GOL RATCHETS UP PRESSURE ON OIL COMPANIES TO CONTRIBUTE TO

S E C R E T SECTION 01 OF 02 TRIPOLI 000099 NOFORN SIPDIS DEPT FOR L (SCHWARTZ, JACOBSON) AND NEA/FO (HUDSON) E.O. 12958: DECL: 2/3/2019 TAGS: ENRG EPET ECON EINV PREL PGOV PTER LY SUBJECT: GOL RATCHETS UP PRESSURE ON OIL COMPANIES TO CONTRIBUTE TO U.S.-LIBYA CLAIMS FUND REF: A) TRIPOLI 0072, B) 08 TRIPOLI 564 TRIPOLI 00000099 001.2 OF 002 CLASSIFIED BY: Gene A. Cretz, Ambassador, U.S. Embassy - Tripoli, U.S. Dept of State. REASON: 1.4 (b),(c),(d) ¶1. (C) Summary: The GOL told international oil companies (IOCs) operating in Libya that they "must" contribute to the U.S.-Libya comprehensive claims fund by February 28 or suffer serious (but otherwise ill-defined) consequences. Major IOCs appear to be inclined to hold the line against contributing; however, they are concerned that lesser players and oil industry service companies may capitulate. Muammar al-Qadhafi's recent musing that Libya could nationalize its oil production may have been partly intended to prompt contributions to the $1.5 billion fund. The timing of the GOL's stepped up effort to collect contributions from the IOCs is probably related to the fact that Libya's parliament -- the General People's Congress -- is scheduled to convene soon to review the government's performance and approve a significantly reduced national budget. Post recommends that for now we maintain close contact with U.S. IOCs, remind GOL interlocutors that we are aware of the most recent demand, reiterate our firm redlines, and reassess if further GOL pressure is brought to bear on the companies in the lead-up to the February 28 deadline. End summary. OIL COMPANIES MUST CONTRIBUTE ... ¶2. (C/NF) In a meeting with general managers of IOCs on February 1 (list of companies at para 8),Prime Minister-equivalent al-Baghdadi al-Mahmoudi and National Oil Corporation Chairman Shukhri Ghanem said IOCs must contribute to the U.S.-Libya Comprehensive Claims Settlement Fund. Al-Mahmoudi said Libya had taken a "loan" to populate the fund for compensation of U.S. victims of terrorism; however, it was "impossible" for the GOL or USG to contribute to it, the loan was coming due and IOCs "must" contribute. The claims compensation deal would allow Libya to open new business opportunities for foreign companies - "all businesses, of all nationalities would benefit" - and IOCs and the GOL should therefore "work as a team" to solve the problem of financing the fund. No dollar figure for the amount of the loan was given and companies were not told how much they should 
contribute. Some IOCs in attendance at the February 1 meeting, however, had previously received letters from the National Oil Company (NOC) specifying appropriate contributions levels. ... OR SUFFER CONSEQUENCES ¶3. (C/NF) Ghanem told IOC representatives that he was "in a bind" because expectations by the General People's Congress that IOCs would contribute to the fund had been disappointed. IOCs must contribute by February 28 or the NOC would be compelled to " ... reconsider our relationship with you". Al-Mahmoudi underscored that there would be "serious consequences". The representative for Challenger Drilling, the only IOC representative who spoke, said the company would have legal difficulties if it chose to contribute to the fund. Ghanem and al-Mahmoudi were quick to offer possible mechanisms that would allow IOC's to circumvent such problems. IOC representatives said Ghanem and al-Mahmoudi did not/not mention the possibility that Libya could nationalize oil production, a specter Muammar al-Qadhafi raised in his January 21 DVC with Georgetown University students (ref A). PRESSURE BECOMES COERCION ¶4. (C/NF) Representatives of U.S. companies Occidental (Oxy), ConocoPhillips and Hess separately told us they interpreted the remarks by al-Mahmoudi and Ghanem as a threat, albeit a bit of an oblique one since the consequences for companies that chose not to pay were not spelled out. Nonetheless, the Hess representative flatly said that "pressure had turned into coercion" on February 1. ConocoPhillips' representative assessed that the major IOCs would continue to hold the line against contributing to the fund, but speculated that smaller operators and service companies might relent and pay. He estimated that the number of companies solicited so far was about 100. U.S. IOC representatives agreed that there were differences of opinion on whether and how to respond (i.e., orally or in writing); they are awaiting instructions from their respective headquarters. ¶5. (C/NF) The Canadian Ambassador, who had been briefed on the meeting by PetroCanada's representative, told the Ambassador on February 3 that it appeared Ghanem and al-Mahmoudi were under "tremendous pressure" from the top (i.e., from Muammar al-Qadhafi) to get contributions. His sense was that the TRIPOLI 00000099 002.2 OF 002 companies were so far holding ranks and would not break. The Canadian Ambassador offered that the best course of action would be to continue to monitor treatment of the companies and make it clear to the GOL that our governments "have taken note of what is happening and are not indifferent to it." He did not think a formal demarche would be useful at this time. In a possibly related twist, the Canadian Ambassador said Ghanem was offered (and allegedly accepted) Italian citizenship, perhaps signaling that Ghanem is under such intense pressure that he is looking for a way out. (Note: As reported ref B, Ghanem tried to resign last year after National Security Adviser Muatassim al-Qadhafi, son of Muammar al-Qadhafi, solicited him for funds and/or oil lifts that he could sell, allegedly to establish a military/security unit and make unspecified security upgrades. A longtime friend of Ghanem's told us on January 28 that Ghanem was "fed up" with obstacles to reform and GOL infighting, and was "looking for a way out" of his position. End note.) ¶6. (C/NF) French Commercial Counselor Alain Boutebel said he understood from TOTAL's representative that U.S. companies were "upset" that the USG had not done more to protect them. (Comment: We are in frequent contact with the U.S. IOCs in Libya and have not yet heard this complaint. They are aware that the U.S. government, including the Embassy, have repeatedly reminded GOL officials of the U.S. position that U.S. companies were not to be pressured into contributing to the fund. End comment.) His information was that TOTAL had not yet decided how to respond. He expected the solicitation and threat of repercussions for companies who chose not to contribute to be a prominent item on the agenda for the next round of Libya-EU Framework Agreement talks, scheduled for February 10-12. ¶7. (S/NF) Comment: Reporting in sensitive channels suggested that before the claims compensation fund was populated, al-Qadhafi, who prides himself on being a shrewd bargainer, made it clear that he intended to extract contributions from foreign companies to cover the GOL's initial outlay. In that regard, his suggestion at the January 21 Georgetown DVC that Libya could slow or temporarily cease oil production and/or nationalize its oil industry may have been intended to prompt oil executives to contribute to the fund as much as to remind the USG and global markets of Libya's strategic significance as an hydrocarbon producer. With the General People's Congress scheduled to convene soon to review the performance of the cabinet and approve a significantly reduced national budget, al-Mahmoudi and Ghanem are probably feeling increasing pressure to meet the Leader's expectation that the $1.5 billion pay-out to American claimants be fully funded from foreign sources. Post recommends remaining in close contact with U.S. IOCs, noting the February 1 meeting with GOL interlocutors and reminding them of our "no pressure" redline, and reassessing this approach if the GOL brings increased pressure to bear on U.S. companies. End comment. ¶8. (C/NFA) List of companies present at February 1 meeting. The first 10 are producers; the last five are service companies. Hess Marathon ConocoPhillips Occidental ENI TOTAL Wintershall PetroCanada Repsol StatoilHydro Schlumberger Baker KCA Deutag Halliburton Challenger CRETZ