GOL VIEWS ON DISPOSITION OF C-130'S IN GEORGIA AND POSSIBLE

C O N F I D E N T I A L SECTION 01 OF 03 TRIPOLI 000481

SIPDIS

DEPT FOR NEA/MAG

E.O. 12958: DECL: 6/10/2018
TAGS: PGOV PREL MARR MASS LY
SUBJECT: GOL VIEWS ON DISPOSITION OF C-130'S IN GEORGIA AND POSSIBLE
PURCHASE OF SPARE PARTS AND NEW AIRFRAMES

CLASSIFIED BY: Chris Stevens, CDA, U.S. Embassy Tripoli, Dept of
State.
REASON: 1.4 (a),(b),(d)

1. (C) Representatives of Lockheed Martin and the Office of the
Secretary of the Air Force traveled to Libya June 2-4 to meet
with officials of the Government of Libya (GOL) to discuss the
disposition of eight C-130H aircraft purchased by Libya in 1974,
which were not granted export licences and remain in Georgia,
and maintenance for the nine other C-130's that currently
comprise Libya's fleet. The U.S. team met with GOL officials on
June 3.

U.S. Participants:

- Costas Papadopolous, Vice President of Corporate Development
for the Arabian Gulf, Libya and Pakistan, Lockheed Martin
Corporation
- Captain John Schutte, Country Director, Office of the
Secretary of the Air Force/IARM Middle East/Africa Division
- Colonel Kyle Carnahan, Defense Attache, U.S. Embassy - Tripoli
- John Godfrey, Political and Economic Chief, U.S. Embassy -
Tripoli

GOL Participants:

- Brigadier General Mahmoud Mustapha Ghasia, Strategic Airlift
Commander, Libyan Air Force
- Colonel Muhammad Asur el-Ghawi, C-130 Maintenance Chief,
Libyan Air Force
- Said Gseebat, Legal Adviser
- Muhammad Matari, Director of the Americas Department, Ministry
of Foreign Affairs

U.S. POSITION


2. (C) The U.S. team stressed that the goal of the meeting was
not/not to reach final agreement on the way ahead, but rather to
identify issues about which the GOL had questions and to discuss
possible solutions. Papadopolous underscored the preference of
Lockheed Martin (LM) that further communications remain in a
government-to-government channel to ensure full transparency for
all actors involved in the process; LM would respond in writing
through DOD and State to the questions and issues raised by GOL
interlocutors. The GOL officials agreed to that formulation.
The two sides agreed to address four main issues: 1) disposition
of the eight C-130H's purchased by Libya in 1974, for which
export licenses were not granted and which remain in Marietta,
Georgia; 2) spare parts for Libya's extant fleet of 7 C-130H's
and 2 C-130 L-100's; 3) the possibility of sending a U.S. Air
Force-Lockheed Martin joint technical team to Libya to assess
the C-130 fleet and identify logistics/maintenance needs, and;
4) the capabilities of the new C-130J variant and GOL interest
in the possible purchase of that aircraft.

LIBYAN POSITION


3. (C) MFA Americas Desk Director Muhammad Matari stressed that
GOL must see movement on resolution of the outstanding issue of
the C-130H's in Georgia in order to facilitate movement on other
issues. Characterizing the aircraft as "hostages" of USG
policy, he stressed that it had been a political decision to
block their export, despite the fact that the GOL had paid for
the aircraft. Suggesting the GOL was limited in its ability to
resolve the issue by domestic political constraints, he said
that "at all levels - popular and political" in Libya there was
the strong feeling that Libya should be "compensated" for the
eight C-130H's. A key consideration for the GOL with respect to
possibly repairing the C-130H's, procuring spare parts for
Libya's current fleet, and purchasing new C-130J's was whether
the USG would grant necessary export licenses. It would be
"politically fatal" for senior GOL leaders if they pursued
further purchases of parts and airframes and had those blocked
again by the USG because of export license issues. The GOL had
previously requested in connection with a June 2007 visit to
inspect the aircraft an official statement of the USG's position
on whether it would grant export licenses for the eight C-130H's
in Georgia if/if they were repaired. It had also asked whether
export licenses would be needed and forthcoming for purchases of
spare parts for its current fleet. The GOL had not received
answers to either question to date; a USG statement of position
on those issues would be necessary to facilitate forward
movement.

TAKEAWAYS


4. (C) After a lively but collegial discussion, the two sides
agreed on the following points for follow-up:

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- USG Position on Aircraft Disposition and Export Licenses: The
USG, in coordination with LM, would ideally provide an official
position to the GOL on aircraft disposition and compensation for
the eight aircraft at Marietta. The position would include
assurances that the export of potentially repaired C-130H's,
spare parts, technical orders or future equipment purchases
would not/not be blocked due to export license or other concerns.

- Compensation for C-130H's: The Libyan side stressed that if
the eight aircraft are beyond repair, or if it is not
economically feasible to repair them, they expect and would be
amenable to "fair" compensation for the airframes. After
initially insisting that such compensation should be equal to
the amount of the original purchase price, the Libyan side
conceded that some form of partial compensation would be
acceptable. Matari stressed that it did not matter, from the
GOL's perspective, whether the compensation came from LM or the
USG; the critical point was that Libya must be compensated in
some tangible way. The Libyan side suggested that a mechanism
for such compensation could be a discount in the amount of a
mutually-agreed dollar figure on the price of new C-130J
aircraft.

- $2.7 Million "Residual" Owed to Libya: The Libyan side raised
a payment of $2,775,000 it made to LM in the early stages of the
contract for the eight C-130H's in Marietta. The GOL maintains
that any valuation of compensation it would receive for the
eight C-130H's should include that payment. Papadopolous noted
that the figure likely represented the residual amount of money
paid towards spare parts and training originally envisioned in
the LM-GOL contract that were never delivered. It was agreed
that Papadopolous would follow up with LM to determine what the
$2,775,000 payment had been for and what the company's position
was on whether it owed some or all of that amount to the GOL.

- Time & Material Contract and FMS Rubric: On the possibility of
repairing the eight C-130H's at Marietta, Papadopolous noted the
degraded nature of the airframes and stressed that repair work
necessary to restore the aircraft to airworthiness would have to
be performed under a "time and material contract" with no fixed
contract value. LM's position was that such a contract would
have to be performed under the auspices of the Foreign Military
Sales (FMS) program, as a government-to-government agreement.
Explaining the FMS process, the DATT stressed the advantage of
performing the work under a time and material contract under the
FMS rubric. The Libyan side agreed that any future work and
sales would best be completed under FMS auspices.

- Spare Parts: The Libyan side also agreed that any purchase of
spare parts for its current fleet of C-130's should come through
the FMS system. Libya has obtained some spare parts (NFI) since
it submitted a Materials Requirement List (MRL) last year; it
was agreed that the Libyan side would submit a new Letter of
Request (LOR) through the DATT's office for a Letter of
Availability (LOA) concerning requested spare parts. The Libyan
side also requested updated technical manuals for its current
fleet, valued at $2-3 million.

- Technical Team Visit: The GOL will set a date for a USAF
technical team to visit Libya to inspect the current fleet; the
DATT will coordinate with LM on possible participation by the
company.

- The USG, in coordination with LM, needs to determine an
appropriate resoluton of an outstanding sales and tax lien
levied by the State of Georgia, which was assessed at $3.3
million in 1988 (plus monthly interest and penalties).

- The USG, in coordination with LM, need to address the second
encumbrance on the eight C-130H's resulting from the court case
Price & Frey v. Libya ($17.7 million claim, plus interest since
July 2005).

- C-130J's: The briefing on the new aircraft was well-received;
the Libyan side expressed interest in exploring the possibility
of future purchases, provided that export license guarantees
could be assured by the USG.


5. (C) Comment: The U.S. team assessed that the Libyan side was
genuinely interested in resolving what for them is clearly a
sensitive issue with considerable political equities. A key
achievement was securing agreement from the Libyan side, which
initially insisted that the issue of the eight C-130H's in

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Marietta must be resolved before any other issues could be
explored, that movement on the Marietta aircraft, spare parts
requests and potential C-130J procurement could move in
parallel. Nonetheless, the Libyan side remains wary. In a
sidebar after the meeting, Matari told P/E Chief that Muammar
al-Qadhafi had personally met with Libya's C-130 team to discuss
their upcoming meeting with LM and USG officials. Matari said
al-Qadhafi had stressed that any movement on resolving the
C-130H's, procuring spares or purchasing new C-130J airframes)
must/must be contingent on securing USG guarantees that export
licenses would be granted for those items. There is
considerable concern that U.S.-Libya engagement on C-130's is a
deliberate ruse or an issue on which the USG will ultimately be
unable to deliver because of opposition from Congress, either of
which would greatly embarrass the regime. Matari stressed that
conservative regime elements skeptical of the GOL's decision to
re-engage with the U.S. would capitalize on another failure to
secure export licenses for C-130's and spare parts to
demonstrate U.S. ill will and argue against further
re-engagement. End comment.
STEVENS