MARATHON ONE STEP CLOSER TO DIVESTING

C O N F I D E N T I A L DAMASCUS 002189 SIPDIS SENSITIVE SIPDIS NEA/ELA NSC FOR ABRAMS/DORAN/SINGH TREASURY FOR GLASER/LEBENSON EB/ESC/TFS FOR SALOOM E.O. 12958: DECL: 04/10/2015 TAGS: EAIR ECON ETTC SY SANC SUBJECT: MARATHON ONE STEP CLOSER TO DIVESTING REF: DAMASCUS 196 Classified By: CDA Stephen Seche for reasons 1.5 b/d ¶1. (U) On May 10, the AP and other news services reported that Marathon Oil Company concluded a USD 127 million deal to develop an oil and gas concession in the center of Syria despite looming US sanctions. In spite of the news report implying otherwise, Marathon,s concession is actually quite old and has been in dispute with the SARG since the 1980,s. In fact, concluding the agreement reported today is a necessary first step for Marathon to be able to sell its concession to Petro-Canada, and NOT a new investment. The Marathon Petro-Canada deal was negotiated over the course of 2005 and concluded before the end of the year, though it has been waiting a formal signing for months before it could be sent to Parliament for final approval (reftel). ¶2. (C) On May 9, Petro-Canada general manager, Hisham Yazigi told us that once Parliament approves the agreement, Petro-Canada will pay Marathon Oil USD 51 million for a 90 percent interest in the concession, as per a pre-existing agreement with the Syrian Ministry of Petroleum and Natural Resources. Yazigi complained to us that he did not understand why the SARG was insisting Marathon retain a ten percent interest in the concession, but opined that Petro-Canada will soon acquire that final ten percent as well. Yazigi commented that the USD 51 million his company will pay Marathon would not equal Marathon,s prior investment in the block, which Marathon executives previously told us stood at approximately USD 180 million, but was the best deal Marathon could expect given the circumstances. ¶3. (C) Comment. Today,s news story is misleading at best and one more example of the SARG twisting a divestiture into a foreign direct investment headline, and using the story to imply relations are improving between the regime and the USG. The SARG requiring Marathon to retain a ten percent interest in the concession, for at least the short term, is likely attributable to its management of this media message. The real story is one the SARG is much less willing to have told ) most US companies continue to actively work to divest their business interests in Syria. SECHE