US embassy cables | Libyan efforts destabilise Maltese business interests

Libyan ministries are alleged to have asked US interests not to make use of Maltese businesses if they wish to set up shop in the North African dictatorship, US embassy cables leaked on Monday show.

In one instance, the National Oil Corporation (NOC) – which controls all form of oil production onshore and offshore Libya – was reported to be laying new conditions with exploration firms not to use servicing firms based in Malta.

American ambassador Gene Cretz reported in a November 2007 cable that the Libyan government was looking to extract additional tax revenue from offshore exploration and drilling, by prohibiting offshore servicing that is not based in Libya.

“The GOL had previously allowed the servicing of these activities out of Malta, but is now moving to curtail that and to require that they be based out of Libya. The relocation of onshore support services for offshore operations generates considerable income for the Tax Authority: offshore drilling operations can cost up to $750,000 per day for deep-water operations.”

Oil companies, many of which use Malta as a base to host employees, are reported in the cable to find it hard to conduct business in Libya. Restrictive conditions include the forcible employment of Libyans in key positions: so for each renewal of a one-year visa for an expatriate employee, an additional Libyan employee must be hired. An expatriate employee staying on for three years could be accountable for the addition of four Libyan employees (one counterpart at hiring plus one for each visa issued).

In another instance, the Libya’s GPCIET secretary (General People’s Committee for Industry, Economy and Trade) Mohammed Ali al-Hweij told a director of Caterpillar (CAT) – the US heavy machinery firm – that it could not have any Maltese partners in Libya.

According to the August 2009 cable, Andrew Sheridan of CAT’s Middle East regional office was told that if CAT was to set up a dealership in Libya “partners from Tunisia, Malta, Egypt or Saudi Arabia were unacceptable even as managers or agents but that ‘European and American’ partners were acceptable.”

The meetings took place just three months after Libya had signed a memorandum of understanding with Malta to train Libyan military officials in search and rescue missions.

Sheridan would later learn that the Libyans would only allow CAT to have the government-owned Economic and Social Development Fund (ESDF) to be its Libyan agent. According to ESDF head Hamed Hoderi, the European ‘partners’ would be limited to management functions with no ownership rights. “Hoderi indicated that the GOL (government) and ESDF planned to use the CAT deal as a template for all other heavy equipment and auto dealerships.

Hoderi repeatedly pressed CAT for a quick decision, which Sheridan understood to be an implied threat to reinstate the ban on CAT imports,” ambassador Gene Cretz wrote in his cable.