GHANEM "UNDER THE GUN" TO COLLECT CONTRIBUTIONS FOR CLAIMS

UNCLAS TRIPOLI 000139

DEPT FOR NEA, L AND EB

E.O. 12958: N/A
TAGS: PREL ENRG ETRD LY
SUBJECT: GHANEM "UNDER THE GUN" TO COLLECT CONTRIBUTIONS FOR CLAIMS
COMPENSATION FUND


1. (C) Summary: During a February 10 introductory meeting with
the Ambassador, the chairman of Libya's National Oil Company,
Dr. Shukri Ghanem, said Libya was unlikely to nationalize its
oil industry and that Muammar al-Qadhafi's public comments were
an expression of the Leader's frustration that foreign companies
had not yet contributed to the international fund established
under the U.S.-Libya Claims Compensation Agreement signed in
August. The Ambassador said U.S. companies had reported feeling
pressured to contribute to the fund, which if true was contrary
to the understanding between the two governments that any
contributions from U.S. firms would be strictly voluntary.
Ghanem took the point but said he was under pressure to recover
$700 million the NOC had "lent" the fund in October, and hoped
that the U.S. would encourage companies to find a creative way
to help. End summary.


2. (C) Ghanem welcomed the Ambassador to Libya, saying he was
pleased that normal relations had been restored. He recounted
"better times" when there was a large American community
resident in Tripoli, and Americans lived and worked "side by
side" with Libyans. Many Libyans, including himself, had
studied in the United States (Ghanem has a Phd from the Fletcher
School at Tufts University). Ghanem compared the current state
of U.S.-Libyan relations to a married couple who had been
divorced for 25 years and then remarried: "It's not easy. We
are watching each other very carefully, analyzing everything the
other one says." After a discussion of the situation in Gaza
during which Ghanem and his staff argued the merits of
al-Qadhafi's proposal for a one-state solution, the Ambassador
asked about the Leader's recent public statements suggesting
that Libya might nationalize its oil sector.


3. (C) Ghanem dismissed the possibility of nationalization as
unlikely, saying "We are not taking any action and are
continuing business as usual." The Leader's comments were a
sign of his "frustration" that foreign companies had not yet
contributed to the international fund established under the
U.S.-Libya Claims Compensation Agreement signed in August.
Reviewing the negotiating history, Ghanem said that once the
U.S. government made it clear that the USG would not pay into
the $1.8 billion fund, the GOL adopted the same position. The
solution was for the GOL to solicit contributions from "friendly
countries and companies." While some foreign governments had
helped, so far no private companies had contributed. This had
led the leadership to conclude that the companies were merely
exploiting Libya's resources. As a result, the NOC was under
increasing pressure from the leadership to recover the funds it
had "loaned" to enable the agreement to be implemented last
October. That was why the Prime Minister had summoned
international oil companies earlier in the month and pressed
them to respond to the NOC's letters soliciting contributions.
Ghanem said that the current amount of the funding "gap" was
$700 million; the NOC had suggested that U.S. companies
(presumably he was referring to the oil producers, vice the
service companies and companies that are only exploring)
contribute $180 million, based on their level of production.
The amounts were relatively small for companies that stood to
make large profits from producing oil and gas in Libya, he said.
He predicted that "some" foreign companies would eventually
make a contribution. (Comment: We have heard from contacts in
the IOCs that Gazprom would make a payment. End comment.)


4. (C) The Ambassador reminded Ghanem that putting pressure on
U.S. companies "crossed a red-line" and was contrary to the
understanding between the U.S. and Libya. The PM's February 28
"deadline" for companies to respond "sent a troubling signal" in
that it suggests that their business could suffer if they fail
to contribute to the fund. Ghanem acknowledged the point
(without addressing whether there would be any negative
consequences after the deadline had passed) but said he needed
to find a solution and was open to other ideas, such as
re-labeling the fund if that would make it more palatable for
U.S. companies. He asked that the U.S. at least refrain from
instructing U.S. companies not to contribute. The Ambassador
replied he was in no position to do that, reiterated again the
U.S. position of no pressure, and urged Ghanem and his
colleagues in the GOL to consider the long-term relationship
with the United States.


5. (C) Comment: Ghanem fully understands the U.S. red-line and
will no doubt pass the message to the political leadership, if
only to help relieve some of the pressure he is getting from
above. At the same time, it is clear that the Libyans, sensing a
dead-end in soliciting contributions pegged to the fund, are now
actively seeking other creative ways to package the
solicitation. The one-two punch of threatening nationalization
while summoning the IOCs and giving them a deadline might lead
to payments from some foreign companies. The American IOCs with
whom we are in contact continue to tell us they intend to hold
the line, and are looking for USG support.

CRETZ