US embassy cable - 04DJIBOUTI947

C O N F I D E N T I A L SECTION 01 OF 02 DJIBOUTI 000947 
 
SIPDIS 
 
STATE FOR AF, AF/E AND AF/EPS 
 
E.O. 12958: DECL: 07/11/2014 
TAGS: PREL, ECON, ETRD, PGOV, SCUL, DJ, TC 
SUBJECT: MOBIL FILES CIVIL COURT ACTION AGAINST GOVERNMENT 
OF DJIBOUTI 
 
REF: A. DJIBOUTI 869 
 
     B. DJIBOUTI 731 
 
Classified By: AMBASSADOR MARGUERITA D. RAGSDALE. 
REASONS 1.4 (B) AND (D). 
 
 1. (C) During Ambassador's 7/9 meeting with Nairobi-based 
John J. DiTullio, Cluster Sales and Operations Manager for 
Exxon-Mobil East and Southern Africa, and Mobil Djibouti 
Director General, Alain Adam, Adam stated that Exxon/Mobil 
had filed on July 8 an action against the Government of 
Djibouti in civil court in Djibouti.  The action seeks 
annulment of the Government of Djibouti's notice of May 10 to 
Mobil that it would be required to shut down its petroleum 
operations at the existing port and move to the new port in 
Doraleh, as of May, 2005. (See reftels).  The action also 
seeks associated costs from the Government of Djibouti for 
the court case. 
 
2. (C) Ambassador asked for a copy of the court brief, which 
Adam provided on July 10.  The brief, through La SCP Boivin 
et Associes (Attorneys-at-Law), based in Paris, and Alain 
Martinet, a local lawyer in Djibouti, presents as facts, per 
Embassy's informal translation, inter alia: 
 
-- that Mobil has operated in Djibouti since the 1970s; 
-- that Mobil is sole owner of the site of land on which its 
activities are taking place; 
-- that Mobil has made substantial improvements to the site 
over the years and that the site has the capacity to store 
around 90,957 cubic meters of hydrocarbons; 
-- that Mobil is a substantial employer in Djibouti-- with 43 
contract employees for an indeterminate duration and with an 
additional 39 temporary employees; 
-- that information concerning the new Port of Doraleh 
remains fragmentary, indeed incomplete, and does not allow 
Mobil to envisage what would be its place in the new 
infrastructure; 
-- that the excavation work for the new port only began in 
the month of June 2003, and this infrastructure could not 
possibly be operational, at best, until the end of 2005; 
-- and that Mobil had not received from the Djiboutian 
authorities any official information concerning the 
cancellation of petroleum activities on the site of the 
current and how the required transfer to Doraleh would take 
place. 
- 
In its court brief, Mobil also alleges that the decision of 
the Minister of Equipment and Transport, as enunciated in the 
May 10 letter, is illegal, in that the decision is: 
 
--tainted by defect of knowledge and is taken in ignorance of 
the general principle of respect for rights of the defense to 
present its observations; and 
--is not in conformity with the Constitution of Djibouti, is 
lacking in legal basis, does not support justifications of 
general interests, and leads to disproportionate and 
discriminatory consequences. 
 
3. (C) In her meeting with Mobil representatives, Ambassador 
reiterated her preference that Mobil not quit its operations 
in Djibouti, if at all possible.  She said it was important 
to have a major American company doing business in Djibouti 
and continuing its positive impact on the Djiboutian economy. 
 DiTullio said he believed the Government of Djibouti had not 
thought seriously about the loss of revenues and jobs that 
would follow a Mobil departure.  Adam pressed the point that 
it was not possible to complete the port of Doraleh in the 
time frame envisioned by the Government and that he had so 
informed the Government.  Ambassador cautioned that this 
might be a less effective position to take with a very 
sensitive Djiboutian government. She said, indeed, Emirates 
National Oil Company (ENOC)-- the project manager-- is moving 
toward 24-hour shifts to ensure completion of the Doraleh 
project AHEAD of schedule. 
 
4. (C) Ambassador also expressed to Mobil her willingness to 
approach President Guelleh directly on Mobil's behalf, if it 
is Mobil's corporate preference to fight to retain its 
operations at the existing port.  She said she believed Total 
would certainly press to do so, if it has not already done 
so, but was unsure about Shell. Indeed, Ambassador added, 
Total will likely present an argument that the Government of 
Djibouti needs a back-up terminal to Doraleh and that Total's 
facilities at the existing port might fill that need, 
especially if Shell and Mobil have already folded.  DiTullio 
thanked Ambassador for her willingness to support Mobil's 
presence here at the highest levels of the Djiboutian 
government and said he would let the Ambassador know as to 
the route corporate headquarters in Fairfax ultimately wished 
to take on this matter. 
 
5. (C) During the meeting, Adam repeated the offer that Mobil 
made earlier to the U.S. military to purchase its Djibouti 
site, should Mobil ultimately be obliged to vacate.  The site 
consists primarily of storage tanks, offices and warehouses. 
(see reftel A)  Ambassador said she understood that the U.S. 
military did not see an interest or need in purchasing the 
Mobil site.  Adam said Mobil would accept a leasing 
arrangement, if the U.S. military preferred. Ambassador 
suggested that it might be better for Exxon-Mobil's Fairfax 
headquarters to put forward such a plan formally to the U.S. 
Department of Defense, rather than broach it regionally or 
locally. 
 
6. (C) Adam also reiterated his long-standing complaint that 
Camp Lemonier has not used Mobil's services in its petroleum 
purchases in Djibouti. Ambassador encouraged, and DiTullio 
supported vigorously, that Adam set up direct contact with 
CJTF-HOA Commander  General Helland at Camp Lemonier on this 
issue.  DiTullio concurred, and stated that personal 
relations are very important. He added that it is also 
important to let the Camp know the aspects of Mobil's 
services that make it the superior vendor in Djibouti. Adam 
has since taken steps to follow up and Ambassador also raised 
this with General Helland during her weekly meeting with him 
on 7/12. 
 
7. (C) Comment: Mobil's court action may be primarily a 
tactical step to protect its considerable financial 
interests, more than focused on immediate remedies.  It is 
clear, however, that Mobil would prefer -- if business volume 
warranted -- to retain its operations at the existing port. 
If it cannot, it has also made clear that it is prepared to 
leave -- with full compensation for its losses expected of 
the Government of Djibouti. Mobil insists that the current 
Djiboutian economic environment cannot sustain the viability 
of four oil companies.  Ambassador has encouraged Mobil to 
think long-term, rather than short-term, and to consider 
future commercial possibilities if Doraleh turns out to be 
the economic powerhouse the Government of Djibouti expects. 
In addition, she has advised Mobil that it is a far greater 
challenge for a company to re-enter a market, and regain 
goodwill,  once it has vacated it. End comment. 
RAGSDALE