REACTION TO VICTIMS OF TERRORISM LEGISLATION

UNCLAS SECTION 01 OF 02 TRIPOLI 000113

SIPDIS

SENSITIVE

DEPT FOR NEA/MAG, COMMERCE FOR NATE MASON, ENERGY FOR GINA
ERIKSONSENSITIVE, SIPDIS

E.O. 12958: N/A
TAGS: ECIN ECON EINV EPET ETRD PREL PTER PGOV ETTC LY
SUBJECT: REACTION TO VICTIMS OF TERRORISM LEGISLATION

TRIPOLI 00000113 001.2 OF 002



1. (SBU) Summary: Recent legislation making it easier for
plaintiffs in terrorism-related lawsuits to seize foreign
government-owned assets to satisfy U.S. court judgments has
caused concern among U.S. firms partnered with Libyan companies
(especially in the energy sector),and provoked a sharply
negative reaction from the GOL. U.S. companies are attempting
to clarify and reduce their potential exposure under section
1083 of the 2008 National Defense Authorization Act (aka, "the
Lautenberg Amendment"). The Libyan National Oil Corporation
(NOC) has informed American oil companies that it is "their
problem" to solve, and has begun requiring U.S. and other
companies to conduct all operations in non-dollar denominations.
A senior MFA official warned the CDA that this law could set
back US-Libyan relations. The MFA has pressed European
governments not to cooperate with U.S. judicial efforts to
attach Libyan assets in Europe under the law. End summary.


OIL PRODUCING & OIL SERVICES COMPANIES AT GREATEST RISK


2. (SBU) U.S. companies participating in joint venture
partnerships with Libyan national oil companies assess
themselves as being at greatest risk under section 1083 of the
National Defense Authorization Act. This list includes
Occidental, ConocoPhillips, Marathon and Amerada Hess. These
companies are involved in jointly developing Libyan oilfields
and in extracting and lifting crude oil. The three U.S.
partners in the Oasis Group (Marathon, ConocoPhillips and
Amerada Hess, who are partnered with Libyan state firm Waha) pay
$2 million/month to the GOL in operating fees, and $100
million/month in taxes and royalties. Company reps assess that
these payments -- as well as jointly-held facilities and
equipment -- would be exposed to court-ordered attachment and
seizure under section 1083. U.S. oil service companies, such as
Halliburton, may also be exposed, according to local company
reps, and most service companies have frozen further expansion
until the risks are clarified. Company reps have expressed
concern to us that their GOL partner companies would view any
U.S. court-ordered attachments of payments or equipment as a
breach of contract, potentially leading to termination of their
work in Libya.

3.(SBU) U.S. companies engaged exclusively in the exploration
(as distinct from production),such as Chevron and ExxonMobil,
assess themselves to be subject to less risk for the moment,
since they make no regular payments to the GOL that would be
subject to attachment (the signing bonuses agreed in connection
with winning their Exploration and Production Sharing (EPSA)
agreements have already been paid to the GOL, and day-to-day
exploration work is contracted out to largely non-GOL entities).
Nevertheless, company reps say that they are concerned about
the longer-term impact of this legislation on their future plans
in Libya.

NOC REACTS SWIFTLY

4 (SBU) Libya's National Oil Corporation (NOC) has instructed
all international partner companies to cease conducting
transactions in U.S. dollars. U.S. oil company contacts have
privately told us that the NOC's intent was to reduce its
exposure to U.S. courts, since dollar transactions are routed
through the U.S. financial system. The edict has disrupted the
payments system in the energy sector, which has traditionally
used the dollar.


5. (SBU) The NOC's chairman, Shukri Ghanem, informed U.S. firms
in late January that they were "on their own" to resolve the
problems caused by the new legislation, hinting that the firms
would suffer the consequences for any U.S. court-ordered
disruption of their operations in Libya. U.S. company reps have
told us that they believe that the NOC could find them in breach
of their contractual obligations if U.S. courts disrupt their
monthly payment of operational fees to the NOC.

GOL NOT PLEASED


6. (SBU) Senior MFA adviser Abdelati Obeidi told CDA that the
GOL viewed the Act as a potentially serious setback to US-Libyan
relations. He said the GOL understood that the initiative had
come from the Congress, but did not understand why the
Administration failed to block it, or at least its application
to Libya, as it had done in the case of Iraq.


7. (SBU) Separately, according to European and ex-Soviet bloc
diplomats in Tripoli, the GOL has pressed their governments not
to cooperate with any U.S. judicial efforts to attachment Libyan

TRIPOLI 00000113 002.2 OF 002


assets in Europe under the Act. One European diplomat expressed
surprise at the sharp edge of the Libyan demarche, noting that
their GOL interlocutor had threatened unspecified consequences
for the country's commercial interests in Libya if the country
facilitated seizure of Libyan assets pursuant to U.S. claims.


8. (SBU) Comment: The enactment of section 1083, together with
the mid-January $6 billion U.S. court judgment against Libya in
the UTA airliner case, has caused deep concern among U.S. energy
companies operating in Libya and consternation within the GOL.
The companies are analyzing their exposure; the GOL is
misinterpreting these developments as deliberate slights or, in
the words of Obeidi, "a return to the era of sanctions." Both
are waiting to see how section 1083 will be applied, hoping, of
course, that it will not be. End comment.
STEVENS