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: TRIPOLI 00000481 002 OF 003 - 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 TRIPOLI 00000481 003 OF 003 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