NOPEC WORRIES US, ARAMCO LAWSUITS WORRY US MORE

C O N F I D E N T I A L SECTION 01 OF 04 RIYADH 001475

SIPDIS

SIPDIS

DEPT OF ENERGY PASS TO A/S HARBERT, DAS HEGBURG, MWILLIAMSON
DEPT OF TREASURY FOR A/S CLOWERY

E.O. 12958: DECL: 07/10/2017
TAGS: EPET ENRG EINV IR SA
SUBJECT: NOPEC WORRIES US, ARAMCO LAWSUITS WORRY US MORE

REF: A. ROSS-RJACHIM/GALLOGLY/HART 7/10/2007 E-MAIL

B. RIYADH 1416

C. SECSTATE 88197

Classified By: DCM Michael Gfoeller for reasons 1.4 (b) and (d).


1. This is an action request. Please see paragraph six.

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SUMMARY
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2. (C) In a July 8 meeting, HRH Deputy Minister of
Petroleum (MinPet) Prince Abdulaziz bin Salman bin Abdulaziz
Al-Saud indicated his concern with pending NOPEC legislation,
but frankly told Embassy officers that he was far more
concerned with the nuisance lawsuits cropping up against
Saudi Aramco in U.S. district courts alleging price fixing in
concert with OPEC. He told us he would like the USG to file
a "statement of interest" (SOI) on behalf of Saudi Aramco
invoking the act of state and sovereign immunity doctrines in
these cases. He told us that King Abdullah specifically had
raised the lawsuit issue with Vice President Cheney during
his May visit - rather than NOPEC - and that the Saudi
government would judge the Administration's willingness to
file an SOI as a test of good faith on the lawsuit and NOPEC
issues. Prince Abdulaziz believes a SOI would discourage
additional lawsuits and send a potent signal to Congress that
would lessen NOPEC's potential for passage. In contrast to
the stern reaction the Prince Abdulaziz delivered last week
(ref B),he appeared willing to consider strategies to move
forward on NOPEC. He estimated NOPEC has a "5%" chance of
passing, but "we must consider all contingencies, and this is
being propelled in a nasty way by public opinion"

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Act of State and Sovereign Immunity Doctrines At Stake;
"We Are Asking You to Intervene"
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3. (C) On July 8, the DCM, Pol Counselor, and Energy
Attache met with HRH Deputy Petroleum Minister Prince
Abdulaziz bin Salman bin Abdulaziz Al-Saud to discuss the
NOPEC issue. Prince Abdulaziz told us that that
Minister Naimi recently had written a letter to Secretary
Bodman protesting NOPEC, and provided a copy of the
letter. Despite the broadside he delivered against NOPEC a
few days prior (ref B) Prince Abdulaziz then
steered the conversation towards lawsuits filed against Saudi
Aramco in U.S. district courts alleging restraint
of trade and price-fixing conspiracies in the sale of
petroleum products. Prince Abdulaziz explained,
"It's very crucial you understand how this is evolving.
Saudi Aramco is being named as a co-conspirator in
legal cases that are growing larger by the day." Prince
Abdulaziz stated it appeared it had become "a game"
to take Saudi Aramco to court in the US, with the same
lawyers cynically taking the firm into court
in "so many cases across so many districts." The Prince
called the onslaught "frustrating and
financially draining." He added, "There is a straightforward
connection between NOPEC and the cases
against Aramco. It is the "political question (e.g., act of
state doctrine) and sovereign immunity
doctrines. We rely on you to tell the courts that they are
the purview of the executive branch."
He complained action had not been taken earlier. "We have
written to the USG to request intervention
at the district court level - we're vindicated by precedent.
If this had been done earlier, it would have
prevented us from being taken from court to court. We are
asking you to intervene."


4. (SBU) Embassy Riyadh is currently aware of two class
action suits filed by plaintiffs Fast Break
Foods and Green Oil Company against Saudi Aramco. Two other
class action suits by plaintiffs Spectrum Stores
and Countrywide Petroleum have been filed against PDV and
Citgo Petroleum and do not explicitly target
Saudi Aramco. Prince Abdulaziz nonetheless considers Saudi
Arabia and Saudi Aramco "implicit
targets" of the two latter cases, as all OPEC member states

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are listed as "un-named co-conspirators." Prince
Abdulaziz has stated there are additional cases filed against
Saudi Aramco as well, and has promised to
provide us additional information as soon as possible.

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Give Us a Statement of Interest Now
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5. (C) Prince Abdulaziz told Embassy officers that MinPet
legal counsel has compiled a spreadsheet of 53 different
cases since 2003 in which the USG has filed SOIs (ref A).
The Prince stated that he was "asking for USG intervention
now", as the plaintiffs were seeking "billions and billions,
and forceful divestiture of Aramco property." He told us
that while the USG has told him it rarely filed SOIs, his
legal team's research had found this not to be so. He
appeared disappointed the USG has not moved more swiftly to
respond to his request to file a SOI.

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Interagency Committee Access Request
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6. (SBU) Prince Abdulaziz conveyed a request for MinPet's
counsel, White and Case, to meet with the inter-agency group
handling the Saudi Aramco lawsuits issue. (Note: Embassy
Riyadh has since learned such a meeting has in fact been
held. End note.) Action Request: Embassy Riyadh requests the
interagency committee explore whether it would be appropriate
to hold another meeting with MinPet counsel to update
information exchange.

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Production is a Sovereign Government Decision
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7. (C) Switching back to the NOPEC issue, Prince Abdulaziz
drew a firm line in the sand on the issue of production as a
sovereign government decision. He appeared quite taken aback
that Congress would question a nation's right to decide when
and how to produce its own natural resources. He noted,
"Even in Iraq, where the petroleum system was designed with
USG civilian input, it is recognized that production level is
a sovereign government decision."

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Port Arthur Expansion Hinges on USG Action
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8. (C) Prince Abdulaziz then moved on to the near-term
impact of the court cases and NOPEC on the U.S. investment
climate, and Saudi Aramco's final investment decision on the
proposed expansion of the Motiva Port Arthur refinery. Saudi
Aramco is currently considering whether to expand its Motiva
refinery in Port Arthur, Texas. The Saudi Aramco-Shell joint
venture refines 285,000 barrels per day (bpd); the proposed
325,000 bpd expansion would make Port Arthur the largest
refinery in the US. Shortages in U.S. refinery capacity have
contributed significantly to petroleum product price
volatility in recent years. Prince Abdulaziz stated, "Our
final decision hinges on what reasons we have to pursue
investment. We are facing daunting (court) cases. We are
pursuing the engineering, but we need solid intervention from
the USG to have the comfort we need for this project."
Prince Abdulaziz underscored the tight timeline for the
refinery expansion decision. "I greatly appreciate the many
efforts Secretary Bodman and his staff have made on our
behalf. However, though I recoil from saying it so
forthrightly, these decisions are perhaps beyond our
paygrade. The people at Aramco are really very upset. They
have to make a final decision on the expansion of the Port
Arthur refinery by July or August."

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No More Serious Thing the USG Could Do than File A SOI
King Abdullah Raised Aramco Lawsuit Issue with VP Cheney
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9. (C) Prince Adbulaziz continued, reflecting
disappointment the USG had not yet taken action in the
district court cases. "We want to register our serious

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disappointment that the USG has not yet intervened in the
district court cases. There is nothing greater that the USG
can to do demonstrate its commitment in the NOPEC issue than
intervene in these court cases." Prince Abdulaziz
underscored that he is "ready to fly at any time to
Washington to meet with DOE or the interagency committee to
discuss the cases against Saudi Aramco. What is crucial in
this issue is that the spread of the fire is stopped. Every
week there is a new case. The cases are here already. NOPEC
will just add insult to injury. The SOI would say a lot
about how much the USG is committed to fending off this
legislation. The lawsuits are our deepest concern,
candidly."


10. (C) Prince Abdulaziz continued, discussing
Vice-President Cheney's May 2007 visit. "During the visit of
the Vice-President, the King raised the cases, not NOPEC."
Prince Abdulaziz made clear the decision to raise the
lawsuits instead of NOPEC was a calculated political decision
taken at the highest levels. He continued, adding, "If the
USG intervenes in these cases, it will be a serious
demonstration, more serious than a NOPEC veto - there is not
a more serious thing the USG can do - than submitting a
brief to the court. If this happens, the people in Congress
will see the Administration practicing what it says." In the
interests of moving the lawsuits issue forward, Prince
Abdulaziz agreed to forward a background paper by 14 July to
the Embassy sharing more details on the legal cases being
filed against Saudi Aramco.


11. (C) Prince Abdulaziz is particularly piqued, as he
perceives NOPEC spurring more legal action against Saudi
Aramco. He explained, "NOPEC is the enabling element for
people to take more cases to court against Aramco."
Conversely, he hopes the Administration filing an SOI will
send a public signal which would curtail additional lawsuits.
Prince Abdulaziz frankly assessed, "I don't believe NOPEC
will become law, I give it a 5% chance, but as a policy
person, we're commissioned to look at all possibilities. I
wonder if even a veto will hold. Even with the assumption
that the Administration in good faith will practice the
Statement of Administration Policy and the President will
veto it, there is that 5% contingency, what can we do? This
is being propelled in a nasty way by public opinion."

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Government Fears Impact of NOPEC Outside Oil Sector
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12. (C) Prince Abdulaziz reflected on the wide range of
concerns the Saudi government and royal family are expressing
to him concerning possible impacts of NOPEC. He stated,
"SAMA (The Saudi Arabian Monetary Agency, the central bank)
is really concerned, they have lots of accounts in the U.S."
He also told us that individuals are concerned will they be
targeted as an "accomplice" if they visit the US, musing, "We
can't say it's not possible." He wondered out loud, "Could
King Abdullah be served papers on a state visit? We have to
re-look at our whole investment approach. NOPEC is
tantamount to the Arab embargo inversely practiced by the US.
How can we unload our (crude tanker) vessels in US
jurisdiction if we're subject to this?"

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Looking To the Future: What Can you Tell Us About
Future Administrations?
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13. (C) Prince Abdulaziz has been well-informed by his
legal team, and understands the current Administration will
not take action under NOPEC. However, potential action of
future administrations remain a source of concern,
particularly for petroleum investments such as refineries
with a 30-plus year lifespan. Prince Abdulaziz noted, "Some
of our lawyers are serious Democrats. This administration
won't make an issue of this bill, but they can't guarantee
future administrations."

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I'm Trying to Keep This From Boiling Over;
Need for Contingency Planning
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14. (C) Prince Abudulaziz spoke at length about his efforts
to keep tempers from flaring within the Saudi government and
OPEC members, many of which considered NOPEC an affront to
their consistent efforts to meet U.S. and world energy
demand. The Prince told us, "I'm trying to keep the lid on
the box, but it's boiling. I've had to resort to scare
tactics to keep it within this building." He explained his
efforts to tamp down anti-NOPEC agitation within the Saudi
consultative council, the Majlis al Shoura, and bemoaned that
there is little the Saudis can do on NOPEC that will not
aggravate the situation. He told us, "I took this issue to
the Shoura Council two weeks ago. We spent an hour and a
half of five hours on NOPEC just to convince people to be
quiet on this, and not speak out against Congress. I had to
tell an OPEC minister to be quiet. We understand the best
position on NOPEC is to be quiet, what else can we do?
Anything we do would invigorate interest in the bill. This
bill is based on elections. The FTC (Federal Trade
Commission) has said one, two, three times that there is no
price manipulation in this market. The facts and logic do
not support the bill. Elections support the bill."


15. (C) Prince Abdulaziz also focused on the need for
contingency planning in the event that NOPEC were passed into
law, noting that the question as to whether a veto of NOPEC
would hold remained open. He stated, "I cannot just be a
sitting duck, I have to do a risk exposure assessment. I'm
not questioning the good faith of the Administration, but we
can't act without total dis-regard for an energy bill that's
still flying between conference committees. Things get
added, drop out, pass, don't pass -- as a policy person, I
must look at how we'll be affected. We have no interest in
creating a crisis here. Clarity and stability in our
bilateral dealings for an enabling environment and further
investment in the US are paramount."

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Iran's Aqazadeh: Didn't Trust Him Then, Don't Trust Him Now
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16. (C) In side comment, Prince Abdulaziz told us he does
not consider Iranian Atomic Energy Head Gholamreza Aqazadeh
to be trustworthy. He re-counted a story of a difficult OPEC
session in 1987, when, as a junior official in his first big
negotiation, the Prince spent 12 hours negotiating with
Aqazadeh, who was then Iran's oil
minister. At the end of the session, Aqazadeh went
downstairs, and told the press "180 degrees of what was
agreed! And now he's the head of Iran's nuclear portfolio."
The Prince charged, "I've never had a good negotiation
experience with the Iranians. They always renege on their
contracts, re-interpret, and differently interpret."

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Comment
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17. (C) Prince Abdulaziz has astutely noticed that NOPEC
has grabbed the USG's attention in a way that his earlier
requests for intervention in the lawsuits against Saudi
Aramco have not. In bit of political jujitsu, he is using
our willingness to attend to NOPEC to extend our interest to
another issue which is more front and center for him right
now. The NOPEC bill is a large threat to Saudi interests -
one that is a couple of months in the future. However,
Prince Abdulaziz perceives the lawsuits as a threat right
now, one that could derail the expansion of the Port Arthur
refinery, possibly by the end of the summer. The Prince
clearly believes the USG is being unresponsive to his request
to file a SOI on behalf of Saudi Aramco, given the large
number of such interventions the USG has filed in past years.
As he waved his spreadsheet of SOIs in the air, he seemed
to be asking, "Who else do you have on this list of 53 whose
interests are more important to you than us?"

FRAKER