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INFO RUEHTU/AMEMBASSY TUNIS 0773
RUEHAS/AMEMBASSY ALGIERS 0908
RUEHRB/AMEMBASSY RABAT 0846
RUEHEG/AMEMBASSY CAIRO 1415
RUEHFR/AMEMBASSY PARIS 0702
RUEHLO/AMEMBASSY LONDON 1016
RUEHTRO/AMEMBASSY TRIPOLI 5037

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

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