US embassy cable - 05SANAA1571

C O N F I D E N T I A L SECTION 01 OF 02 SANAA 001571 
 
SIPDIS 
 
E.O. 12958: DECL: 06/11/2015 
TAGS: PREL, PGOV, PTER, ECON, ETRD, YM, ECON/COM, ENERGY 
SUBJECT: SALEH ON HUNT OIL DISPUTE, 2006 ELECTIONS, VISIT 
TO WASHINGTON 
 
REF: A. SANAA 1511 
     B. SANAA 1352 
     C. SANAA 1281 
 
Classified By: Ambassador Thomas C. Krajeski for reasons 1.5 b and d. 
 
1. (C) Summary.  Ambassador met with President Saleh on June 
9 to encourage the ROYG to resolve its dispute with Hunt Oil. 
 He highlighted for the President the many potential negative 
effects for Yemen if the headline American company in the 
country took the ROYG to the International Public Court. 
Ambassador and Saleh also discussed the award of the Aden 
Port management contract to Dubai Ports International, 
scheduling for Saleh's upcoming visit to Washington, and the 
2006 Presidential election.  End Summary. 
 
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Award of Aden Port Tender to DPI a Positive Sign... 
--------------------------------------------- ------ 
 
2. (C) Focusing on ROYG economic reform efforts to improve 
its investment climate, Ambassador zeroed in on two recent 
events, the Aden Port tender award to Dubai Ports 
International (DPI) and ROYG's on-going dispute with Hunt 
Oil.  He praised Saleh for the ROYG's June 8 announcement 
awarding the Aden Port tender to DPI as a positive symbol 
that Yemen is serious about opening its economy to foreign 
investment.  DPI, said Ambassador, is an excellent and 
experienced company with an international reputation.  It is 
the right choice to develop the huge potential of Aden Port 
and the Aden Free Zone.  Saleh responded that he personally 
had made the decision.  (Comment: While the tender process 
was far from transparent, this indicates the President 
understands that such an important contract for Yemen's 
economic development needed to go to the most capable bidder. 
 End Comment). 
 
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...But Hunt Oil Dispute, Not So Much 
------------------------------------ 
 
3. (C) Ambassador said the USG was concerned that the 
headline American Company in Yemen will be forced to leave 
Yemen at a time when Yemen is trying to improve its 
investment climate, a major tenet of economic reform (ref A). 
 Hunt believes its case has a strong legal basis, Ambassador 
told Saleh, and has made its intentions clear to sue the ROYG 
at the International Public Court in Paris.  Litigation 
promises to be costly and lengthy, and a crucial source of 
Yemen's revenue could well be held in escrow during the 
proceedings. 
 
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Saleh: Hunt's Extension is Over, Finished! 
------------------------------------------ 
 
4. (C) "The contract is over, it is finished!" exclaimed 
Saleh, "new conditions must be established."  Saleh agreed 
that avoiding a court battle was best.  He suggested to 
Ambassador that he meet with Prime Minister BaJammal and Oil 
Minister Baraba to discuss "in detail" the terms and 
conditions of a new PSA.  "You can leak this information to 
Hunt," said Saleh, "tell them they will have priority over 
the other companies -- they will win."  Ambassador politely 
demurred.  A meeting with PM BaJammal was possible, but we 
could not involve ourselves directly in the negotiation. 
Ambassador stressed that Hunt maintains it signed a legally 
binding agreement with the ROYG for a five-year extension. 
Although the firm is willing to discuss some of the financial 
details, it will go to court rather than renegotiate the 
extension itself, said Ambassador.  (Note: Ambassador's 
meeting with head of Yemen Hunt Wyndell Caverness reported 
septel.  End Note). 
 
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Saleh's Fall Trip to Washington 
------------------------------- 
 
5. (C) President Saleh raised his upcoming visit to 
Washington this fall, saying he wanted to focus on 
substantive issues rather than protocol during his trip. 
"Please," said Saleh,  "I want to go in September.  I am 
going to France and Japan in November already and I get more 
tired than I did ten years ago."  Ambassador said September 
vice November would be difficult but that he would relay the 
message. 
 
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Saleh: "I'm old, I'm tired, I May Not Seek Reelection 
--------------------------------------------- -------- 
 
6. (C) Ambassador told Saleh he looked forward to 2006 local 
council elections and Presidential elections and to 
witnessing Yemen's democratic process unfold.  "I wonder if 
it will be a close race," Ambassador asked the President. 
"As for me, I might not be a candidate," said Saleh, 
complaining that he was getting older and Yemen was facing 
huge economic and population problems.  "Yemen is not an easy 
country to govern," continued Saleh, "It is like dancing in a 
circle of snakes." 
 
7. (C) Comment: Obviously Saleh is not serious about sitting 
out the 2006 Presidential election.  He is, however, 
increasingly paranoid about a possible challenger in 2006 
according to several ROYG insiders, and, no doubt, 
preoccupied with succession to his long rule in 2013.  Unless 
the Constitution is amended for a second time, Saleh's next 
term will be his last.  Judging from recent attempts to 
promote a cult of personality and a lack of serious movement 
on democratic and economic reform, however, Saleh remains 
focused not on his legacy, but on maintaining his hold on 
power.  End Comment. 
Krajeski