Ref ID: 09TRIPOLI139

Date: 2/12/2009 18:25

Origin: Embassy Tripoli

Classification: UNCLASSIFIED

Destination:

Header: TelegramUNCLASSIFIED TRIPOLI 00000139 VZCZCXRO2854PP RUEHTRODE RUEHTRO #0139 0431825ZNR UUUUU ZZHP 121825Z FEB 09FM AMEMBASSY TRIPOLITO RUEHC/SECSTATE WASHDC PRIORITY 4479INFO RHMFISS/DEPT OF ENERGY WASHINGTON DCRUCPDOC/DEPT OF COMMERCE WASHINGTON DCRUEHTRO/AMEMBASSY TRIPOLI 5004

Tags: PREL,ENRG,ETRD,LY

UNCLAS TRIPOLI 000139 DEPT FOR NEA, L AND EB E.O. 12958: N/A TAGS: PREL, ENRG, ETRD, LY SUBJECT: GHANEM “UNDER THE GUN” TO COLLECT CONTRIBUTIONS FOR CLAIMS COMPENSATION FUND

1.(C) Summary: During a February 10 introductory meeting with the Ambassador, the chairman of Libya’s National Oil Company, Dr. Shukri Ghanem, said Libya was unlikely to nationalize its oil industry and that Muammar al-Qadhafi’s public comments were an expression of the Leader’s frustration thatforeign companies had not yet contributed to the international fund established under the U.S.-Libya Claims Compensation Agreementsigned in August. The Ambassador said U.S. companies had reported feeling pressured to contribute to the fund, which if true was contrary to the understanding between the two governments that any contributions from U.S. firms would be strictly voluntary. Ghanem took the point but said he was under pressure to recover $700 million the NOC had “lent” the fund in October, and hoped that the U.S. would encourage companies to find a creative way to help. End summary.

2.(C) Ghanem welcomed the Ambassador to Libya, saying he was pleased that normal relations had been restored. He recounted “better times” when there was a large American community resident in Tripoli, and Americans lived and worked “side by side” with Libyans. Many Libyans, including himself, had studied in the United States (Ghanem has a Phd from the Fletcher School at Tufts University). Ghanem compared the current state of U.S.-Libyan relations to a married couple who had been divorced for 25 years and then remarried: “It’s not easy. We are watching each other very carefully, analyzing everything the other one says.” After a discussion of the situation in Gaza during which Ghanem and his staff argued the merits of al-Qadhafi’s proposal for a one-state solution, the Ambassador asked about the Leader’s recent public statements suggesting that Libya might nationalize its oil sector.

3.(C) Ghanem dismissed the possibility of nationalization as unlikely, saying “We are not taking any action and are continuing business as usual.” The Leader’s comments were a sign of his “frustration” that foreign companies had not yet contributed to the international fund established under the U.S.-Libya Claims Compensation Agreement signed in August. Reviewing the negotiating history, Ghanem said that once the U.S. government made it clear that the USG would not pay into the $1.8 billion fund, the GOL adopted the same position. The solution was for the GOL to solicit contributions from “friendly countries and companies.” While some foreign governments had helped, so far no private companies had contributed. This had led the leadership to conclude that the companies were merely exploiting Libya’s resources. As a result, the NOC was under increasing pressure from the leadership to recover the funds it had “loaned” to enable the agreement to be implemented last October. That was why the Prime Minister had summoned international oil companies earlier in the month and pressed them to respond to the NOC’s letters soliciting contributions. Ghanem said that the current amount of the funding “gap” was $700 million; the NOC had suggested that U.S. companies (presumably he was referring to the oil producers, vice the service companies and companies that are only exploring) contribute $180 million, based on their level of production. The amounts were relatively small for companies that stood to make large profits from producing oil and gas in Libya, he said. He predicted that “some” foreign companies would eventually make a contribution. (Comment: We have heard from contacts in the IOCs that Gazprom would make a payment. End comment.)

4.(C) The Ambassador reminded Ghanem that putting pressure on U.S. companies “crossed a red-line” and was contrary to the understanding between the U.S. and Libya. The PM’s February 28 “deadline” for companies to respond “sent a troubling signal” in that it suggests that their business could suffer if they fail to contribute to the fund. Ghanem acknowledged the point (without addressing whether there would be any negative consequences after the deadline had passed) but said he needed to find a solution and was open to other ideas, such as re-labeling the fund if that would make it more palatable for U.S. companies. He asked that the U.S. at least refrain from instructing U.S. companies not to contribute. The Ambassador replied he was in no position to do that, reiterated again the U.S. position of no pressure, and urged Ghanem and his colleagues in the GOL to consider the long-term relationship with the United States.

5.(C) Comment: Ghanem fully understands the U.S. red-line and will no doubt pass the message to the political leadership, if only to help relieve some of the pressure he is getting from above. At the same time, it is clear that the Libyans, sensing a dead-end in soliciting contributions pegged to the fund, are now actively seeking other creative ways to package the solicitation. The one-two punch of threatening nationalization while summoning the IOCs and giving them a deadline might lead to payments from some foreign companies. The American IOCs with whom we are in contact continue to tell us they intend to hold the line, and are looking for USG support. CRETZ