SYRIAN OIL DEAL DEMARCHE: INDIAN RESPONSE

C O N F I D E N T I A L SECTION 01 OF 03 NEW DELHI 000166

SIPDIS

SIPDIS

DEPARTMENT FOR SA/INS AND EB/ESC
DOE FOR DAVID PUMPHREY, TOM CUTLER, MIRIAM SALERNO

E.O. 12958: DECL: 01/09/2016
TAGS: PREL EPET ENRG ETRD PGOV IN SY CH IS LE
SUBJECT: SYRIAN OIL DEAL DEMARCHE: INDIAN RESPONSE

REF: A. (A) 2005 STATE 230115


B. (B) 2005 NEW DELHI 9343

Classified By: DCM ROBERT O. BLAKE FOR REASONS 1.4 (b) and (d)


1. (C) SUMMARY: In response to Ref-A demarche points,
Additional Secretary Ahmad of India's Ministry of Petroleum
and Natural Gas told CDA that he had had concerns about the
economic benefit of the joint India-China purchase of equity
in a Syrian oil field, and that -- had he known there would
be such a strong subsequent U.S. objection -- he might have
withheld his recommendation of approval for the deal.
PolCouns and Poloff also delivered Ref-A demarche to MEA
Middle East officials on January 6, who responded that while
New Delhi supports US objectives regarding reforming Syrian
behavior, the oil deal was a business deal worked out without
GOI input. New Delhi is most concerned with avoiding
increased conflicts in the region, the MEA stressed. END
SUMMARY.

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MINISTRY OF PETROLEUM AND NATURAL GAS
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2. (C) CDA Robert O. Blake met on January 6 with Talmiz
Ahmad, Additional Secretary (for International Cooperation),
India's Ministry of Petroleum and Natural Gas (MPNG) to
discuss India's energy relations with Iran (septel) and to
deliver Ref-A points concerning the agreement announced
December 20, 2005 to sell a 37% stake owned by Petro-Canada
in a Syrian oil and gas field to a joint venture of companies
owned by India's Oil and Natural Gas Corporation (ONGC)
Limited and the China National Petroleum Corporation pending
SARG approval. The CDA left as a non-paper the demarche
taking points.


3. (C) Noting that the USG has bilateral sanctions against
Syria, the CDA underscored USG concerns that the Syrian
Government (SARG) has not satisfactorily responded to UNSC
resolutions mandating SARG cooperation on the investigation
of the assassination of former Lebanese Prime Minister
Hariri. The USG is concerned that the India-China investment
would send a signal to Syria that the international situation
had returned to normal and that the SARG need not change its
behavior. The USG believes strong international pressure is
needed to get Syria to the table, the CDA stressed.


4. (C) Ahmad -- who had served in India's foreign service in
Saudi Arabia, as Ambassador to Oman, and in their Middle East
section -- indicated that he had known Hariri and he noted
the high regard Hariri had enjoyed in diplomatic circles and
from the Saudi Government. Calling the SARG an authoritarian

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regime, which would conduct actions such as the Hariri
assassination "in parallel," Ahmad said such a move "made no
sense, was stupid and absurd, and could have only negative
consequences for Syria." Reviewing the talking points, Ahmad
said he had not expected the USG objection would be so strong
and that, had he known before he had recommended approval of
the deal, he might not have agreed to it.


5. (C) He said he has not been enthusiastic about the GOI's
general policy of spending large amounts of money on equity
in overseas oil and gas assets -- including those "marginal
assets" being unloaded by major companies seeking to reinvest
cash elsewhere. He had had doubts when he agreed
specifically to buying these Syrian oil field assets, which
have been producing for 20 years and are expected to decline.
India's ONGC and China's CNPC would share expected oil
output of three million metric tons annually (about 60,000
barrel a day). An "American financial company" had brought
the deal to the GOI for consideration, Ahmad said, claiming
he did not remember which company, but mentioning Citicorp
and Goldman Sachs. Ahmad questioned whether these finance
companies had performed adequate due diligence to assure that
the assets' production potential justified the price.


6. (C) The GOI approval process on these acquisitions has
been "too rushed" and had not allowed time for prudent
review, Ahmad said. The Board of the ONGC had been given 30
minutes to consider and approve the deal; then the "Empowered
Committee of the Secretary" of MPNG had had two hours to
consider and approve it; after which the MPNG passed it to
the GOI Cabinet with a half-day time frame for approval.

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MINISTRY OF EXTERNAL AFFAIRS
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7. (C) PolCouns and Poloff delivered Ref-A demarche to
MEA Joint Secretary (West Asia and North Africa) M.
Manimekalai, accompanied by WANA Director KG Govindan and
Under Secretary Subir Dutta. PolCouns emphasized the need
to encourage Syria to comply with the relevant UNSCRs and
moderate its behavior, particularly in its dealings with
its neighbors. Manimekalai agreed that India would like to
see Syria improve its behavior, particularly in helping to
resolve the regional conflicts involving Israel, Lebanon,
the Palestinians, and Iraq. New Delhi believes that the
governments in Damascus and Beirut are both working with
the Mehlis commission "within their capabilities," she
said. The Syrians are "beginning to understand" the need
to reform their behavior, she argued, and outside pressure
would only rally public opinion behind the regime's worst
policies.

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8. (C) Regarding the oil transaction, Manimekalai pointed
out that although ONGC is a majority state-owned firm, its
directors made this decision purely from a business
standpoint with an eye to shareholder value, and the GOI
had no input in the deal. Her immediate question for us
was, "are you looking at sanctions" on the companies? The
whole question of Syria needs to be "handled carefully,"
the Joint Secretary stated, stressing that India "does not
want to see another thing like what happened in Iraq."
Although India does not have as much influence as the US
does in the region, Manimekalai concurred that New Delhi is
interested in promoting democracy as much as possible,
which brings with it stability, development, and a bulwark
against terrorism.
MULFORD