poles their jobs while Polish firms - mostly food exporters and builders - were shut out of the Russian market. Polish-Russian economic relations, a primary focus of Russian President Vladimir Putin's visit to Poland last week, have yet to fully recover. "Turnover (in Russian trade) fell from more than zł. 60 million ($15 million) to less than zł. 20 million ($5 million) in 1998," said Waldemar Mierzwa, spokesman for Budimex, one of the largest domestic builders. "The only contract realized (with Russian ties) since then was the building of Polish soldiers' cemeteries in Katyń, Kharkoye and Miednoye," Mierzwa added, noting that a Polish-Russian commission created to commemorate Polish Army officers murdered in 1940 by Soviet secret police awarded the contract. Putin made no mention of Katyń, and offered only small conciliatory gestures to Poland during his two-day visit to the country. The first Russian leader to visit the country in eight years talked business with President Aleksander Kwaśniewski and other movers and shakers in Polish entrepreneurial circles. "This is the beginning of the spring of our relations," Kwaśniewski said of the visit. "Whether it becomes a full spring depends only on both of us." The meetings failed to bring deals on several key outstanding economic issues: future natural gas delivery volumes to Poland from Russia and a pipeline route that would link the Arctic, via Poland, and the rest of Europe. But the focus on trade issues is also a major concern for Poland. Since the collapse of the Soviet Union, exchange of goods between the two nations has heavily favored Russia - Poland's annual trade deficit with Russia runs at about $3 billion. "This is no longer only Poland's problem," Infrastructure Minister Marek Pol said last week. "Russia is beginning to realize that a country unable to balance a trade deficit will seek contracts with other countries." Oil and gas payments account for a large portion of the trade imbalance. Poland wants to renegotiate its 1996 agreement for Russian gas after revising downward its long-term demand projections. The pact forces Poland to buy contracted gas, regardless of the country's needs. While Kwaśniewski last week said he is hopeful for a resolution by February, the Russians have yet to show any flexibility. Earlier, officials from both governments placed the issue in the hands of the companies - Polskie Górnictwo Naftowe i Gazownictwo (PGNiG) and Russian giant Gazprom - but refused to set timetables. The Russians could be swayed on the demand issue if Poland accepts Gazprom's proposed alternative route to the existing east-west Yamal gas pipeline. Russia's alternative, bypassing the Ukraine - which Gazprom accuses of pilfering gas and not paying bills - would run north-south along Poland's eastern border. Poland envisions a gas line further to the West, entering Poland from Belarus and curving south into Slovakia. Another round of talks is scheduled for Feb. 15. While nothing was inked on the larger issues, Polish and Russian business owners signed a series of smaller cooperation agreements between shipping firms, bus manufacturers, regional governments, chambers of commerce, and banks. "It's too early to say for sure (if relations will continue to improve), but we were able to conduct talks during (Putin's) visit ... in the next few months (we) are planning to sign some contracts," said Budimex's Mierzwa.