RUSSIA INTERESTED IN LIBYA'S ECONOMIC POTENTIAL

C O N F I D E N T I A L MOSCOW 000184

SIPDIS

SIPDIS

E.O. 12958: DECL: 01/24/2018
TAGS: PGOV PREL ECON LY RS
SUBJECT: RUSSIA INTERESTED IN LIBYA'S ECONOMIC POTENTIAL

Classified By: Ambassador William J. Burns for reasons 1.4 (b/d).


1. (C) Summary: Foreign Minister Lavrov's recent visit to
Libya is part of a concerted GOR effort to improve relations
with Tripoli and win contracts as Libya develops
economically. The GOR is particularly interested in Libyan
hydrocarbon resources, infrastructure projects, and possible
construction of a nuclear power plant. The GOR recognizes
that despite long-standing ties to Libya, Russia must compete
with Europe and the U.S. for Libyan business. Lavrov also
discussed Libya's seat on the UNSC, where, the GOR is
confident, Libya will support the Russian position on
international issues. The MFA does not rule out a Putin
visit before he leaves the Presidency in May. End summary.


2. (C) FM Lavrov cast his December 23-24 trip to Libya to the
Ambassador as providing the necessary high-level intervention
to cut through the opaque Libyan bureaucracy and invigorate
efforts to lay the foundation of a visit by President Putin.
According to MFA Second Secretary Maxim Ganzey, Lavrov signed
agreements intended to further bilateral trade and economic
cooperation, a Russian priority. The GOR and Russian
business hope to tap into Libya's $80 billion government
spending program intended to use oil revenue to improve
infrastructure and economic conditions. Among the possible
projects Lavrov discussed with Libyan officials were oil and
gas exploration and development, electric power plants,
housing construction, and nuclear power. Representatives of
Rosatom accompanied Lavrov and gave a presentation on
construction of a nuclear plant for Libyan officials,
according to Ganzey. Lavrov was also accompanied by
representatives of Russian Railways, who hope to land a
contract in Libya. Ganzey explained that Russian Railways
intended overseas projects to be a significant element of its
business activity, and pointed to the announcement on January
21 that this Russian government agency had won a $800 million
contract to construct a 323-mile rail line in Saudi Arabia.


3. (C) The groundwork for Lavrov's visit was laid by Russian
and Libyan government and business representatives working
under the auspices of the joint Business Council, which had
outlined an array of large-scale Libyan projects in which
Russia might take part. Russia believed its long-standing
ties to Libya put it in good stead to win Libyan business,
but understood it would need to compete against American and
European companies. Ganzey noted that the Europeans,
especially the French, have been quick to establish business
relations with Libya following the removal of international
sanctions against the Qadhafi regime.


4. (C) Russian businesses have not received any special
treatment from Libyan authorities, according to Ganzey.
Russian firms Gazprom and Tatneft have won the right to
develop Libyan gas and oil fields, but have failed to win all
the contracts they sought. Lukoil also hoped to become more
active in Libya. Ganzey commented that the continuing
detainment of Aleksander Tsygankov, Lukoil's Tripoli
representative, for possible industrial espionage is a
"strange" situation. Tsygankov has been held in detention
since November 2007, but never formerly charged. The matter
was discussed during Lavrov's visit and would hopefully be
resolved shortly.


5. (C) Russian interest in Libya also stems from the
country's increasing diplomatic activity and membership on
the UNSC. While it is too early to predict the role Libya
would play on the UNSC, the GOR appears confident Libya would
support its position on international issues, including the
Iranian nuclear program. Libya had become more active in
African diplomacy, which Ganzey attributed, in part, to
increasing confidence that coincided with rising oil and gas
revenues.


6. (C) Comment: The Russians find the Libyans frustrating
partners, but see significant contracts at the end of these
difficult diplomatic exchanges. While the GOR and Russian
press declared Putin's January 17-18 visit to Bulgaria his
last as President, MFA Middle East and North Africa Director
Vershinin did not rule out a Tripoli visit.


7. (U) Minimized Considered.

BURNS