(S) NINTH TERRORIST LIST: NASCO GROUP (NIGERIA)

S E C R E T SECTION 01 OF 04 ABUJA 000187

SIPDIS


C O R R E C T E D C O P Y( CORRECTING DECL AND REASON)


DEP FOR EB/ESC/ESP, S/CT, AF/W


E.O. 12958: DECL: 1.6X6
TAGS: PTER PREL ECON ETTC NI
SUBJECT: (S) NINTH TERRORIST LIST: NASCO GROUP (NIGERIA)
LIMITED

REF: A. STATE 10592

B. STATE 11652

C. LAGOS 144


Classified by Ambassador Howard F. Jeter; Reason 1.6X6



1. (S) Summary: The question of including the NASCO Group
(Nigeria) Ltd AND other NASCO SUBSIDIARIES IN NIGERIA in the
assets freeze is a question of balancing our national
security interests in confronting terrorism and its many
components against our interests in Nigeria and the resultant
strain the designation of the NASCO subsidiaries would have
on the bilateral relationship. The national security
imperative against counter terrorism is of paramount
importance and that effort must not be found wanting.
However, pursuit of this objective in a given situation, may
undercut other important objectives and interests we may have
in a particular country. This is the case with Nigeria and
NASCO. The Mission does not know the extent to which NASCO's
Nigerian operations contribute to the global network of
terrorism; Nor are we arguing that the NASCO group should not
be placed on the list. If NASCO has abetted terrorism, it
should pay the price for that affiliation. However, we would
like to make Washington aware of the potential reaction in
Nigeria to such a move and to the effect it might have on our
relations here. If NASCO is added, the public disclosure of
corroborative evidence would go far in reducing the
inevitable criticism of our move. Additionaly, we offer other
thoughts in paras 13 and 14 below on how the NASCO Group link
with terrorism could be severed, but in ways that would tend
to reduce the fallout inimical to the US-GON bilateral
relationship. These ideas include the proposal that any
freezes ordered should be limited to the NASCO parent company
in Turkey, not the Nigerian subsidiaries. (Reftel C was
transmitted in error and should be disregarded.) End summary.



2. (S) Ref A includes (29) NASCO Group (Nigeria) Limited, the
holding company for twelve NASCO companies (30-41),the
majority of which manufacture consumer products and are
co-located in a large industrial complex located on a
one-kilometer stretch of Yakubu Gowon Way, Old Airport Road
Junction, Jos, Plateau State, Nigeria. Telephone numbers
(234)73-463-175, (234)73-463-347 and facsimile
(234)73-461-554. Group President and Managing Director is
Mr. Attia A. Nasreddin. Muslim owned NASCO is the largest
private employer in Plateau State and one of the largest
private employers in mostly-Muslim northern Nigeria. NASCO
is a functioning industrial enterprise that meets the real
needs of the Nigerian consumer, even as much of Nigeria's
industrial plant is moribund or operating at under 30% of
installed capacity. . A huge industrial complex with
distribution centers across the country, NASCO Group sources
95 percent of its industrial inputs locally, directly employs
over 1500 Nigerians and indirectly sustains the employment of
10,000 to 12,000 additional people. We estimate that,
including family members, between 80,000 and 125,000 persons
would lose their major source of income if NASCO were shut
down.



3. (U) NASCO began operations in Nigeria in 1963 as carpet
and blanket maker Northern Nigeria Fiber Products Limited.
NASCO has since expanded into seven manufacturing companies
(NASCO Fibre Products Limited, PolyFibre Industry Limited,
NASCO Foods Nigeria Limited, NASCO Household Products
Limited, NASCO Beauty Care Products, NASCO Pack Limited and
NASCO Confectionery Company Limited),one marketing company
(NASCO Marketing Company Limited),one service company (NASCO
Management Service Limited),one trading company (NASCO
Trade) and one land development company (NASCO Property and
Investment Company Limited).



4. (S) Ref A notes (35) NASCO Rice & Cereals Company
Limited, for which Post has no reference. Descriptions of
the NASCO companies follow:


--(31) NASCO Fibre Products manufactures three types of
carpets, two sizes of blankets, jute twine, jute cloth and
jute sacks. According to company information found on the
internet, NASCO Fibre Products also produces car components
such as floor mats, molded carpets, wheel archlining and roof
felt carpets for Peugeot Automobile and ANAMMCO (a bus and
truck assembler with links to DaimlerChrysler).


--(40) NASCO Polyfibre Industries Limited produces polyfiber
and yarn for industrial use.


--(32) NASCO Food (Nigeria) Limited sources good quality
grains from Nigerian farmers. These grains are processed
into finished products, including twenty types of biscuits,
five types of wafers and cornflakes. The number of farmers
C O R R E C T E D C O P Y (CORRECTING DECL AND REASON)
indirectly employed by this company is not known. However,
it is likely that hundreds of small and medium-size farms
located near Jos supply products to NASCO. These farms would
employ or support thousands of low-income Nigerians.


--(33) NASCO Household Products Limited, established in 1973,
produces soaps, detergent powder, hair care products,
glycerine and other industrial chemicals, such as sulfonic
acid and textile auxiliaries. This company sells to
industrial consumers in the pharmaceutical and cosmetic
sector.


-- (39) NASCO Beauty Care Products started production in 1994
and produces petroleum jelly, three types of shampoo, hair
lotion, hair curl activator, hair conditioner, body cream and
body lotion.


-- (36) NASCO Confectionery Company (Nigeria) Limited,
acquired by NASCO in 1985, produces sweets, toffees, jellies
and bubble gum.


-- (34) NASCO Pack Limited manufactures and sells packaging
materials, including multi-color labels and cartons,
cellophane, transwrap film, polythene bags and corrugated
box-board cartons. The company also offers professional
services in packaging design.


-- (37) NASCO Marketing Company Limited was incorporated in
1990 to provide marketing services to other NASCO Group
companies. The company is involved in product development,
packaging design, sales promotion, distribution, advertising
and market research. NASCO Marketing Company has
approximately 450 distributors, 150 direct cash customers and
85 appointed supermarkets. These customers are serviced via
eight depots located around the country in major state
capitals.


-- (30) NASCO Management Services Limited provides management
support, such as manpower planning and financial and
administrative services, to the NASCO Group companies.


-- (38) NASCO Property and Investment Company Limited has
responsibility for NASCO's cosmetics business and is
developing (among other prjects) one of Nigeria's largest
private housing estates, NASCO Town, a commercial and
residential estate in Lagos.


--------------
Economic Impact
--------------



5. (S) NASCO is probably the largest private sector employer
in Plateau State and the mainstay of the state capital's
productive economy. Unlike many of Nigeria's industrial
plants, NASCO has functioned successfully in Nigeria for
nearly 40 years. Freezing its assets would shut the company
down and sharply increase unemployment and poverty, the prime
factor that led to September's massive bloodletting (over
3,000 dead). USG economic development policy in Nigeria
encourages increased industrial capacity, particularly in the
food processing/agribusiness sector. Closing NASCO would run
counter to these objectives, while also profoundly
destabilizing an already restive area.

6. (S) According to a published January 2000 interview with
Mr. Attia A. Nasreedin, NASCO Group (Nigeria) Limited is the
only fully integrated company in Nigeria that sources 95
percent of its inputs from local raw materials. In 1999,
NASCO Group (Nigeria) Limited turnover equaled roughly N2.7
billion (USD 27 million). These companies combined directly
employ over 1500 Nigerians. Since each formal-sector worker
in Nigeria typically supports between 9 and 15 dependents,
the direct impact of an assets freeze (which would quickly
halt production if implemented correctly) would have an
enormous and highly negative impact. Shutting down NASCO
would have a powerful, albeit indirect, negative impact on
the entire economy: Nine depots, 450 distributors and 85
appointed supermarkets around the country would suffer
significant (perhaps total) loss of business without NASCO
products. Most of NASCO's suppliers would lose a critical
(perhaps the critical) outlet for their products. Entire
farming communities in the vicinity of Jos could be ruined
(high transport costs might make it uneconomical for them to
sell to other buyers, assuming such buyers could be found.
Nigerians would lose access to an entire range of affordable
consumer goods, damaging their already lessened sense of
well-being. We could expect many consumers to be "priced
out" of such staples as corn flakes and laundry soap. Those
who could afford to pay for imported substitutes would pay
far more. An economy just hit with a major fuel price
increase would feel another blow.


C O R R E C T E D C O P Y (CORRECTING DECL AND REASON)
--------------
Political Impact
--------------

7. (S) The case of NASCO reflects the delicate balance we
must strike between the national security imperative to
confront and combat terror and our longer-term interests in
minimizing the gulf between USG perceptions of our efforts
and those of Muslims and the developing world. If we are to
retain key allies in the war on terror, our actions must not
visit destruction (even economic destruction) on their
people. Nigeria has the largest Muslim population in Africa,
and its economy is struggling to reach self-sustaining
growth. Reaction in the Muslim community would be strong and
negative. We are far from certain that the GON would agree
to freeze NASCO's Nigerian assets (since that would
effectively shut down the companies and leave tens of
thousands destitute). If it did, media and prominent
individuals heretofore sympathetic to our anti-terror
campaign could be expected to question our motives
(suggestions that NASCO was being closed so that U.S.
products could replace Nigerian ones) and to argue that the
GON was putting Western economic interests ahead of those of
Nigeria (recycling of the old "lackey of Western interests"
charge).



8. (S) Recognizing that our principal national interest at
this time is eradicating terrorism and denying it support,
the Mission notes that account must be taken of our other
national interests. We are not in a position to evaluate the
negative impact that NASCO's continued operation in Nigeria
might have on the war on terror, but we can say with
certainty that, absent evidence that could be released to the
Nigerian public, shutting down NASCO would seriously impair
(possibly destroy) U.S. credibility as regards economic
reform: We cannot argue that investment in the Nigerian
agro-industrial sector is a key to self-sustaining growth and
then shut down a paragon of that sector without public
explanation.



9. (S) As noted above, Plateau State and some areas that
adjoin it are restive. Widespread unemployment, notably
among youth, was the prime factor underlying the horrible
bloodletting in September of 2001 (3,000-plus deaths). If we
convince the GON to shut down NASCO, thousands more will lose
their jobs, and tens of thousands will suffer. The result
will be greater instability in the eastern Middle Belt. Such
instability would be detrimental to our key objective of
sustaining Nigeria's nascent democracy.



10. (S) Para 2 of Ref B sets forth strategic objectives for
our public diplomacy efforts in support of the war on terror.
These include fostering an international environment
conducive to our efforts to build and maintain coalitions for
a war on terrorists with global reach, convincing
international publics that the war on terrorism is in the
interest of their nations, and reducing anti-American
sentiment. As we have explained above, the tactic of
freezing NASCO's assets in Nigeria would run counter to each
of these strategic objectives. At bottom, the average
Nigerian, whether Moslem or not, would be hard pressed to
understand how shutting down his supplier of cornflakes and
cookies helps the global battle against terrorism. Many
Nigerians sympathetic to the war against terror would view
this as an example of the USG using its weight to overstep
its bounds. Unless we can make a compelling public case, too
many Nigerians would suspect an ulterior motive behind our
action. The sympathy of many Nigerians, including some now
positively disposed toward us and our anti-terror efforts,
would turn against us unless we can tell them why this step
is necessary.



11. (S) As briefly mentioned in para 7 above, placing NASCO
on the assets freeze list would also place the Obasanjo
Administration in awkward straits. The GON has been
pilloried by domestic opponents as too eager to please the
West by joining the battle against terrorism and too eager to
bend to Western pressure on belt tightening economic reform
that might hurt the consumer in the short haul, e.g. the fuel
increase. These criticisms, one political, the other
economic, converge in the case of the possible NASCO asset
freeze. Unless the freeze order is accompanied by the
disclosure of corroborating evidence, the GON will face a
barrage of public criticism if it decides to close this
network of companies and negatively affect the national
economy without receiving a tangible compensatory benefit
(e.g., debt forgiveness) in return.



12. (S) Moreover, the GON will want to resist the notion
that it allowed a conduit of terrorist financing not only to
operate here, but to become a leading enterprise. It could
C O R R E C T E D C O P Y (CORRECTING DECL AND REASON)
be made to appear that the Obasanjo Administration does not
know what is happening in its own backyard. This could hurt
the GON's credibility at a sensitive time. Because the GON
has been a staunch ally against terrorism we should do what
we can to avoid placing it in this whipsaw.

13. (S) Should Washington decide to include NASCO on the list
but not to divulge convincing evidence, the impact to our
interests here and the bilateral relationship perhaps could
be lessened if the NASCO inclusion is limited, at the present
time, to other NASCO operations, such as the parent based in
Turkey. If the freeze on the parent begins to affect the
subsidiaries in Nigeria, it will be seen as the indirect
consequence of action taken in a third country and not a
direct result of a request made by the USG to the GON. We
could also engage with the GON to find a way to sterilize the
proceeds of NASCO's Nigeria operations, so that they could
not readily fund terrorism.



14. (S) Last, we foresee no great political or economic
fallout in placing the handful of Nigerians and expatriates
working in Nigeria for NASCO in key positions on the list.
As long as NASCO keeps operating, most Nigerians will not
care. If NASCO fails some years down the road because of the
withdrawal of management talent, we believe the public
response will at that time be manageable.



15. (S) In the final analysis, not knowing the extent to
which NASCO's Nigerian operations contribute to financing
global terror, the Mission is unable to do a cost/benefit
calculation in terms of U.S. national interests. That will
have to be left to those who have access to both parts of the
equation. What we can say, however, is that shutting down
NASCO's industrial and commercial operations in Nigeria will
have considerable negative fallout.



16. (U) Ref C was sent in error and should be disregarded.
Jeter