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R 230832Z JUL 08
FM AMEMBASSY TRIPOLI
TO RUEHC/SECSTATE WASHDC 3721
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHRB/AMEMBASSY RABAT 0675
RUEHTU/AMEMBASSY TUNIS 0567
RUEHAS/AMEMBASSY ALGIERS 0729
RUEHEG/AMEMBASSY CAIRO 1169
RUEHVT/AMEMBASSY VALLETTA 0327
RUEHRO/AMEMBASSY ROME 0457
RUEHFR/AMEMBASSY PARIS 0556
RUEHLO/AMEMBASSY LONDON 0875
RUEHMD/AMEMBASSY MADRID 0026
RUEHTRO/AMEMBASSY TRIPOLI 4231
C O N F I D E N T I A L SECTION 01 OF 02 TRIPOLI 000595
SIPDIS
DEPT FOR NEA/MAG; COMMERCE FOR NATE MASON
E.O. 12958: DECL: 7/23/2018
TAGS: ECIN ECON EINV ETRD EWWT KCOR PGOV LY
SUBJECT: A COMMERCIAL CAUTIONARY TALE: BECHTEL'S BID FOR SIRTE PORT PROJECT FALLS FLAT
CLASSIFIED BY: John T. Godfrey, CDA, U.S. Embassy - Tripoli, Dept of State. REASON: 1.4 (b)
1. (C) Summary: An unsuccessful year-long bid by U.S. firm Bechtel to build a commercial port in the Libyan city of
Sirte has shed light on how decisions about large foreign investment projects in Libya are made. Bechtel's bid went
through several evolutions, including signing a memorandum of understanding with the Prime Minister and a resolution by
Libya's Cabinet-equivalent to give the company the contract. In the end, the contract evaporated after apparent
late-innings intervention by senior regime figures. Despite a year's worth of effort, $1 million worth of expenses,
numerous high-level visits, and formal decisions by the GOL to bless the contract, the company's efforts were ultimately
unsuccessful, underscoring the fact that Libya's much-trumpeted bidding process is less than transparent, and that the
GOL's formal structures do not have the final word on major foreign investment projects. The fact that an operator with
Bechtel's savvy and deep pockets was ultimately unable to secure its contract serves as a cautionary tale for the many
U.S. and western companies seeking to enter Libya's booming market. End summary.
PROMISING BEGINNINGS ...
2. (C) U.S. engineering and consulting giant Bechtel has just declared as dead a year-long attempt to secure a $1
billion cost-plus contract to build a commercial port in the Libyan city of Sirte. Bechtel began its pursuit of the
Sirte port contract in July 2007, when senior Bechtel representative Charles Redman (strictly protect), former U.S.
Ambassador to Germany, arrived in Tripoli for discussions at the invitation of the Qadhafi Development Foundation (QDF),
a quasi-governmental entity headed by Saif al-Islam al-Qadhafi, son of Muammar al-Qadhafi. During the initial visit, QDF
representatives encouraged Bechtel to bid on several small infrastructure projects so the company could "prove itself".
Redman made it clear that Bechtel wanted, but did not need, business in Libya and had a record that spoke for itself.
Eventually, QDF representatives invited Bechtel to execute two projects: a new commercial port facility at Sirte and
management of an industrial city adjacent to the Ras Lanuf oil facility. The QDF proposed that Bechtel partner with the
Libyan Economic and Social Development Fund (ESDF) to execute the Sirte Port project.
3. (C) This initial burst of positive energy dissipated over the next six months. Bechtel slowly made progress on a
contract for the Sirte port project, but its relationship with General People's Committee (GPC) for Transportation, its
primary interlocutor on the deal (apart from the QDF), became increasingly difficult. This primarily manifested itself
in a lack of responsiveness on facilitation of visas for Bechtel representatives, prompting Bechtel to seek support from
other quarters of the Government of Libya (GOL) to facilitate travel by its negotiators and technical staff. In November
2007, then Deputy Foreign Minister Muhammed Siala remarked publicly during a visit to Washington that Bechtel would not
secure the Sirte port contract if Secretary Rice failed to visit Libya by year's end.
LEAD TO HIGH-PROFILE COMMITMENTS
4. (C) After months of go-slow negotiations, Bechtel experienced an apparent breakthrough in February, when Redman
received an urgent call from Minister of Transportation Elmabruk, who asked that the company's team be in Sirte on
February 25 to "sign the contract". Although the company was still in the midst of conducting a laborious due diligence
review of the contract (key provisions of which had not been finalized), they were convinced to rush a delegation to
Sirte in time for a signing event. At that event, Prime Minister al-Baghdadi al-Mahmoudi and Bechtel signed a memorandum
of understanding (MOU) committing the two sides to finalizing the contract as soon as possible. In addition, the General
People's Committee (Cabinet-equivalent) issued Decision #158 on March 3, which was effectively an announcement of
contract terms that granted permission to the GPC for Transportation to sign a contract with Bechtel. Following these
public steps by the GOL, Bechtel reported that the GPC for Transportation appeared to be working in earnest to finalize
an English-language version of the contract.
RADIO SILENCE BROKEN BY BAD NEWS FROM SAIF AL-ISLAM'S INTERMEDIARY TRIPOLI 00000595 002 OF 002
5. (C) With expectations running high that a final deal was imminent, Bechtel pressed on with negotiations and a
fully-vetted contract was presented to the Transportation Minister in early May. From that point on, all communication
with the QDF, GPC for Transportation and Libyan Ports Authority (another key player in the deal) went dead. Sensing that
something was amiss, Bechtel representatives continued to inquire about that status of the contract, but received no
response. On July 14, Abdulhakim el-Ghami, described as "an intermediary for a person very close to Saif al-Islam",
called Redman to inform him that the port project had been canceled. (Note: Redman told us el-Ghami, who is based in
Munich, appears to be a key conduit for Saif al-Islam's dealings with foreign companies. End note.) Bechtel received no
explanation as to why the contract was cancelled, but el-Ghami encouraged the company to "seriously consider"
undertaking a different, unspecified infrastructure development project.
6. (C) Comment: Bechtel's experience throws into stark relief the fact that economic and commercial decisions ostensibly
finalized by even the most senior levels of the GOL can be overturned by influential elements operating outside the
formal government structure. Libyan officials have made much of recent measures designed to ensure transparency and
predictability in bids for commercial contracts; however, the reality is that contracts of any size, particularly those
involving foreign companies, are subject to intense maneuvering by regime insiders jockeying to ensure that they company
they happen to champion wins the prize. Bechtel's story also reinforces post's understanding of Saif al-Islam's key as a
principal gatekeeper for large foreign investment projects in Libya, a process he manages through the QDF and the
National Engineering Services and Supply Company (NESSCO - further details will be reported septel). The silver lining
in this tale of woe is that Bechtel's power division has been awarded a project management job for construction of a new
power plant outside Sirte; however, the sorry denouement of the company's efforts to secure the Sirte port contract have
dampened its for seeking any new major projects in Libya in the near future and should serve as a cautionary tale for
other U.S. companies considering major investment projects here. . GODFREY