BRAZIL'S PETROBRAS: NO INTENTION OF TAKING OVER OXY'S

C O N F I D E N T I A L BRASILIA 001017 SIPDIS SIPDIS NSC FOR CRONIN DOE FOR S.LADISLAW TREASURY FOR OASIA - DAS LEE, DDOUGLAS STATE PASS TO FED BOARD OF GOVERNORS FOR ROBITAILLE USDOC FOR 4332/ITA/MAC/WH/OLAC/JANDERSEN/ADRISCOLL/MWAR D USDOC FOR 3134/ITA/USCS/OIO/WH/RD/SHUPKA STATE PASS USAID FOR LAC E.O. DECL: 05/25/2016 TAGS: EPET EINV ECON PREL BR EC SUBJECT: BRAZIL'S PETROBRAS: NO INTENTION OF TAKING OVER OXY'S ECUADOR ASSETS REF: A) STATE 81527 B) BRASILIA 1006 Classified by Economic Counselor Bruce Williamson, reasons 1.4 (b) and (d). ¶1. (C) In separate meetings on May 23, visiting WHA Assistant Secretary Thomas Shannon and the Charge delivered ref A points SIPDIS to President Lula's chief of Staff, Dilma Rousseff, as well as Foreign Ministry Under Secretaries Felicio and Patriota. A/S Shannon stated that Ecuador's dispute with Occidental Petroleum had presented the USG with a big problem and added that how it was handled could easily impact the coming elections in that country. Occidental is poised to take the GOE to arbitration and the USG may open government-to-government talks under our Bilateral Investment Treaty (BIT) and possibly even take action against Ecuador's preferential market access privileges. The USG is trying to approach the issue in a way that is non-inflammatory, but the GOE must be made to understand how serious a problem this could be. U/S Felicio noted that the GOE had contacted Petrobras about helping out in managing recently nationalized sectors, but Petrobras emphatically declined, noting that it had a very full plate at the moment. ¶2. (SBU) The Charge also made ref A points to Petrobras International Director Nestor Cervero in a May 26 meeting at Petrobras headquarters in Rio de Janeiro (see septel). Cervero stated that Petrobras had no intention of taking over Occidental's Ecuador assets. He noted that Petrobras and Occidental were partners in several projects in the United States and that it would be bad policy for Petrobras to undermine its relationship with Occidental by taking over its Ecuador assets. A similar situation had come up with regard to Sudan, Cervero stated, and Petrobras had likewise demurred. Petrobras does not intend to abandon its other Ecuador projects despite the GOE action against Occidental, he added. CHICOLA