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P 261758Z MAY 06
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C O N F I D E N T I A L BRASILIA 001017 
 
SIPDIS 
 
SIPDIS 
 
NSC FOR CRONIN 
DOE FOR S.LADISLAW 
TREASURY FOR OASIA - DAS LEE, DDOUGLAS 
STATE PASS TO FED BOARD OF GOVERNORS FOR ROBITAILLE 
USDOC FOR 4332/ITA/MAC/WH/OLAC/JANDERSEN/ADRISCOLL/MWAR D 
USDOC FOR 3134/ITA/USCS/OIO/WH/RD/SHUPKA 
STATE PASS USAID FOR LAC 
 
E.O. DECL: 05/25/2016 
TAGS: EPET EINV ECON PREL BR EC
SUBJECT: BRAZIL'S PETROBRAS: NO INTENTION OF TAKING OVER OXY'S 
ECUADOR ASSETS 
 
REF: A) STATE 81527   B) BRASILIA 1006 
 
Classified by Economic Counselor Bruce Williamson, reasons 1.4 
(b) and (d). 
 
¶1.  (C) In separate meetings on May 23, visiting WHA Assistant 
Secretary Thomas Shannon and the Charge delivered ref A points 
 
SIPDIS 
to President Lula's chief of Staff, Dilma Rousseff, as well as 
Foreign Ministry Under Secretaries Felicio and Patriota.  A/S 
Shannon stated that Ecuador's dispute with Occidental Petroleum 
had presented the USG with a big problem and added that how it 
was handled could easily impact the coming elections in that 
country.  Occidental is poised to take the GOE to arbitration 
and the USG may open government-to-government talks under our 
Bilateral Investment Treaty (BIT) and possibly even take action 
against Ecuador's preferential market access privileges.  The 
USG is trying to approach the issue in a way that is 
non-inflammatory, but the GOE must be made to understand how 
serious a problem this could be.  U/S Felicio noted that the GOE 
had contacted Petrobras about helping out in managing recently 
nationalized sectors, but Petrobras emphatically declined, 
noting that it had a very full plate at the moment. 
 
¶2.  (SBU) The Charge also made ref A points to Petrobras 
International Director Nestor Cervero in a May 26 meeting at 
Petrobras headquarters in Rio de Janeiro (see septel).  Cervero 
stated that Petrobras had no intention of taking over 
Occidental's Ecuador assets.  He noted that Petrobras and 
Occidental were partners in several projects in the United 
States and that it would be bad policy for Petrobras to 
undermine its relationship with Occidental by taking over its 
Ecuador assets.  A similar situation had come up with regard to 
Sudan, Cervero stated, and Petrobras had likewise demurred. 
Petrobras does not intend to abandon its other Ecuador projects 
despite the GOE action against Occidental, he added. 
 
CHICOLA