Identifier
Created
Classification
Origin
09TRIPOLI413
2009-05-21 08:07:00
CONFIDENTIAL
Embassy Tripoli
Cable title:  

LIPSTICK ON A PIG: LIBYA RENAMES CLAIMS COMPENSATION FUND

Tags:  PGOV PREL ECON EFIN EPET EINV KCOR LY QA 
pdf how-to read a cable
VZCZCXRO9691
PP RUEHBC RUEHDE RUEHDH RUEHKUK RUEHROV
DE RUEHTRO #0413/01 1410807
ZNY CCCCC ZZH
P 210807Z MAY 09
FM AMEMBASSY TRIPOLI
TO RUEHC/SECSTATE WASHDC PRIORITY 4845
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEHAAA/NSC WASHINGTON DC
RUEHHH/OPEC COLLECTIVE
RUEHTRO/AMEMBASSY TRIPOLI 5375
C O N F I D E N T I A L SECTION 01 OF 03 TRIPOLI 000413 

SIPDIS

STATE FOR NEA/MAG AND L (SCHWARTZ); COMMERCE FOR NATE MASON;
ENERGY FOR GINA
ERICKSON; CAIRO FOR ALEX SEVERENS; PARIS AND LONDON FOR NEA
WATCHERS

E.O. 12958: DECL: 5/19/2019
TAGS: PGOV, PREL, ECON, EFIN, EPET, EINV, KCOR, LY, QA
SUBJECT: LIPSTICK ON A PIG: LIBYA RENAMES CLAIMS COMPENSATION FUND

REF: A) TRIPOLI 99; B) TRIPOLI 139, C) DOHA 286

TRIPOLI 00000413 001.2 OF 003


CLASSIFIED BY: Gene Cretz, Ambassador, U.S. Embassy Tripoli,
U.S. Department of State.
REASON: 1.4 (b),(d)
C O N F I D E N T I A L SECTION 01 OF 03 TRIPOLI 000413

SIPDIS

STATE FOR NEA/MAG AND L (SCHWARTZ); COMMERCE FOR NATE MASON;
ENERGY FOR GINA
ERICKSON; CAIRO FOR ALEX SEVERENS; PARIS AND LONDON FOR NEA
WATCHERS

E.O. 12958: DECL: 5/19/2019
TAGS: PGOV, PREL, ECON, EFIN, EPET, EINV, KCOR, LY, QA
SUBJECT: LIPSTICK ON A PIG: LIBYA RENAMES CLAIMS COMPENSATION FUND

REF: A) TRIPOLI 99; B) TRIPOLI 139, C) DOHA 286

TRIPOLI 00000413 001.2 OF 003


CLASSIFIED BY: Gene Cretz, Ambassador, U.S. Embassy Tripoli,
U.S. Department of State.
REASON: 1.4 (b),(d)
1. (C) Summary: Libya's National Oil Company (NOC) recently
convoked the major international oil companies (IOCs) in Libya
and presented a new law establishing a fund for charitable
contributions. While the stated purpose of the law is to gather
contributions to support charitable, social and humanitarian aid
programs, NOC officials - including Chairman Shukri Ghanem -
openly conceded that the new law was the government's latest
attempt to prompt IOCs to make "voluntary" contributions to the
fund established under the U.S.-Libya Comprehensive Claims
Compensation Agreement, which is to compensate victims of
terrorism and their families. Citing concerns about potential
violations of the Foreign Corrupt Practices Act (FCPA),IOC
heads here told the Ambassador and emboffs they do not plan to
make any contributions to the new fund. IOCs in Libya are
already obligated under the terms of their contracts to spend a
certain amount on social programs and have initiated programs to
fight diabetes (a growing problem in Libya),and promote road
safety. End summary.

LIBYAN NATIONAL OIL COMPANY CALLS INTERNATIONAL OIL COMPANIES TO
CARPET

2. (C) On May 4, the National Oil Company (NOC) convoked the
Libyan deputy managers of IOCs to a presention on a new law
establishing a charitable contribution fund (Decision number
148-2009). (Note: In Libya, the deputies of IOCs must be
Libyan nationals. End note). The stated purpose of the law is
to gather donations to support charitable, social and
humanitarian aid programs. The fund would manage and monitor
charity contributions coming from all foreign companies and
would encourage them to contribute grants, donations, and
support to the fund. The fund is to be managed by a Management
Committee comprised of a General Manager and four members
nominated by the General People's Committee
/>(cabinet-equivalent). In addition to "voluntary" contributions,
40 per cent of environmental fines paid by foreign companies,
including oil companies, would go into the fund.

NEW "CHARITY FUND" A THINLY-VEILED VERSION OF OLD CLAIMS
COMPENSATION FUND

3. (C) The NOC officials chairing the meeting admitted the law
was the government's latest attempt to spur the IOCs to make
"voluntary" contributions to the fund created under the
U.S.-Libya Comprehensive Claims Compensation Agreement (see refs
A and B). The deputy managers were told their companies would
get 'better treatment' if they made early contributions to the
charity fund. In discussing potential consequences if they
declined to make such contributions, it was suggested that the
companies could be fined for infringing Libya's environmental
laws, or their employees could be stopped by police for
(alleged) traffic infractions. (Note: The latter is a common
practice here. Police frequently stop vehicles with foreign
commerical license plates and fine their drivers on the spot.
End note.) Since the meeting, the major IOCs have remained
resolute and have not contributed to either the old compensation
fund or the new charity fund. There are persistent rumors,
however, that Gazprom and a few small oil services companies
have contributed to the compensation fund and possibly to the
new charity fund as well. (Note: Gazprom Chairman Alexei Miller
announced publicly earlier this week that Gazprom expected to
conclude an agreement with the NOC in the near future to develop
a large gas field. End note.)

SHUKHRI GHANEM TO MARATHON: BE A "GOOD NEIGHBOR" AND GIVE TO THE
NEW FUND

4. (C) In a recent meeting, NOC Chair Shukhri Ghanem admitted
to a senior visiting Marathon Oil official (strictly protect)
that the GOL had simply renamed the old compensation fund and
presented it as a charity fund. Noting that neither the Libyan
government nor the USG had wanted to contribute to the fund, he
said it had become apparent that IOCs were not inclined to
contribute to it, either. He blamed the refusal of American
companies to pay for the reluctance of other IOCs to contribute.
Ghanem explained that the new charity fund would give companies
an opportunity to show they are "good neighbors" by supporting
charitable, social and humanitarian aid programs. The issue of
IOCs contributing to the fund had been elevated to the highest
levels and went beyond just the NOC, he said, in an implicit
reference to Leader Muammar al-Qadhafi. Separately, senior
British Gas executives and a Libyan contact with excellent ties
to Ghanem recently told Emboffs that Ghanem and the NOC were

TRIPOLI 00000413 002.2 OF 003


under pressure from Muammar al-Qadhafi and Prime Minister
al-Baghdad al-Mahmoudi. (Note: The latter was tasked
immediately after finalization of the U.S.-Libya Comprehensive
Claims Compensation Agreement with "accreting" contributions to
the fund for victims of terrorism. End note.) Those contacts,
who expressed shock that the NOC had been so candid in admitting
that they had simply re-named the fund, speculated that Ghanem
was under such pressure to generate contributions that he and
his staff weren't thinking clearly.

5. (C) The senior Marathon executive told the Ambassador his
company did not see any way it could participate in the new fund
since its lawyers assessed that contributions could violate the
Foreign Corrupt Practises Act (FCPA). Marathon's leadership was
worried that if they contributed to the fund this time, it would
establish a dangerous precedent for further solicitations in
Libya and elsewhere. (Note: Post read with interest ref C, which
suggests the Qataris and Libyans may be using the same play
book. End note.) The Oasis Group (also known by its Arabic name
as the Waha Group),which includes Marathon, Amerada Hess, and
ConocoPhillips, already paid Libya USD 1.8 billion in signing
bonuses to re-enter Libya. The request for additional payment
to the charity fund is not something Marathon is in a position
to do. According to Marathon's manager in Libya (strictly
protect),the company is strongly committed to fulfilling its
corporate social responsibility obligations, but is unwilling to
simply hand out cash to a less-than-transparent charity fund.
Some provisions in the new law call for using the fines paid by
companies for breaching environmental codes to fund sustainable
development programs. Contacts at Marathon said this would not
affect Marathon or its Waha partners since they are only
investors (vice operating companies). In addition, Waha's
operations are onshore, vice offshore, and therefore less prone
to environmental infractions.

THE VIEW FROM OTHER IOCS

6. (C) Hess' General Manager (strictly protect) agreed that
the new fund is simply a new name for the old compensation
claims fund. He noted Hess is already devoting resources to
social programs in Libya, including a diabetes awareness and
treatment project with experts affiliated with Harvard
University. To require the company to "voluntarily" pay into a
new fund would be a non-starter for Hess. Chevron's GM
(strictly protect) wondered why the government did not simply
levy a new tax on the IOCs rather than create the new fund.
While the companies would not have liked this, it would have
simplified collecting the funds and provided a more tenable
approach with respect to FCPA issues. Shell's GM (strictly
protect) told the Ambassador he was concerned by the NOC's
decision to convoke Libyan national deputy GM's, an approach he
viewed as "targeting" Libyan colleagues in the belief that they
would be more susceptible to strong-arm tactics. (Note: He
personally assessed that his locally-engaged staff were even
more loyal to the IOCs than the expatriate staff. End note.) He
noted that the NOC typically convoked expatriate general
managers. Even though Shell in Libya was not directly impacted
by the Lockerbie compensation issue, Hope agreed the IOCs needed
to "hold rank" and not succumb to pressure to pay into the new
fund. As Shell is only involved in onshore exploration, its
susceptibility to potential environmental fines is also slight.
He noted Shell is already supporting several social programs in
Libya. They are proud of their road safety program and believe
this program could be partly credited with the government's
recently-enacted requirement that drivers wear seat-belts not
only on highways but also within Tripoli. They also have a
program to help young people start and run their own businesses.
Payments into the new fund would be very difficult to justify
to Shell's shareholders and lawyers, who are concerned with the
bottom line and FCPA issues, respectively.

7. (C) Comment: Efforts to solicit contributions under the new
law reflect the intense pressure Ghanem and the NOC are under
from the most senior levels - likely including Muammar
al-Qadhafi himself- to generate money for the claims
compensation fund. If the law for the new charity fund had been
rolled out a few months from now and had not been blatantly
connected to the compensation fund, IOCs may have been able to
seriously consider contributing. In addition to the fact that
the NOC didn't bother to try to maintain the fiction that the
new fund was different from the claims compensation fund,
slumping oil prices, the global recession and disappointment
with meager oil and gas discoveries in Libya by IOCs to date
make it difficult to impossible for IOCs to seriously entertain

TRIPOLI 00000413 003.2 OF 003


this latest demand. End comment.
CRETZ