OXY: PRESSING THE GOE TO NEGOTIATE

UNCLAS QUITO 000681 SIPDIS SENSITIVE DEPT PLEASE PASS TO USTR BENNETT HARMAN E.O. 12958: N/A TAGS: EINV EPET ETRD ECON EC SUBJECT: OXY: PRESSING THE GOE TO NEGOTIATE REF: A. QUITO 667 ¶B. QUITO 611 ¶C. QUITO 601 ¶1. (SBU) Summary. Ambassador met March 28 with President Gutierrez to urge him to allow time for the parties to negotiate a solution to Occidental Petroleum's (Oxy) problems in Ecuador. The DCM phoned newly appointed commercial dispute czar with the same message. Econoffs also met with the Ministers of Trade and Economy and PetroEcuador President Bonilla to express concerns about the latest threat to expropriate Oxy's assets in Ecuador. The AmCham is providing a legal analysis to Bonilla that will give him additional legal grounds for not declaring caducity. Though Bonilla said he has a report finding grounds for caducity, Gutierrez will meet with his cabinet March 28 to press for additional time for negotiations. End summary. Heading Off GOE Caducity Declaration -------------- ¶2. (SBU) The Ambassador met with President Gutierrez March 28 to explain that a declaration of caducity (contract nullification and seizure of assets) against Oxy would cost the GOE the support of the USG. Gutierrez said he understood, but that the Social Christian (PSC) and Democratic Left (ID) parties had threatened him with an impeachment trial in Congress if he did not declare caducity. The Ambassador suggested that Gutierrez buy some time to allow the parties to negotiate a solution. She noted that Oxy was willing to talk on that and other pending problems it had in Ecuador. Gutierrez said he would meet with his cabinet on March 28 to press for additional time for negotiations. ¶3. (SBU) The DCM spoke with newly designated commercial dispute czar and Presidential confidant Carlos Polit over the Easter holiday weekend. He urged Polit to reach out to the Procurador and PetroEcuador President Bonilla to encourage them to permit serious negotiations to take place and keep the matter out of the press. Econ Counselor met with Minister of Economy Yepez and Minister of Trade Baki with similar messages. Polit also joined Econ Counselor's meeting with Baki and called Procurador Borja urging him to permit time for the parties to negotiate before publicly challenging the GOE to declare caducity. Econoff met with Bonilla March 22 urging him to talk with Oxy. The AmCham is providing Bonilla with its Energy Committee's legal analysis on the lack of legal grounds to declare caducity against Oxy. Oxy Meetings with PetroEcuador -------------- ¶4. (SBU) Oxy officials met with Bonilla on March 23. As a result, they will meet again March 28 to offer more details toward a possible resolution of outstanding problems between Oxy and the GOE. Oxy told econoff on March 28 that Oxy would submit a "generous" written offer for consideration, but it will be conditioned on resolving a number of matters. We will keep Washington advised of further developments. KENNEY