GOC TO WATCH POTENTIAL LIBYA CONTRACTS CLOSELY

C O N F I D E N T I A L ZAGREB 002186 SIPDIS DEPARTMENT FOR NEA/PDAS (LAROCCO); EUR/SCE (NARDI/KABUMOTO); EUR/RPM (WASER); NP/RA (JSMITH); EUR/PRA (CORDOVA); IO/PHO (CARLSON); AND INR/SPM (ZARZECKI) E.O. 12958: DECL: 10/09/2013 TAGS: PARM MNUC KNNP LY HR SUBJECT: GOC TO WATCH POTENTIAL LIBYA CONTRACTS CLOSELY REF: STATE 282619 CLASSIFIED BY: POLOFF JUSTIN FRIEDMAN, REASONS 1.5 (B) & (D) ¶1. (C) SUMMARY: DCM DELIVERED REFTEL POINTS PRESIDENTIAL FOREIGN AFFAIRS AVISOR IVICA MASTRUKO ON OCTOBER 6 AND TO MFA ASSTANT MINISTER FOR NON-EUROPEAN AFFAIRS DRAZEN MARGETA ON OCTOBER 7. THE GOC INTERLOCUTORS SAID THAT WHILE CROATIA HAD A SIGNIFICANT INTEREST IN SECURING PURELY CIVILIAN WORK IN LIBYA, THE GOC SHARED OUR CONCERNS AND WOULD IMPLEMENT A STRICT POLICY TO ENSURE THAT ANY CONTRACTS WOULD NOT BE TO THE BENEFIT THE LIBYAN MILITARY. END SUMMARY. ¶2. (C) DCM DELIVERED REFTEL POINTS PRESIDENTIAL FOREIGN AFFAIRS AVISOR IVICA MASTRUKO ON OCTOBER 6 AND TO MFA ASSTANT MINISTER FOR NON-EUROPEAN AFFAIRS DRAZEN MARGETA ON OCTOBER ¶7. NOTING CROATIA'S LONG HISTORY OF BUSINESS RELATIONS WITH LIBYA, DCM STRESSED THAT U.S. SANCTIONS WERE STILL IN PLACE, AND CAUTIONED THAT POSSIBLE INVESTMENT BY THE CROATIAN ENERGY FIRM INA IN LIBYA COULD RAISE ILSA CONCERNS. DCM WARNED THAT LIBYA HAD TRIED IN THE PAST TO SECURE OVERHAUL SERVICES FOR MILITARY SHIPS BY ATTEMPTING TO HIDE THEIR MILITARY NATURE, AND URGED THE GOC TO BE VIGILANT IN ITS MONITORING OF APPROACHES BY LIBYA TO CROATIAN SHIPYARDS. ¶3. (C) REFERRING TO PRESIDENT MESIC,S VISIT TO LIBYA IN AUGUST, PRESIDENTIAL ADVISOR MASTRUKO INSISTED THAT CROATIA WAS INTERESTED ONLY IN CONSTRUCTION OF ROADS, RAILROADS, A DIABETES CENTER AND A WATER PIPELINE IN LIBYA. HE ASSERTED THAT ITALY AND MONTENEGRO HAD SECURED MAJOR CONTRACTS TO OVERHAUL LIBYAN SHIPS, IMPLYING THAT SOME MAY BE MILITARY. MASTRUKO SAID THAT CROATIA WOULD LIKE TO SECURE OVERHAUL CONTRACTS, ESPECIALLY FOR SHIPS, ENGINES, BUT INSISTED THAT NO MILITARY VESSELS WOULD BE INVOLVED. HE CITED A SMALL SHIPYARD NEAR ZADAR AS A POSSIBLE CONTRACTOR. MASTRUKO ALSO NOTED THAT THE CROATIAN STATE PETROLEUM COMPANY INA WAS INTERESTED IN INVESTING IN OIL REFINERY WORK IN LIBYA. ¶4. (C) ASSISTANT MINSTER MARGETA NOTED THAT PRESIDENT MESIC HAD BROUGHT ALONG A HUGE DELEGATION ON HIS TRIP TO LIBYA. RESPONDING TO THE DCM'S CAUTION ON POSSIBLE ILSA IMPLICATIONS OF ANY INA INVESTMENT IN LIBYA, MARGETA SAID THE DOUBTED THAT ANY INA INVESTMENT WOULD REACH THE $20 MILLION THRESHOLD OF ILSA. HE BELIEVED INA WAS MOST INTERESTED IN SECURING CONTRACTS FOR ITS CROSCO FIELD SERVICES SUBSIDIARY, NOTING THAT CROSCO USUALLY WORKED AS A SUBCONTRACTOR TO OTHER MAJOR OIL SERVICES FIRMS. ¶5. (C) ON SHIPBUILDING, MARGETA SAID THAT LIBYA HAD TRIED TO SEND SOME SHIPS TO CROATIA FOR OVERHAULS CLAIMING THEY WERE CIVILIAN. HOWEVER, THE GOC HAD LEARNED THAT THE SHIPS WERE ACTUALLY IN THE REGISTER OF THE LIBYAN NAVY AND HAD REFUSED TO ALLOW ANY WORK TO BE DONE. DCM URGED THAT THE GOC BE VIGILANT FOR SIMILAR ATTEMPTS TO BYPASS GOC CONTROLS, PARTICULARLY INVOLVING MARINE ENGINE OVERHAULS. ¶6. (C) MARGETA STATED THAT THE GOC SHARED U.S. CONCERNS ON POSSIBLE WMD DEVELOPMENT IN LIBYA. MARGETA NOTED THAT SOME CROATIAN FIRMS HAD MAINTAINED OFFICES IN LIBYA FOR THE LAST DECADE, AND MANY FIRMS REGARD LIBYA AS PART OF CROATIA'S TRADITIONAL MARKET. HE SAID THAT THE GOC WOULD IMPLEMENT A STRICT POLICY TO ENSURE THAT ANY WORK BY CROATIAN FIRMS IS PURELY CIVILIAN IN NATURE. FRANK NNNN