TOTAL BAN ON CATERPILLAR EQUIPMENT RE-IMPOSED IN LIBYA.

C O N F I D E N T I A L TRIPOLI 000157



SIPDIS



DEPT PLEASE PASS TO COMMERCE ( NATE MASON) AND USTR (PAUL BURKHEAD)



E.O. 12958: DECL: 2/17/2019

TAGS: ECON, EIND, ETRD, PREL, KCOR, LY

SUBJECT: TOTAL BAN ON CATERPILLAR EQUIPMENT RE-IMPOSED IN LIBYA.



REF: 07 TRIPOLI 692



CLASSIFIED BY: Gene A. Cretz, Ambassador, U.S. Embassy -

Tripoli, U.S. Dept of State.

REASON: 1.4 (b),(d)

1. (C) Caterpillar's principal representative for Libya, Mohamed

El Fadhel Khalil, called on the Ambassador on February 16.

Khalil is Managing Director of the Parenin Company, a member of

the Tunisia-based Amen Group of Companies. Parenin is the

principal representative of Caterpillar (CAT) in Libya and has

invested considerable resources in establishing after-market

sales support and maintenance facilities in Libya. (Note:

Parenin is not an exclusive representative of CAT; however, the

premium CAT places on after-market support, together with the

fact that investments Parenin has made to date in constituting

maintenance facilities, make it the leading representative of

CAT in Libya. End note.)



2. (C) Khalil briefed the Ambassador on difficulties CAT has

encountered in attempting to sell and service its equipment into

Libya. In 2007, the GOL banned imports of all machines and

parts for Mercedes, BMW and CAT. (Note: As reported reftel,

credible reports at the time suggested that the GOL enacted a

ban on July 28, 2007 against imports of Mercedes, BMW and CAT

vehicles and spare parts, at least in part in connection with

criticism by German parliamentarians of a France-Libya civilian

nuclear cooperation deal. End note.) Khalil said the ban was

signed by the Director of Customs. (Note: Reports at the time

suggested the ban was issued by the office of Prime

Minister-equivalent al-Baghdadi al-Mahmoudi. End note.)

Muhammad Aghil, one of the wealthiest businessmen in Libya and

the owner of the Mercedes franchise, was imprisoned for

approximately six months in connection with the dispute and

eventually relinquished the right to represent Mercedes.

Several well-informed business contacts have reported that Aghil

also transferred a considerable portion of his assets (some put

the aggregate amount as high as two-thirds of his total worth)

to interests representing the al-Qadhafi family as part of the

deal by which he was released from prison and permitted to

engage in (reduced) business activities. Mercedes was

ultimately able to resume importing vehicles and equipment into

Libya under a new (regime-blessed) representative.



3. (C) Khalil said a representative of the al-Qadhafi family (he

did not say who) approached CAT's Vice President of Marketing

for Europe, Africa and the Middle East, Paolo Fellin, shortly

after the total ban was imposed with a request that a member of

the al-Qadhafi family be named as CAT's principal representative

in Libya. CAT demurred. In July 2007, following an appeal by

CAT's local representative to Saif al-Islam al-Qadhafi, the ban

on imports of CAT products was partially lifted, allowing

equipment to be brought in by end-users only (vice

representatives/dealers). The continuing ban on imports of

equipment by the CAT's principal Libya representative (equipment

for showrooms, inventory and parts) has left CAT with only an

11% market share. Without the import restrictions, Khalil

estimated that CAT's market share would likely be close to 25%

in a market with an aggregate value of some USD 50 million per

year.



4. (C) Khalil said the the GOL reinstated the total ban on

imports of CAT equipment approximately two weeks ago. He did

not offer a reason for the reimposition of the ban. He

requested USG support and advocacy, suggesting that the Embassy

raise the issue directly with the Secretary of the General

People's Committee for Economy, Trade and Investment (Minister

of Economy-equivalent),Dr. Ali Essawi



5. (C) Comment: Different permutations of the reasons for CAT's

troubles are making the rounds in Tripoli's rumor mills. A

version has it that both Saadi al-Qadhafi (a son of Muammar

al-Qadhafi) and Khaled al-Hmeidi (son of Free Officer and senior

regime figure al-Khweildi al-Hmeidi) want to be CAT's principal

representative in Libya, and that CAT's difficulties reflect (at

least in part) that struggle. The re-imposition of the total

ban against imports of CAT's equipment coincides with

negotiations to finalize a U.S.-Libya Trade and Investment

Framework Agreement, raising important questions about the

extent to which Libya can be expected to honor basic free trade

principles. Post will coordinate with the Department, DOC and

USTR to develop a strategy for raising CAT's market access

issues with the GOL. End comment.



CRETZ