WARSAW Poland is conducting an unspoken policy of blocking investments from historical adversary Russia, a stance that could be costly for Warsaw, which needs to find new sources of capital to replace the weakened euro zone.
In the past six months, attempts by investors to acquire stakes in two high-profile Polish companies have been torpedoed, according to people with knowledge of the discussions, in large part because the bidders were Russian.
Suspicion of Russian intentions in Warsaw is entrenched: For centuries Poles feared Russians as invaders and oppressive rulers. Since the end of the Cold War, that has been replaced by Polish fear of Russia's economic dominance.
What is new is that Poland's economy is slowing after decades of robust growth and can no longer rely on investor interest from its struggling trading partner, the euro zone.
With this in mind, some have questioned whether Poland can afford to reject any foreign capital, even from Russia.
"Our economy needs capital for us to develop. Why would it matter if it is Russian, or Chinese for that matter?" said Miroslaw Gronicki, a former finance minister in a government led by a leftist alliance that is now in opposition.
A policy of opposing Russian investments in certain sectors could have implications for Russia's biggest lender, the state-controlled Sberbank, which has declared an interest in entering the Polish market.
Reuters has uncovered previously unreported details of how Russian bids were rebuffed for Polimex, one of the country's three biggest construction firms, and a second firm, Poland's largest chemical group Tarnow.
In both cases neither the target firm nor the government ever said publicly they wanted to keep out Russian investors. The Polish government says the nationality of an investor is not a consideration. It is also common for countries to consider strategic issues when it comes to outside investors.
But the actions taken in these cases suggest the intention was to keep assets out of Russian hands, a stance insiders say is part of the unwritten code of doing business in Poland.
"In the case of Russia it is very difficult to separate business from politics," said Igor Chalupec, the former head of Poland's biggest refiner PKN Orlen who himself clashed with the Kremlin when he bought assets in Russia's backyard.
"If we add the emotional burden resulting from the difficult history of Polish-Russian relations, you get an explosive mixture, in which even the simplest of things takes on the size of a national issue," he said.
He said the government of Prime Minister Donald Tusk, when it took office five years ago, was in favor of having normal business relations with Russia, but that has not worked out.
"The fact is that there has been a sobering in Poland's approach towards Russia," said Chalupec.
RUSSIANS? NO THANKS
Events surrounding Polimex show this phenomenon in action. The firm found itself short of cash earlier this year. Under pressure from banks, it announced a share issue and invited interest from investors.
Among those expressing an interest was Russian builder VIS Construction. Media reports said it was seeking to become the biggest shareholder.
During this period, analysts asked a senior Polimex executive what the chances were of the investor being a Russian firm, according to two people who heard the conversation.
The executive's answer was that this was unlikely because the state would not allow it, given that Polimex is carrying out contracts in the power sector viewed as strategic by the government, said the two sources.
A few weeks after the Russian interest emerged, the Industrial Development Agency (ARP), a state-owned entity which restructures ailing companies, announced it would become the largest investor in Polimex, with a 33 percent stake.
Polimex Chief Executive Robert Oppenheim told a shareholders' meeting the talks with VIS were non-binding and the Russian firm did not make an offer. VIS did not respond to questions sent by e-mail.
A spokeswoman for the Treasury Ministry, which oversees ARP, said the agency took the stake in Polimex on commercial terms and that the move was in line with the agency's strategy.
The arrangement would "ensure stable operations of the company, and thanks to this involvement it will be possible to carry out projects in the energy sector," said the spokeswoman.
The treatment of Russian investors fits uneasily with Poland's reputation as a liberal, open economy.
Of 1,621 major foreign companies active in Poland, listed by the Polish foreign investment agency, five come from Russia, compared with 389 from Poland's other major neighbor, Germany.
Russia's total investment in Poland amounted to $63 million in 2011, compared with around 1.5 billion euros ($1.96 billion) from German firms.
Tomasz Aziewicz, deputy head of the parliamentary Treasury committee and a member of the prime minister's party said some Russian investments were different.
"In the case of Russian capital, where the ties between business and politics are often obvious, you have to be really careful, especially in strategic sectors."
"Capital must meet certain requirements in order to be accepted," Aziewicz told Reuters.
Yet when it comes to dealing with specific transactions involving Russian capital, Poland is not always transparent.
The handling of a bid by Russian firm Acron for chemicals company Tarnow is an example.
The Polish treasury ministry had a long-standing plan to sell its majority stake in the firm. Acron came onto the scene in May this year, offering 1.5 billion zlotys ($481 million) for 100 percent in the firm.
The government's initial response to Acron's bid was that it would analyze it. But behind the scenes, according to people close to the transaction, there was hostility.
The fear was that if Acron acquired Tarnow it would supply the firm with Russian-made chemicals, produced cheaply because of low domestic energy prices in Russia. This would allow a Russian-owned Tarnow to undercut Poland's other big chemical firm, Pulawy and possibly put it out of business.
"There was a fear about the impact of the transaction on Pulawy," said a person close to the Polish side of the deal.
"Tarnow management got scared and proposed defense tactics, which were consulted on with the Treasury," said the source.
The defense was a "poison pill". The first step was a capital increase. This diluted the stake that Acron would have had if its bid had succeeded.
The second step was to use the cash raised in the capital increase to pay for Tarnow's takeover of Pulawy. The combined firms would be Europe's No.3 nitrogen fertilizer producer with revenues exceeding 10 billion zlotys.
That prospect was enough to persuade most local mutual and pension funds, which had come close to accepting the Russian firm's offer, to reject Acron in the end. Eventually, Acron had to settle instead for a minority stake.
In a statement sent to Reuters, Acron said it respects the decision of the Polish government and other shareholders.
The Treasury Ministry said in a statement: "The investor's country of origin is of no importance to the Treasury." It said the main considerations in a privatization were the price and the investor's obligations on future investment.
"In some cases other crucial elements are taken into account: the influence of the privatization on the future of a given company, influence on the sector it is operating in and the possible impact on other sectors of the economy," it said.
(Additional reporting by Agnieszka Barteczko, Adrian Krajewski, Pawel Bernat, Karolina Slowikowska and Pawel Sobczak, Editing by Christian Lowe/Jeremy Gaunt)