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USLO TRIPOLI

C O N F I D E N T I A L  TRIPOLI 000197 
 
 
STATE PASS TO COMMERCE FOR NATE MASON 
USTR FOR DOUG BELL 
 
E.O. 12958: DECL:  4/30/2016 
TAGS: ECON PGOV LY
SUBJECT: QADHAFI SONS SQUABBLE OVER COCA COLA 
 
REF: Tripoli 53 
 
CLASSIFIED BY: Gregory L. Berry, Chief of Mission, USLO , 
Tripoli. REASON: 1.4 (b), (d) 
 
¶1.  (C)  Summary:  A lengthy standoff between the 
franchise-holder for Coca Cola-Libya, Ka'Mur Bottling 
Company-U.K., and two of Mu'ammar Qadhafi's sons, Mu'tassim and 
Mohammed, appears to have stabilized in the wake of a compromise 
agreement.  The problem became public on December 28, 2005 as 
security troops controlled by Colonel Qadhafi's son Mu'tassim 
encamped at the Tripoli Coca-Cola plant, owned jointly by Ka'Mur 
Bottling Company and the Libyan Olympic Committee (LOC) through 
their joint venture, the Global Beverage Company (GBC).  With 
the plant shut for more than three months, Colonel Qadhafi's 
daughter Aisha may have intervened to broker a compromise, 
according to which LOC would--at an unspecified future 
date--sell its shares in GBC to the Libyan Social Security Fund. 
 Mu'tassim's men left the plant in late February, shortly after 
USLO sent a strongly-worded diplomatic note to the Ministry of 
Foreign Affairs expressing concern over the legality of the 
plant shutdown and urging a swift resolution to the conflict. 
Coca Cola's General Manager for Libya credits USLO support for 
helping keep the incident under control as Ka'Mur, GBC and Coca 
Cola worked their own channels.  End Summary. 
 
------------------------- 
Long-standing Qadhafi Family Interests Background to Conflict 
------------------------ 
 
¶2.  (C)  In the late 1990's, Coca Cola distributed its product 
in Libya under the supervision of the Office of Foreign Asset 
Control through Al Fursan, a Libyan distributor.  At the time, 
Al Fursan bought product from Coca Cola's plant in Tunisia on 
consignment and distributed through channels in Tripoli and 
Benghazi.  Mu'tassim may or may not have been directly involved 
in linking Al Fursan with Coca Cola through Ka'Mur.   What seems 
more likely is that Ka'Mur attempted to build Al Fursan into a 
partner while the U.S. embargo was still in effect, then severed 
the relationship when Al Fursan demanded a greater piece of the 
action, including rights to the franchise.  Ka'Mur (whose name 
is a mixture of "Kawther" and "Murina", two embargo-era Libyan 
soft drinks) then created the joint-venture between Ka'Mur and 
LOC, GBC.  According to Husni Bey, Chairman of the Husni Bey 
Group (HBG), Mu'tassim was indeed responsible for bringing 
Ka'Mur into Libya.  (Note:  HBG is the agent for U.S. consumer 
products manufacturer Procter & Gamble).  Bey believes Mu'tassim 
shut the plant down as revenge for Mohammed's "takeover" of 
Ka'Mur while he (Mu'tassim) was in Egypt, exiled for his role in 
an act of  "insubordination" against his father in the late 
1990's. 
 
¶3.  (C)  Immediately after the formation of GBC, Al Fursan filed 
suit against Ka'Mur and Coca Cola for breach of contract, and 
sent correspondence to Coca Cola International claiming that 
Ka'Mur had stolen the franchise from them.  Ka'Mur then filed a 
counter-suit with the Libyan Court of Appeals, which it won.  Al 
Fursan demanded damages for lost business as well as restitution 
of the franchise; the company apparently lost on both counts. 
Ka'Mur claims it prepared a counter claim for more than the 
amount demanded by Al Fursan, for materials it says Al-Fursan 
bought from them prior to the rupture but never settled.  Both 
Bey and Azza Maghur, Ka'Mur's attorney in the counter-suit 
against Al Fursan and the sister of a close associate of 
Mohammed Qadhafi, say it is likely that Al Fursan made the 
initial overture to Mu'tassim after legal efforts against Ka'Mur 
failed.  Both claim Al Fursan's lawyer, Ibrahim Legwell, 
fabricated allegations against Ka'Mur and inaccurately described 
the situation and possible consequences Mu'tassim (Note: Maghur 
showed Econoff documents supporting this claim.  As an aside, 
Legwell and Reema 'Ali, his U.S.-based partner, have been 
aggressive in courting U.S. corporate clients, even as they 
denounce U.S. companies as "tools of imperialism"). 
 
------------------- 
Threats, Clashes and Interventions 
------------------- 
 
¶4.  (C)  Abdul Galil Besher, Chairman of the Board of the Coca 
Cola Bottling Company of Egypt and a member of Ka'Mur's board, 
requested a meeting with COM on January 19 to discuss an "issue" 
related to the Tripoli bottling plant.  Besher indicated that on 
December 28, two weeks after the plant began production, "two 
military cars carrying armed personnel without clear 
identification illegally broke into the facility, asked the 
employees to leave the premises and shut down the plant."  Kamal 
Shahata, a member of Ka'Mur's Managing Committee, told USLO 
during a follow-on meeting two weeks later that during 
altercations with Mu'tassim's forces, one expatriate worker was 
slightly injured and some plant materials were destroyed.  Early 
in the crisis, armed men allowed plant managers to enter the 
premises singly or in pairs, but then barred Ka'Mur and Coca 
Cola employees completely.  In the following weeks, various 
individuals described by Shahata as "freelancers" attempted to 
extort shareholdings and/or cash in return for a resolution of 
the conflict.  On February 7, anonymous callers threatened three 
key Coca Cola employees, all Jordanian nationals, with 
"political problems" and direct bodily harm.  Shehata indicated 
that Ka'Mur immediately filed complaints with the Shaabiyya 
(municipality) of Tripoli, the local police station as well as 
the equivalent of the District Attorney.  Shehata and Besher 
complained that at no time did any Libyan authority offer a 
legal justification for the plant's shutdown.  Shehata and 
Besher filed for "personal protection" with the Tripoli police 
and on February 8 visited Mohammed Qadhafi.  They report 
Mohammed Qadhafi declined to get involved personally, yet 
encouraged Ka'Mur to do "everything within its power to resolve 
the matter according to Libyan law."  Shehata returned to 
Tripoli the first week of February to meet with Rajab Shiglabu, 
Chairman of the Libyan Foreign Investment Board (LFIB), under 
whose authority Ka'Mur began operation in Libya.  On February 9, 
Besher and Shehata requested USLO's assistance in taking 
Ka'Mur's case to higher-level authorities, stressing the 
implications for other current and prospective U.S. investors. 
He insisted the company would accept nothing less than a full 
and satisfactory legal settlement of the matter, as anything 
short would expose the company to further risks. 
 
------------------------------- 
Rumors of Deal Brokering to Resolve Squabble 
------------------------------- 
 
¶5.  (C)  On February 20, Econoff received a text message from 
Kamal Shehata, then abroad, saying that the Libyan authorities 
had given GBC the green light to re-start production.  When 
Econoff met again with Shehata on February 24, he confirmed that 
the bottling plant  re-opened and was operating at 
half-capacity.  Shehata said that the restart followed a 
dramatic incident in which men loyal to Mu'tassim abducted and 
assaulted one of Mohammed Qadhafi's in-laws to "send a signal to 
The Engineer (Mohammed)."  The incident allegedly took place at 
Mohammed's Gargaresh residence on the night of February 15. 
According to Shehata, Mu'tassim's associates arrived to 
Mohammed's residence and began shouting for him to come out. 
Receiving no response, they left in search of one of Mohammed's 
cousins, whom they stowed in the trunk of one of their cars and 
brought back to the residence.  According to Shehata, one of 
Mohammed's associates, overhearing Mu'tassim raging earlier in 
the evening, called Ali Mehanna, the founder of Ka'Mur and one 
of GBC's board members, to urge him to "leave the city 
(Tripoli), immediately" as Mu'tassim's men were coming for him. 
"Because they could not find Ali (Mehanna), Mu'tassim's men 
grabbed Mohammed's cousin instead," said Shehata.  Rumors 
circulated through the business community in the days following 
the alleged assault that Aisha Qadhafi had brokered a deal 
between the brothers, obligating Mohammed to sell LOC's shares 
in GBC, in return for Mu'tassim's leaving Ka'Mur and LBC alone. 
Shehata denies that Aisha was involved, instead crediting 
Mohammed with the decision to sell LOC's shares in GBC to the 
Social Security Fund as a means of lessening tensions with his 
brother.  Shehata, who spoke with Econoff in hushed voice in the 
lobby of the Corinthia Hotel, said that although he had heard 
"stories" about doing business in Libya, he "never imagined" 
that what transpired was still possible here. "You know the 
movie, The Godfather?  We've been living it for the last few 
months."  On March 20, a mid-level manager at the Tripoli plant 
told Econ/Comm Assistant that Mu'tassim the night before 
assaulted one of Mohammed Qadhafi's cousins (on his Mother's 
side), a member of LOC, in an incident that he claimed is 
directly related to the plant closure.  This individual, who 
spoke on condition of anonymity, said at that time the issue 
over Coca Cola remained "very much alive."  On March 19, a 
mid-Level (Libyan) manager at the plant told the Econ/Comm 
Assistant that Mu'tassim had  assaulted another of Mohammed 
Qadhafi's cousins, and that the "compromise" threatened to 
unravel. 
 
--------------------------------- 
Coca Cola Plant Operating at Capacity Since Mid-April 
--------------------------------- 
 
¶6.  (C)  Since mid-April, the Coca Cola plant is operating at 
pre-shutdown capacity.  In a March 22 meeting, GBC's General 
Manager, Azem Yousef, looking visibly under stress, said that 
despite recent positive developments, he was "not optimistic" 
about a long-term solution to the dispute.  He said the next 
milestone would be the transfer of shares from LOC to SSF, 
"hopefully this summer."  At the moment, it is unclear who the 
losers and winners are in the so-called truce:  Mohammed is to 
divest the shares of LOC, Ka'Mur apparently is being forced to 
accept a greater ownership stake in the company by the U.S. 
parent and Mu'tassim seems to have gotten nothing (which may be 
the source of his ongoing discontent).  Coca Cola volunteered to 
participate as a sponsor of several USLO events in the recent 
Tripoli International Fair, held April 2-12.  Yousef told 
Econoff that the only hope for a lasting solution rests with 
successful transfer of shares from LOC to SSF, perhaps in June. 
He added that as far as he was concerned, "Libya is not a place 
worth doing business."  Shahata told Econoff in February that if 
Ka'Mur had known how much trouble Libya would be, the company 
would have never entered the market. 
 
----------------- 
Advocacy Efforts on behalf of Coca Cola 
----------------- 
 
¶7.  (C)  While unlawful seizure and shutdown of a foreign 
commercial enterprise in Libya is a violation of 1997 Law No. 5 
for Foreign Investment, USLO was obliged to take into 
consideration when responding to Ka'Mur's original complaints 
the fact that Ka'Mur is not a U.S. entity.  To protect the broad 
interests of a brand representing several million USD in annual 
sales to a U.S.-based company, USLO met Rajab Shiglabu, Chairman 
of the Libyan Foreign Investment Board (LFIB) February 20 and 
asked that the matter be resolved.  Shiglabu offered assurances 
that the case would be mediated through the Libyan justice 
system and that any dispute would end soon.  USLO also met with 
Under Secretary of the General People's Committe for Economy and 
Trade on March 16 and was told that "the matter should not 
concern the U.S.; the Libyan government will determine who 
should hold the licenses."   Two days before the plant 
re-opened, USLO sent a strongly-worded diplomatic note 
expressing serious concern over the plant closure and noting the 
growing risk of severe damage to U.S. investor confidence in 
Libya.  Yousef, in his March 22 meeting with Econoff, said he 
was "very grateful" for USLO assistance, indicated that the 
diplomatic note likely did have a positive effect, and did not 
think that USLO could push further at this time. 
 
¶8.  (C)  Comment:  The Coca Cola incident is a case study in the 
involvement of Qadhafi family members directly influencing the 
flow, pace and nature of economic activity.   Family members 
squabble over personal financial interests with little regard to 
the possible impact on foreign investors or international public 
opinion.  In this incident, LFIB proved ineffective in enforcing 
provisions of the 1996 investment law it is charged to 
implement.  Given the number of people who knew of some aspect 
of this dispute and the plant closure, it is also noteworthy 
that the news was kept out of the press, other than for a brief 
mention in the on-line, "dissident" internet website Libya 
Al-Yowm.  All parties involved -- including the foreign 
companies -- had an interest in keeping things quiet as long as 
there seemed a possibility of a near-term solution.   The Coca 
Cola squabble is typical of the power struggles likely to 
continue as the Qadhafi children and other regime elite continue 
to define (or re-define) their respective spheres of commercial 
influence (see Septel).  The lesson learned for future USG 
advocacy is that pressure has to be applied to a variety of 
different entities, given the diffuse nature of the Libyan 
Jamahiriya ("state of the masses"), and it may be difficult to 
access information given a cultural bias towards resolving 
conflict through personal intervention. End Comment. 
 
 
BERRY