SALEH ON HUNT OIL DISPUTE, 2006 ELECTIONS, VISIT

C O N F I D E N T I A L SECTION 01 OF 02 SANAA 001571

SIPDIS

E.O. 12958: DECL: 06/11/2015
TAGS: PREL PGOV PTER ECON ETRD YM ECON COM ENERGY
SUBJECT: SALEH ON HUNT OIL DISPUTE, 2006 ELECTIONS, VISIT
TO WASHINGTON

REF: A. SANAA 1511

B. SANAA 1352

C. SANAA 1281

Classified By: Ambassador Thomas C. Krajeski for reasons 1.5 b and d.


1. (C) Summary. Ambassador met with President Saleh on June
9 to encourage the ROYG to resolve its dispute with Hunt Oil.
He highlighted for the President the many potential negative
effects for Yemen if the headline American company in the
country took the ROYG to the International Public Court.
Ambassador and Saleh also discussed the award of the Aden
Port management contract to Dubai Ports International,
scheduling for Saleh's upcoming visit to Washington, and the
2006 Presidential election. End Summary.

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Award of Aden Port Tender to DPI a Positive Sign...
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2. (C) Focusing on ROYG economic reform efforts to improve
its investment climate, Ambassador zeroed in on two recent
events, the Aden Port tender award to Dubai Ports
International (DPI) and ROYG's on-going dispute with Hunt
Oil. He praised Saleh for the ROYG's June 8 announcement
awarding the Aden Port tender to DPI as a positive symbol
that Yemen is serious about opening its economy to foreign
investment. DPI, said Ambassador, is an excellent and
experienced company with an international reputation. It is
the right choice to develop the huge potential of Aden Port
and the Aden Free Zone. Saleh responded that he personally
had made the decision. (Comment: While the tender process
was far from transparent, this indicates the President
understands that such an important contract for Yemen's
economic development needed to go to the most capable bidder.
End Comment).

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...But Hunt Oil Dispute, Not So Much
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3. (C) Ambassador said the USG was concerned that the
headline American Company in Yemen will be forced to leave
Yemen at a time when Yemen is trying to improve its
investment climate, a major tenet of economic reform (ref A).
Hunt believes its case has a strong legal basis, Ambassador
told Saleh, and has made its intentions clear to sue the ROYG
at the International Public Court in Paris. Litigation
promises to be costly and lengthy, and a crucial source of
Yemen's revenue could well be held in escrow during the
proceedings.

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Saleh: Hunt's Extension is Over, Finished!
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4. (C) "The contract is over, it is finished!" exclaimed
Saleh, "new conditions must be established." Saleh agreed
that avoiding a court battle was best. He suggested to
Ambassador that he meet with Prime Minister BaJammal and Oil
Minister Baraba to discuss "in detail" the terms and
conditions of a new PSA. "You can leak this information to
Hunt," said Saleh, "tell them they will have priority over
the other companies -- they will win." Ambassador politely
demurred. A meeting with PM BaJammal was possible, but we
could not involve ourselves directly in the negotiation.
Ambassador stressed that Hunt maintains it signed a legally
binding agreement with the ROYG for a five-year extension.
Although the firm is willing to discuss some of the financial
details, it will go to court rather than renegotiate the
extension itself, said Ambassador. (Note: Ambassador's
meeting with head of Yemen Hunt Wyndell Caverness reported
septel. End Note).

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Saleh's Fall Trip to Washington
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5. (C) President Saleh raised his upcoming visit to
Washington this fall, saying he wanted to focus on
substantive issues rather than protocol during his trip.
"Please," said Saleh, "I want to go in September. I am
going to France and Japan in November already and I get more
tired than I did ten years ago." Ambassador said September
vice November would be difficult but that he would relay the
message.

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Saleh: "I'm old, I'm tired, I May Not Seek Reelection
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6. (C) Ambassador told Saleh he looked forward to 2006 local
council elections and Presidential elections and to
witnessing Yemen's democratic process unfold. "I wonder if
it will be a close race," Ambassador asked the President.
"As for me, I might not be a candidate," said Saleh,
complaining that he was getting older and Yemen was facing
huge economic and population problems. "Yemen is not an easy
country to govern," continued Saleh, "It is like dancing in a
circle of snakes."


7. (C) Comment: Obviously Saleh is not serious about sitting
out the 2006 Presidential election. He is, however,
increasingly paranoid about a possible challenger in 2006
according to several ROYG insiders, and, no doubt,
preoccupied with succession to his long rule in 2013. Unless
the Constitution is amended for a second time, Saleh's next
term will be his last. Judging from recent attempts to
promote a cult of personality and a lack of serious movement
on democratic and economic reform, however, Saleh remains
focused not on his legacy, but on maintaining his hold on
power. End Comment.
Krajeski