Cables show Libya pressed oil firms to reimburse terror costs

One cable seen by Reuters, sent from the U.S. embassy in Tripoli, shows Gaddafi's government exerting heavy pressure on U.S. and other oil companies to reimburse Tripoli the $1.5 billion Libya had paid in 2008 into a fund to settle terrorism claims from the 1980s.

The amount was the initial payment in a planned $1.8 billion fund. The cable suggests Gaddafi intended foreign oil companies to provide full funding for the scheme, which at the time was a key factor in improving ties between Libya and the United States.

Even before Libya paid into the fund, Gaddafi, "who prides himself on being a shrewd bargainer, made it clear that he intended to extract contributions from foreign companies to cover the ... initial outlay," according to the April 2009 cable titled "GOL ratchets up pressure on oil companies to contribute to U.S.-Libya claims fund."

Senior Libyan officials met representatives of 15 oil producing and service companies -- including Marathon, ConocoPhillips, Occidental, ENI, Total , Wintershall, PetroCanada, Repsol and StatoilHydro -- to say they must contribute or Libya's National Oil Corporation (NOC) would be compelled to "reconsider our relationship with you," the cable says.

Prime Minister-equivalent al-Baghdadi al-Mahmoudi is cited as telling oil firms that if they did not comply, there would be "serious consequences."

When Challenger Drilling's representative said it would have legal difficulties if it chose to contribute to the fund, the officials "were quick to offer possible mechanisms that would allow (the companies) to circumvent such problems," the cable said, citing a representative from Hess who later complained that "pressure had turned into coercion" at the meeting.

The instinct to ask oil companies for money was apparently not new. An earlier cable, sent in July 2008, relates how one of Gaddafi's sons, National Security Adviser Muatassim al-Gaddafi, was demanding "$1.2 billion in cash or oil shipments" from the NOC itself.

The reported attempts by Gaddafi's sons "to use the NOC as a personal bank" alongside doubts about prospects for meaningful reform, suggest "the regime remains unchanged with respect to the way it conducts key elements of its business," says the cable headlined "National Oil Corporation chairman Shukri Ghanem may seek to resign soon."

Muatassim may have intended to use some of the funds to establish a military or security unit akin to that of his younger brother, Khamis, and to pay for unspecified "security upgrades" he wanted to make in his capacity as National Security Adviser, the cable says.

Gaddafi had laughingly dismissed the claim, the cable says; but it cites a Libyan businessman outside the NOC as stating Gaddafi's children are "undisciplined thugs": "No one can cross or refuse such people ... without suffering consequences, particularly when the matter is to do with money."