CROATIA KEEPS PUSHING ON LIBYA SHIP REFIT

S E C R E T SECTION 01 OF 02 ZAGREB 000331

SIPDIS


CINCUSNAVEUR LONDON UK//N22/N2//
USCINCEUR VAINHINGEN GE// ECJ2-HSE/ECSD-J2

E.O. 12958: DECL: 02/24/2014
TAGS: PREL MARR LY HR
SUBJECT: CROATIA KEEPS PUSHING ON LIBYA SHIP REFIT

REF: A. A) SECDEF DTG 121648Z FEB 04

B. B) MOON-ENGLISH E-MAIL 2/23/04

C. C) ZAGREB 0071

D. D) 03 STATE 331261

E. E) 01 ZAGREB DAO IIR 6 933 0002 02

CLASSIFIED BY: DCM PATRICK MOON, REASONS 1.5 (B) & (D)

SUMMARY AND COMMENT:
--------------


1. (C) AS A FOLLOW ON THE PRESIDENT MESIC RAISING POTENTIAL
LIBYAN SHIP REFIT CONTRACTS WITH SECRETARY RUMSFELD (REF A),
PRESIDENTIAL FOREIGN POLICY ADVISOR MASTRUKO PROVIDED US
ADDITIONAL DETAILS OF THE PROPOSED SCOPE OF THIS $120 MILLION
PROJECT (REF B). THE $120 MILLION CONTRACT INCLUDES $7.5
MILLION FOR REFIT OF THE AL-MUNJED DIVER SUPPORT SHIP AND 15
OTHER OVERHAUL OR SHIP CONSTRUCTION PROJECTS IN CROATIAN
SHIPYARDS. HOWEVER, WORK ON THE OTHER PROJECTS IS CONTINGENT
ON THE REFIT OF THE AL-MUNJED.


2. (C) GIVEN THE IMPORTANCE OF SUCH A LARGE CONTRACT TO
CROATIAN SHIPYARDS, WE EXPECT THE CROATIANS TO CONTINUE TO
PRESS US ON THIS PROJECT, ESPECIALLY AS U.S. AND EUROPEAN
TIES IMPROVE WITH LIBYA. END SUMMARY AND COMMENT.

DETAILS OF WORK ON LIBYAN SHIPS EMERGES
--------------


3. (C) DURING SECRETARY RUMSFELD,S VISIT ON FEBRUARY 8,
PRESIDENT MESIC ASKED THAT THE U.S. DROP ITS OBJECTIONS TO
CROATIAN SHIPYARD WORK ON LIBYAN VESSELS. IN RESPONSE TO OUR
REQUEST FOR ADDITIONAL INFORMATION ON THE REPORTED $120
MILLION CONTRACT, MESIC,S FOREIGN POLICY ADVISOR, AMBASSADOR
IVICA MASTRUKO, PROVIDED US ON FEBRUARY 23 A NOTE ON
POTENTIAL LIBYAN SHIP OVERHAUL AND CONSTRUCTION PROJECTS.
THE NOTE WAS DRAFTED BY THE MARITIME DIVISION OF THE CROATIAN
GENERAL CONTRACTING FIRM INGRA (INFORMAL TRANSLATION SENT TO
DEPARTMENT IN REF B).


4. (SBU) THE INGRA NOTE ADVISED THAT THE $120 MILLION
CONTRACT INCLUDED:

-- OVERHAUL OF THE AL MUNKHED SALVAGE SHIP -- $7.5 MILLION
-- OVERHAUL OF THE RO-RO SHIP -- $10.5 MILLION
-- OVERHAUL OF COAST GUARD SHIPS (8 UNITS) -) $65.5 MILLION
-- BUILDING SHIPS FOR THE CUSTOMS AND MARITIME POLICE (6
UNITS) -- $36 MILLION

FURTHER, THE NOTE ADVISED THAT WORK ON THE OTHER PROJECTS WAS
CONTINGENT ON OVERHAUL OF THE AL-MUNKHED SALVAGE SHIP. (THE
AL-MUNKHED SALVAGE SHIP IS THE AL-MUNJED DIVER SUPPORT SHIP
REFERRED TO IN REFS C AND D.) THE NOTE FROM INGRA GOES ON TO
ASSERT: &SHIPBUILDING EXPERTS ARE WELL AWARE THAT THE LIBYAN
NAVY COOPERATES WITH MOST EUROPEAN COUNTRIES, ESPECIALLY WITH
ITALY AND FRANCE. THEY HAVE CONDUCTED ON A REGULAR BASIS
EXERCISES WITH ITALY, WHICH IS A NATO MEMBER, AND HAVE HAD
THEIR SHIPS REPAIRED IN ITALIAN SHIPYARDS.8


5. (SBU) THE CROATIAN NAVY HAS A SISTER SHIP TO THE AL MUNJED
ALSO IN NEED OF OVERHAUL, AND COULD REAP CONSIDERABLE COST
SAVINGS BY COMPLETING THE LIBYAN REFIT FIRST.

SIMILARITY TO EARLIER CONTRACT WITH LIBYA
--------------


6. (S/NF) DETAILS OF THIS $120 MILLION CONTRACT ARE SIMILAR
IN SCOPE TO A PROPOSED CONTRACT IN 2001 (REF E),ALTHOUGH
SOME OF THE PROJECTS HAVE CHANGED. THE PRICE QUOTED FOR THE
AL-MUNJED OVERHAUL IS THE SAME - $7.5 MILLION. THE OVERHAUL
OF EIGHT COAST GUARD SHIPS IN THE NEW CONTRACT IS QUITE
SIMILAR IN SIZE AND SCOPE TO THE 2001 PROPOSAL OF $63 MILLION
TO OVERHAUL SEVEN TO NINE LA COMBATTANTE MISSILE BOATS. THE
CONSTRUCTION OF FIVE NAVY PATROL BOATS IN 2001 IS NOW
SUPPLANTED BY CONSTRUCTION OF SIX SHIPS FOR CUSTOMS AND THE
MARITIME POLICE. THE OVERHAUL/REPAIR OF A PRESUMABLY
CIVILIAN ROLL-ON/ROLL-OFF SHIP REPLACES THE CONSTRUCTION OF
FOUR NEW UNITS PROPOSED IN 2001. THE OVERALL CONTRACT PRICE
WAS $138 MILLION IN 2001.

COMMENT
--------------


7. (C) IN PREVIOUS CONVERSATIONS, INGRA REPRESENTATIVES AND

ZAGREB 00000331 001.2 OF 002

--------------


1. (C) AS A FOLLOW ON THE PRESIDENT MESIC RAISING POTENTIAL
LIBYAN SHIP REFIT CONTRACTS WITH SECRETARY RUMSFELD (REF A),
PRESIDENTIAL FOREIGN POLICY ADVISOR MASTRUKO PROVIDED US
ADDITIONAL DETAILS OF THE PROPOSED SCOPE OF THIS $120 MILLION
PROJECT (REF B). THE $120 MILLION CONTRACT INCLUDES $7.5
MILLION FOR REFIT OF THE AL-MUNJED DIVER SUPPORT SHIP AND 15
OTHER OVERHAUL OR SHIP CONSTRUCTION PROJECTS IN CROATIAN
SHIPYARDS. HOWEVER, WORK ON THE OTHER PROJECTS IS CONTINGENT
ON THE REFIT OF THE AL-MUNJED.


2. (C) GIVEN THE IMPORTANCE OF SUCH A LARGE CONTRACT TO
CROATIAN SHIPYARDS, WE EXPECT THE CROATIANS TO CONTINUE TO
PRESS US ON THIS PROJECT, ESPECIALLY AS U.S. AND EUROPEAN
TIES IMPROVE WITH LIBYA. END SUMMARY AND COMMENT.

DETAILS OF WORK ON LIBYAN SHIPS EMERGES
--------------


3. (C) DURING SECRETARY RUMSFELD,S VISIT ON FEBRUARY 8,
PRESIDENT MESIC ASKED THAT THE U.S. DROP ITS OBJECTIONS TO
CROATIAN SHIPYARD WORK ON LIBYAN VESSELS. IN RESPONSE TO OUR
REQUEST FOR ADDITIONAL INFORMATION ON THE REPORTED $120
MILLION CONTRACT, MESIC,S FOREIGN POLICY ADVISOR, AMBASSADOR
IVICA MASTRUKO, PROVIDED US ON FEBRUARY 23 A NOTE ON
POTENTIAL LIBYAN SHIP OVERHAUL AND CONSTRUCTION PROJECTS.
THE NOTE WAS DRAFTED BY THE MARITIME DIVISION OF THE CROATIAN
GENERAL CONTRACTING FIRM INGRA (INFORMAL TRANSLATION SENT TO
DEPARTMENT IN REF B).


4. (SBU) THE INGRA NOTE ADVISED THAT THE $120 MILLION
CONTRACT INCLUDED:

-- OVERHAUL OF THE AL MUNKHED SALVAGE SHIP -- $7.5 MILLION
-- OVERHAUL OF THE RO-RO SHIP -- $10.5 MILLION
-- OVERHAUL OF COAST GUARD SHIPS (8 UNITS) -) $65.5 MILLION
-- BUILDING SHIPS FOR THE CUSTOMS AND MARITIME POLICE (6
UNITS) -- $36 MILLION

FURTHER, THE NOTE ADVISED THAT WORK ON THE OTHER PROJECTS WAS
CONTINGENT ON OVERHAUL OF THE AL-MUNKHED SALVAGE SHIP. (THE
AL-MUNKHED SALVAGE SHIP IS THE AL-MUNJED DIVER SUPPORT SHIP
REFERRED TO IN REFS C AND D.) THE NOTE FROM INGRA GOES ON TO
ASSERT: &SHIPBUILDING EXPERTS ARE WELL AWARE THAT THE LIBYAN
NAVY COOPERATES WITH MOST EUROPEAN COUNTRIES, ESPECIALLY WITH
ITALY AND FRANCE. THEY HAVE CONDUCTED ON A REGULAR BASIS
EXERCISES WITH ITALY, WHICH IS A NATO MEMBER, AND HAVE HAD
THEIR SHIPS REPAIRED IN ITALIAN SHIPYARDS.8


5. (SBU) THE CROATIAN NAVY HAS A SISTER SHIP TO THE AL MUNJED
ALSO IN NEED OF OVERHAUL, AND COULD REAP CONSIDERABLE COST
SAVINGS BY COMPLETING THE LIBYAN REFIT FIRST.

SIMILARITY TO EARLIER CONTRACT WITH LIBYA
--------------


6. (S/NF) DETAILS OF THIS $120 MILLION CONTRACT ARE SIMILAR
IN SCOPE TO A PROPOSED CONTRACT IN 2001 (REF E),ALTHOUGH
SOME OF THE PROJECTS HAVE CHANGED. THE PRICE QUOTED FOR THE
AL-MUNJED OVERHAUL IS THE SAME - $7.5 MILLION. THE OVERHAUL
OF EIGHT COAST GUARD SHIPS IN THE NEW CONTRACT IS QUITE
SIMILAR IN SIZE AND SCOPE TO THE 2001 PROPOSAL OF $63 MILLION
TO OVERHAUL SEVEN TO NINE LA COMBATTANTE MISSILE BOATS. THE
CONSTRUCTION OF FIVE NAVY PATROL BOATS IN 2001 IS NOW
SUPPLANTED BY CONSTRUCTION OF SIX SHIPS FOR CUSTOMS AND THE
MARITIME POLICE. THE OVERHAUL/REPAIR OF A PRESUMABLY
CIVILIAN ROLL-ON/ROLL-OFF SHIP REPLACES THE CONSTRUCTION OF
FOUR NEW UNITS PROPOSED IN 2001. THE OVERALL CONTRACT PRICE
WAS $138 MILLION IN 2001.

COMMENT
--------------


7. (C) IN PREVIOUS CONVERSATIONS, INGRA REPRESENTATIVES AND

ZAGREB 00000331 002.1 OF 002

E OVER THESE PROJECTS IF
CROATIA CONTINUES TO STALL. PRESIDENT MESIC HAS A LONG-TIME
FASCINATION WITH LIBYA AND QADHAFI AND AN OPENLY AVOWED
DESIRE TO WIN BUSINESS FOR CROATIAN FIRMS IN LIBYA. MESIC'S
PERSISTENCE IN RAISING THIS CONTRACT, INCLUDING WITH
SECRETARY RUMSFELD, INDICATES TO US THAT HE WILL CONTINUE TO

SIPDIS
PURSUE THIS NAVAL REFIT/CONSTRUCTION CONTRACT ON BEHALF OF
INGRA.


8. (C) WE WILL CONTINUE TO URGE PATIENCE PER REF D
INSTRUCTIONS, ESPECIALLY AS DETAILS OF THE NEW CONTRACT RAISE
QUESTIONS ABOUT OTHER ASPECTS OF THE PROPOSED WORK. HOWEVER,
WE ARE CERTAIN THAT THE CROATIANS WILL BECOME INCREASINGLY
ANNOYED AND SUSPICIOUS OF U.S. MOTIVES AS THE U.S. AND OTHER
EUROPEAN COUNTRIES IMPROVE THEIR TIES WITH LIBYA. THE
CROATIANS ARE CONVINCED THAT THE AL-MUNJED IS AN INNOCUOUS
SALVAGE SHIP TO BE USED FOR OFFSHORE PETROLEUM OPERATIONS AND
THAT SIGNIFICANT DELAYS WILL RESULT IN THE LIBYANS TAKING THE
WORK TO ITALIAN SHIPYARDS AT A TIME WHEN CROATIAN SHIPYARDS
STRUGGLE TO AVOID BANKRUPTCY.
FRANK

ZAGREB 00000331 002.2 OF 002

E OVER THESE PROJECTS IF
CROATIA CONTINUES TO STALL. PRESIDENT MESIC HAS A LONG-TIME
FASCINATION WITH LIBYA AND QADHAFI AND AN OPENLY AVOWED
DESIRE TO WIN BUSINESS FOR CROATIAN FIRMS IN LIBYA. MESIC'S
PERSISTENCE IN RAISING THIS CONTRACT, INCLUDING WITH
SECRETARY RUMSFELD, INDICATES TO US THAT HE WILL CONTINUE TO

SIPDIS
PURSUE THIS NAVAL REFIT/CONSTRUCTION CONTRACT ON BEHALF OF
INGRA.


8. (C) WE WILL CONTINUE TO URGE PATIENCE PER REF D
INSTRUCTIONS, ESPECIALLY AS DETAILS OF THE NEW CONTRACT RAISE
QUESTIONS ABOUT OTHER ASPECTS OF THE PROPOSED WORK. HOWEVER,
WE ARE CERTAIN THAT THE CROATIANS WILL BECOME INCREASINGLY
ANNOYED AND SUSPICIOUS OF U.S. MOTIVES AS THE U.S. AND OTHER
EUROPEAN COUNTRIES IMPROVE THEIR TIES WITH LIBYA. THE
CROATIANS ARE CONVINCED THAT THE AL-MUNJED IS AN INNOCUOUS
SALVAGE SHIP TO BE USED FOR OFFSHORE PETROLEUM OPERATIONS AND
THAT SIGNIFICANT DELAYS WILL RESULT IN THE LIBYANS TAKING THE
WORK TO ITALIAN SHIPYARDS AT A TIME WHEN CROATIAN SHIPYARDS
STRUGGLE TO AVOID BANKRUPTCY.
FRANK

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