DEBT, ARMS, AND ENERGY ON AGENDA FOR QADHAFI-PUTIN MEETING

UNCLAS SECTION 01 OF 02 TRIPOLI 000319

SIPDIS

SIPDIS

DEPT FOR NEA/MAG AND EUR/RUS

E.O. 12958: N/A
TAGS: PGOV PREL KNNP ETTC ENRG PINR ELTN RS LY
SUBJECT: DEBT, ARMS, AND ENERGY ON AGENDA FOR QADHAFI-PUTIN MEETING

REF: A) TRIPOLI 297, B) 07 TRIPOLI 1038

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1. (C) Summary: With Russian President Vladimir Putin scheduled
to arrive on April 16 for an overnight visit, hundreds of
Russian security and support staff have descended on Tripoli,
filling the capital's major hotels, old city and shopping
districts. Confirming media reports, Russian Embassy officials
say Putin's agenda for meetings with Leader Muammar al-Qadhafi
will include rescheduling Soviet-era debt, and discussing
military equipment sales, gas production and a possible civilian
nuclear energy agreement. Officials from Rosoboroneksport and
Gazprom will accompany Putin. End summary.


2. (C) Putin will overnight at Tripoli's sole (nominal)
five-star venue, the Corinthia Baab Afriqiya Hotel (which also
houses the US Embassy). Hundreds of busy Russian advance
officials have managed to make time to tour Tripoli's Old City
and to shop for inexpensive knock-off clothing and goods in
adjacent markets. The Slovak Ambassador told the CDA that the
Russian delegation comprises some 580 individuals arriving in
Triopli on six to eight Russian aircraft.


3. (C) Russian Poloff Evgeny Kozlov told P/E Chief on April 14
that after fierce negotiations with the GOL over the venue for
the visit, Putin will remain in Tripoli for meetings with Leader
Muammar al-Qadhafi. It is not expected that Putin will travel
to Qadhafi's hometown of Sirte, where he often prefers to host
visiting heads of state. Confirming media reports, Kozlov said
Putin's agenda for his meetings with Qadhafi consist of
rescheduling Soviet-era debt and discussing conventional
military equipment sales, natural gas production and a possible
civilian nuclear energy agreement. Kozlov said finalizing a
mechanism for settling Libya's debt, which he put at "several
billion dollars", was a key priority for Putin. (Note: Media
reports, citing Russia's 2007 budget, claim a figure of $3.5
billion. End note.) He conceded that a possibility was an
arms-for-debt structure akin to that brokered by Russia with
neighboring Algeria in 2006. In that deal, he said, Russia
forgave Soviet-era debt and Algeria agreed to purchase Russian
military equipment.


4. (C) Kozlov said an arms-for-debt deal had been under
discussion for "several years" under the rubric of a joint
Russian-Libyan military cooperation council established in the
late 1990's (see ref B). Russian news agency Interfax reported
April 14 that the deal would include $2.5 billion worth of
anti-aircraft systems, MiG and Sukhoi tactical aircraft,
helicopters, submarines and warships. Kozlov confirmed that
officials from Rosoboroneksport were among Putin's delegation.
(Note: As reported reftel, a Rosoboroneksport official told
former Congressman Curt Weldon that sales of tactical and
strategic airlift aircraft and armored vehicles, and overhaul of
Libyan naval vessels, would be on the table. End note.)


5. (C) Confirming that Gazprom officials would also number among
Putin's party, Kozlov said discussions with Qadhafi were
expected to touch on greater involvement by Russian hydrocarbon
giant Gazprom in projects in Libya in connection with Italian
company Eni. Following a publicized meeting in Moscow last week
between Eni chief executive Paolo Scaroni and Gazprom chief
Alexei Miller, it was announced that Gazprom is in talks with
Eni about a potential asset swap that would give Gazprom access
to gas fields in Libya. As reported ref B, Gazprom won
exploration and production rights in the December 2007
Exploration and Production Sharing Agreement bid round for three
blocks of area 64 in the Ghadames Basin. Local oil and gas
contacts say Gazprom is keen to expand its presence in Libya;
media reports suggest the company's expansion into Libya is part
of a deliberate strategy to further monopolize gas supplies for
Europe's lucrative market.


6. (C) Although media attention to the issue has abated in the
run-up to the visit, Kozlov reiterated remarks reported ref A
that Russia intends to capitalize on a "golden opportunity" to
sign a general framework agreement on civilian nuclear
cooperation during Putin's visit. Other diplomatic contacts
have reported that the Russians hope to exploit the fact that
French-Libyan civilian nuclear cooperation has not progressed to
the GOL's satisfaction since a parallel agreement was signed
during President Sarkozy's visit to Libya last year. Kozlov
suggested that a Russia-Libya civilian nuclear agreement
could/could also be linked to forgiving Libya's Soviet-era debt.
(Note: It is unclear how this would work, since the civilian
nuclear deal has been characterized to us as a general framework
agreement, with commercial details to be negotiated and
finalized in the future. End note.)


7. (C) Comment: Following in the tradition of Sarkozy's visit

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to Tripoli and Qadhafi's December 2007 stops in Paris and
Madrid, Putin appears poised to engage in some high-stakes
commercial diplomacy. The GOL traditionally uses high-value
commercial contracts as expressions of its political goodwill,
and is working to cast the visit as one more manifestation of
its policy of successful engagement with European partners. End
comment.
STEVENS