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04DJIBOUTI947 2004-07-11 14:27:00 CONFIDENTIAL Embassy Djibouti
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					C O N F I D E N T I A L SECTION 01 OF 02 DJIBOUTI 000947 



E.O. 12958: DECL: 07/11/2014



REASONS 1.4 (B) AND (D).

1. (C) During Ambassador's 7/9 meeting with Nairobi-based
John J. DiTullio, Cluster Sales and Operations Manager for
Exxon-Mobil East and Southern Africa, and Mobil Djibouti
Director General, Alain Adam, Adam stated that Exxon/Mobil
had filed on July 8 an action against the Government of
Djibouti in civil court in Djibouti. The action seeks
annulment of the Government of Djibouti's notice of May 10 to
Mobil that it would be required to shut down its petroleum
operations at the existing port and move to the new port in
Doraleh, as of May, 2005. (See reftels). The action also
seeks associated costs from the Government of Djibouti for
the court case.

2. (C) Ambassador asked for a copy of the court brief, which
Adam provided on July 10. The brief, through La SCP Boivin
et Associes (Attorneys-at-Law), based in Paris, and Alain
Martinet, a local lawyer in Djibouti, presents as facts, per
Embassy's informal translation, inter alia:

-- that Mobil has operated in Djibouti since the 1970s;
-- that Mobil is sole owner of the site of land on which its
activities are taking place;
-- that Mobil has made substantial improvements to the site
over the years and that the site has the capacity to store
around 90,957 cubic meters of hydrocarbons;
-- that Mobil is a substantial employer in Djibouti-- with 43
contract employees for an indeterminate duration and with an
additional 39 temporary employees;
-- that information concerning the new Port of Doraleh
remains fragmentary, indeed incomplete, and does not allow
Mobil to envisage what would be its place in the new
-- that the excavation work for the new port only began in
the month of June 2003, and this infrastructure could not
possibly be operational, at best, until the end of 2005;
-- and that Mobil had not received from the Djiboutian
authorities any official information concerning the
cancellation of petroleum activities on the site of the
current and how the required transfer to Doraleh would take
In its court brief, Mobil also alleges that the decision of
the Minister of Equipment and Transport, as enunciated in the
May 10 letter, is illegal, in that the decision is:

--tainted by defect of knowledge and is taken in ignorance of
the general principle of respect for rights of the defense to
present its observations; and
--is not in conformity with the Constitution of Djibouti, is
lacking in legal basis, does not support justifications of
general interests, and leads to disproportionate and
discriminatory consequences.

3. (C) In her meeting with Mobil representatives, Ambassador
reiterated her preference that Mobil not quit its operations
in Djibouti, if at all possible. She said it was important
to have a major American company doing business in Djibouti
and continuing its positive impact on the Djiboutian economy.
DiTullio said he believed the Government of Djibouti had not
thought seriously about the loss of revenues and jobs that
would follow a Mobil departure. Adam pressed the point that
it was not possible to complete the port of Doraleh in the
time frame envisioned by the Government and that he had so
informed the Government. Ambassador cautioned that this
might be a less effective position to take with a very
sensitive Djiboutian government. She said, indeed, Emirates
National Oil Company (ENOC)-- the project manager-- is moving
toward 24-hour shifts to ensure completion of the Doraleh
project AHEAD of schedule.

4. (C) Ambassador also expressed to Mobil her willingness to
approach President Guelleh directly on Mobil's behalf, if it
is Mobil's corporate preference to fight to retain its
operations at the existing port. She said she believed Total
would certainly press to do so, if it has not already done
so, but was unsure about Shell. Indeed, Ambassador added,
Total will likely present an argument that the Government of
Djibouti needs a back-up terminal to Doraleh and that Total's
facilities at the existing port might fill that need,
especially if Shell and Mobil have already folded. DiTullio
thanked Ambassador for her willingness to support Mobil's
presence here at the highest levels of the Djiboutian
government and said he would let the Ambassador know as to
the route corporate headquarters in Fairfax ultimately wished
to take on this matter.

5. (C) During the meeting, Adam repeated the offer that Mobil
made earlier to the U.S. military to purchase its Djibouti
site, should Mobil ultimately be obliged to vacate. The site
consists primarily of storage tanks, offices and warehouses.
(see reftel A) Ambassador said she understood that the U.S.
military did not see an interest or need in purchasing the
Mobil site. Adam said Mobil would accept a leasing
arrangement, if the U.S. military preferred. Ambassador
suggested that it might be better for Exxon-Mobil's Fairfax
headquarters to put forward such a plan formally to the U.S.
Department of Defense, rather than broach it regionally or

6. (C) Adam also reiterated his long-standing complaint that
Camp Lemonier has not used Mobil's services in its petroleum
purchases in Djibouti. Ambassador encouraged, and DiTullio
supported vigorously, that Adam set up direct contact with
CJTF-HOA Commander General Helland at Camp Lemonier on this
issue. DiTullio concurred, and stated that personal
relations are very important. He added that it is also
important to let the Camp know the aspects of Mobil's
services that make it the superior vendor in Djibouti. Adam
has since taken steps to follow up and Ambassador also raised
this with General Helland during her weekly meeting with him
on 7/12.

7. (C) Comment: Mobil's court action may be primarily a
tactical step to protect its considerable financial
interests, more than focused on immediate remedies. It is
clear, however, that Mobil would prefer -- if business volume
warranted -- to retain its operations at the existing port.
If it cannot, it has also made clear that it is prepared to
leave -- with full compensation for its losses expected of
the Government of Djibouti. Mobil insists that the current
Djiboutian economic environment cannot sustain the viability
of four oil companies. Ambassador has encouraged Mobil to
think long-term, rather than short-term, and to consider
future commercial possibilities if Doraleh turns out to be
the economic powerhouse the Government of Djibouti expects.
In addition, she has advised Mobil that it is a far greater
challenge for a company to re-enter a market, and regain
goodwill, once it has vacated it. End comment.