(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