Identifier
Created
Classification
Origin
07CONAKRY1243
2007-11-15 11:28:00
CONFIDENTIAL
Embassy Conakry
Cable title:  

GROWTH OF RESOURCE NATIONALISM IN GUINEA

Tags:  PGOV EPET GV 
pdf how-to read a cable
VZCZCXRO7180
PP RUEHPA
DE RUEHRY #1243/01 3191128
ZNY CCCCC ZZH
P 151128Z NOV 07
FM AMEMBASSY CONAKRY
TO RUEHC/SECSTATE WASHDC PRIORITY 1878
INFO RUEHZK/ECOWAS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHINGTON DC
C O N F I D E N T I A L SECTION 01 OF 02 CONAKRY 001243 

SIPDIS

SIPDIS

TREASURY FOR OFFICE OF AFRICAN NATIONS

E.O. 12958: DECL: 11/07/2017
TAGS: PGOV EPET GV
SUBJECT: GROWTH OF RESOURCE NATIONALISM IN GUINEA

REF: STATE 150999

Classified By: Economic Officer Kim Jordan for Reasons 1.4 (b) and (d).

C O N F I D E N T I A L SECTION 01 OF 02 CONAKRY 001243

SIPDIS

SIPDIS

TREASURY FOR OFFICE OF AFRICAN NATIONS

E.O. 12958: DECL: 11/07/2017
TAGS: PGOV EPET GV
SUBJECT: GROWTH OF RESOURCE NATIONALISM IN GUINEA

REF: STATE 150999

Classified By: Economic Officer Kim Jordan for Reasons 1.4 (b) and (d).


1. (C) SUMMARY. The information and analysis provided
herein is in response to reftel request regarding resource
nationalism in Guinea. END SUMMARY.


2. (C) Over the last year, resource nationalism has become
increasingly evident in Guinea since the country,s new
consensus government declared that it would review all
natural resource contracts as part of its reform agenda. The
new government, headed by Prime Minister Lansana Kouyate,
stressed that the contracts would be reviewed in order to
determine overall fairness, to the parties. Subsequently,
the offshore oil exploration contract of U.S. company
Hyperdyanmics, covering all of the coastal waters off Guinea,
was included in this review.


3. (C) The reassessment of mining and oil contracts was at
first downplayed by the government as nothing more than a
cursory review of contractual terms. However, after several
weeks the government began calling the existing contracts
unfair for Guinea and argued for significant contractual
revisions.,


4. (C) The Government of Guinea set up individual committees
which were assigned to conduct a thorough examination of each
contract. While most of Guinea's mining company contracts
were not affected by the inspection, the Russian bauxite
miner, Rusal, and U.S. oil explorer Hyperdynamics, were both
designated as having contracts requiring renegotiation. The
basis for the claim against Rusal was that when it purchased
the business it did not follow the requirements of the Guinea
privatization law. As for Hyperdynamics, the Government said
that its contract was too broad as it covered all of Guinea's
offshore, while these type of contracts normally are parceled
out geographically to several different companies. In
support of this position, maps of offshore oil exploration
parcels for neighboring Guinea-Bissau and Liberia were
published in local newspapers. These maps demonstrated that
only Guinea had sold all of its exploration rights in a
single contract.


5. (SBU) The government has banned all advertising by
Hyperdynamics because the company has refused to enter into
renegotiations. Rusal, on the other hand, is cooperating
with the government. The principle officers of Hyperdynamics
have appealed to the Guinean President for relief, whose
decision remains pending.


6. (SBU It should also be noted that bauxite companies have
been mining in Guinea for decades without serious problems.
In addition, multi-nationals, such as U.S. company Alcoa,
conduct business here, and were not affected by the contract
reviews. They cooperated and completed the process without
renegotiation.


7. (SBU) At an October 31, 2007 cabinet meeting, the
government invited all companies that had not yet entered
into negotiations to come to the table to discuss the
argument for and against renegotiation. The government also
restated that it will be firm in its defense of national
interests, but remain open to negotiating mutually beneficial
terms. While not explicitly naming Hyperdynamics, the U.S.
company is the only company refusing to negotiate with the
government.


8. (SBU) Aside from the above mentioned demand for
renegotiations, Embassy is not aware of any other demands for
such actions.


9. (C) The Government of Guinea appears to be the main
beneficiary of the renegotiations. It currently has an
annual budget deficit in the neighborhood of $300 million,
representing about 45% of its gross national revenues, so
increasing income from royalties or taxes is a priority.
Efforts to renegotiate are clearly fueled by the
government,s desperate need for additional funds to improve
internal/external budget balances, or required for an IMF
program. However, given the high level of corruption in
Guinea, it is possible that unknown individuals will be able
to access any new revenue streams.


10. (C) With respect to the Hyperdynamics contract, there
are unconfirmed rumors that Brazilian or other companies,
possibly Chinese, are behind the efforts to revise the
contract so that they can then participate in the offshore
oil and gas exploration.


CONAKRY 00001243 002 OF 002



11. (C) Post recommends that a consistent message be
broadcast to all levels of Guinea's government advocating for
respect for the rule of law.
CARTER