MOBIL ACCOMPLISHES OBJECTIVES IN MICRONESIA, SHARES TIPS FOR

C O N F I D E N T I A L SECTION 01 OF 03 KOLONIA 000051

SIPDIS

E.O. 12958: DECL: 4/16/2019
TAGS: PREL ECON EAID FM CH
SUBJECT: MOBIL ACCOMPLISHES OBJECTIVES IN MICRONESIA, SHARES TIPS FOR
SUCCESS

REF: 08 KOLONIA 103

CLASSIFIED BY: Miriam K. Hughes, Ambassador, Amembassy Kolonia,
State.
REASON: 1.4 (b),(d)

1. (C) SUMMARY. Where two previous Mobil executives failed,
Guam Mobil President Kamal Singh succeeded in piloting a smooth
withdrawal of Mobil from an unprofitable market in the Federated
States of Micronesia (FSM). In a farewell breakfast with the
Ambassador, he shared valuable tips that enabled him to guide
the Micronesians to launch their own national petroleum company.
Against all odds, this fledgling company, Petro Corp, has
become a viable entity. Singh said he steered the Micronesians
away from Chinese loans, which he viewed as entangling. He
emphasized the need to deal firmly but respectfully with the
Micronesians on their home turf, building informal relationships
and showing them painstakingly "how to get from A to Z."
Lessons learned have broad applicability, including for Compact
administration. End Summary.



AGAINST ALL ODDS




2. (SBU) At breakfast with Ambassador Hughes on March 21, Guam
Mobil President Kamal Singh (Fijian) announced that he had
received an unexpected promotion. Singh will transfer shortly
to Singapore, where he will take charge of Mobil operations
throughout the Asia-Pacific region. Singh acknowledged that the
promotion was recognition of his successful efforts in the FSM.
Where his two predecessors had failed, Singh succeeded in
negotiating a graceful exit from Micronesia's relatively
insignificant market. At the same time, he did not abandon this
traditional and vulnerable Pacific customer of over forty years.
Mobil will continue to sell fuel to the FSM for the next five
years and to oversee quality assurance and technical personnel
for one year.




3. (SBU) Step by step, Singh guided the Micronesians to launch a
national petroleum company of their own, Petro Corp, which is
now working well. Few observers thought this could happen in a
nation of low managerial capacity and considerable political
disunity.




4. (SBU) Singh said the last holdout in the FSM, the State of
Kosrae, which has long purchased its fuel independently, had
finally come on board to comply with Petro Corp's central
purchasing authority. (Kosrae had been receiving a cheaper
purchase rate from South Korean tankers.) Singh negotiated the
agreement in which Mobil will remain the sole provider of
petroleum to the FSM for the next five years with the aim of
easing the FSM's transition. The agreement requires Petro Corp
to deposit full payment for fuel deliveries in the Bank of Guam
before a Mobil supply tanker departs from Singapore. Through
computer graphics, Mobil monitors current storage levels in all
FSM fuel storage tanks. Mobil also agreed to oversee
maintenance and quality assurance for the first year of Petro
Corp operations.




5. (SBU) Singh convinced the Micronesians to hire an expatriate
chief executive officer for a period of three to five years.
CEO Jared Morris (Fijian) is a petroleum adviser and expert in
the Pacific region. Singh emphasized that only a foreigner
could maintain objectivity and steer a clear course for the
benefit of the enterprise itself. Otherwise, extended family
obligations and political entanglements distort professional
activities in the FSM, he said.




6. (C) Singh additionally emphasized the need to engage with the
Micronesians constantly, consistently and informally in order to
make progress. He observed that all the Micronesians with whom
he dealt were intelligent, subtle and articulate, including FSM
President Mori, Vice President Alik and Secretary of Resources
and Development Peter Christian. "They all had smart vision,"
Singh said. However, he lamented, these leaders of a fragile
and immature nation "did not know how to get from A to Z." He
counseled, "You must guide them closely." To achieve his
objectives, Singh said that for 18 months, he arrived in the FSM
capital island of Pohnpei every Friday afternoon and devoted all
his weekends to negotiating. He used a private dining room at
the Cliff Rainbow Hotel (owned by Secretary Christian) to meet
informally with Micronesians, often separately from one another,
in order to build confidence. Singh described his Micronesian
interlocutors as "eloquent but obfuscatory." He emphasized the

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need to "tease out their intentions." Every Monday, Singh flew
back to Guam.



AVOIDING SWEET DEALS FROM CHINA




7. (C) Throughout the delicate process of Mobil's divestiture,
Singh said the People's Republic of China was extremely active
with counter-offers (reftel). China funded various trips to
China of Secretary Christian and others and offered concession
loans at a rate of 3 percent interest to cover the purchase of
FSM fuel storage tanks, maintenance services and provision of
fuel. At a certain point, the Micronesians confided in Singh
and allowed him to review draft contracts from China. Singh
said the loan agreements contained clauses that could have
locked the FSM into a web of obligations that the Micronesians
would be unable to fulfill.




8. (C) When Singh explained these pitfalls, the Micronesians
demonstrated comprehension. They eventually rejected the offers
from China. Petro Corp purchased the fuel storage tanks in all
four states with the benefit of a loan from the Bank of Guam at
8 percent interest. Singh additionally obtained a commitment
for the FSM to purchase fuel from Mobil only with advance
payments to the Bank of Guam. "Our fuel tankers will not
disembark from Singapore (for the FSM) until the money is in the
bank," Singh said. Mobil also tracks the capacity and storage
levels of all FSM fuel tanks by means of computer graphics.



HOW TO WIN INFLUENCE WITH THE MICRONESIANS




9. (SBU) Singh summarized the lessons he learned through the
trial and error of intense negotiations, which may be useful to
others, including:



--Listen Carefully. Micronesians frequently do not say what
they mean. Perhaps owing in part to their experience with
various colonial masters, they tend to smile, express agreement
or acknowledge statements impassively without registering
disagreement. "Don't assume they are with you," Singh said.
Their expressed views must be massaged, tested and shaped over
time.



--Engage on the Ground. "Be there for them," Singh said,
explaining that influence is exerted only through persistent,
personal contact, which helps build relationships among a very
insular people. When attempted by long distance, confidence
building invariably suffers.



--Choose an Informal, Private Setting. Micronesians are
cautious in the office and in the company of one another. Meet
in the privacy of a home or a restaurant.



--Help the Micronesians Connect the Dots. In the traditional
island cultures, best efforts are generally aimed at achieving
consensus rather than getting results. While the Micronesians
frequently articulate astute visions, Singh observed they lack
the practice of delineating and implementing follow-up steps.
"Help them connect the dots," he said.



--Put an Expatriate at the Steering Wheel, for the Time Being.
Do not hand off a new project or enterprise at too early a
stage. An untested Micronesian at the helm of a weak
institution may be subject to family, cultural and political
pressures that undermine objectives.



--Respect and Patience are Keys to Cooperation. While messages
must be consistent and firm, respect is the cornerstone of
successful communication with the Micronesians. In the

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Micronesian context, dignity, patience and consensus-building
are most important. "Respect, respect, respect," Singh
emphasized as a key to success.



COMMENT: GUIDING PRINCIPLES FOR COMPACT ADMINISTRATION




10. (SBU) The Mobil President's tips, which he shared
forthrightly, track with the Embassy's perceptions. These
lessons are not easily learned or practiced, especially with the
time constraints and pressure for results that most westerners
face. However, they are worth the attention of anyone who seeks
to achieve objectives in the FSM.




11. (SBU) Implementation of the amended Compact, which
predominates in the bilateral relationship, has been
particularly arduous and fraught with frustrations, arising in
part from the Micronesians' inability to easily design programs,
grasp performance measurement concepts and adhere to U.S.
federal fiscal procedures that they find very complicated. We
urgently need development specialists on the ground to build
relationships, accountability, and confidence day by day,
helping the Micronesians get from A to Z to make adjustments
that are vital to their modernization and stability.
HUGHES