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Cablegate: Fico's Libya Trip a Commercial Success

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RR RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHSL #0112/01 0541615
ZNR UUUUU ZZH
R 231615Z FEB 07
FM AMEMBASSY BRATISLAVA
TO RUEHC/SECSTATE WASHDC 0707
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS SECTION 01 OF 02 BRATISLAVA 000112

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: PGOV PHUM PREL ETRD ENRG LY LO
SUBJECT: FICO'S LIBYA TRIP A COMMERCIAL SUCCESS

1. (SBU) Summary. Prime Minister Robert Fico's February 20-22
delegation to Libya focused on commercial objectives,
primarily gaining Slovak military and infrastructure
contracts in Libya as repayment for Libya's debt to Slovakia.
Initial press reports indicate that Libya and Slovakia
reached preliminary agreements on aircraft repair contracts,
and made promises of much greater investments down the road.
Commercial aspects of Fico's visit have received less
international press attention that the PM's comments on
Bulgarian nurses (see reftel), but the delegation's
composition and interests (profiled here) provide insight
into motives for Fico's comments and his broader foreign
policy objectives. End Summary.

Official Side
-------------

2. (SBU) Prime Minister Fico's visit to Libya was officially
designed to find a means of repayment for Libya's
communist-era debt to Slovakia, which is estimated at 130
million USD. Fico hopes to restructure the debt by securing
infrastructure and military sales contracts, in many cases
renewing old Czechoslovak business relationships from 1970s
and 1980s. To meet these objectives, he assembled an
unusually large and high-profile delegation led by Minister
of Economy Lubomir Jahnatek (to press for new contracts) and
Ministry of Finance State Secretary Peter Kazimir (to
renegotiate foreign debt). The Ministry of Foreign Affairs
was represented by State Secretary for Economic Affairs Olga
Algayerova.

Business Side
-------------

3. (SBU) The private business component of the delegation was
perhaps even more high-powered, representing a range of
interests including Slovak oil, gas, aircraft repair, general
military/arms sales, boiler production, water purification,
and the spa industry. Aircraft repair companies came hoping
to secure contracts in return for payment of Libya's debt to
the GOS; the same might be said for Slovak boiler production,
water purification, and military sales companies. The role
of Slovakia's oil and gas company representatives is more
nebulous and seemingly political in nature. Slovak spas have
been offered as a carrot for Libyan investment. In any case,
Slovak companies are eager to access the Libyan market.
Sources at SARIO (the Slovak government investment agency)
and the trade company EBD told Emboff that they see Libya as
Slovakia's strongest growth market in the Middle East for the
immediate future. The delegation members are listed below:

- Miroslav Vyboh is General Director and owner of Willing, a
Zvolen-based military material company specializing in
anti-tank and anti-aircraft systems, spare parts for ground
combat vehicles, ammunition and small arms sales, aircraft
repair, and testing/repair of missiles and rockets. Willing
has contracts in over 50 countries, including several with
Slovakia's Ministries of Defense and Interior. The company
also procures materials for the Slovak Ministry of Defense,
including three rockets from Russia in 2006. Media sources
indicate that Willing has already been trading with the
Libyan government since 2004, but we don't know what it might
be selling. Closely connected with Smer, media reports
indicated that Vyboh needed intervention by Minister of
Interior Robert Kalinak to pass emergency legislation so that
he could get a security clearance for the Libya trip. He had
been denied clearance twice in the past two years for
undisclosed reasons.

- Ozskar Vilagi, CEO of Slovnaft, is the most powerful
businessman in the delegation. Slovnaft announced prior to
the trip that it "hopes to partner with Libyan businesses in
the oil industry," but media speculation suggests that Vilagi
is accompanying Fico in order to curry favor with the new
government. An ethnic Hungarian and executive board member
of Slovnaft's Hungarian parent company, MOL, Vilagi is
considered the primary financial backer of the SMK party.
With SMK out of power, Vilagi has been removed from boards of
two state industries and a wide range of his private business
interests are under pressure. In January, Vilagi struck a
deal with primary Smer financier Juraj Siroky to sponsor
Slovakia's hockey leagues. This trip ban be seen as more of
the same political maneuvering, but also as a serious attempt
to seek opportunities to diversify Slovnaft/MOL oil interests
away from Russia.

- Milan Filo accompanied the delegation as Chairman of
Eco-Invest, a Slovak holding company owning everything from
Slovak banks to paper mills to meatpacking. A business
partner of Vilagi, in the past year Filo has placed many of
his associaties on the board of Slovakia's state gas
distribution company SPP, and was likely really representing
SPP on this trip. Strongly connected to Smer party backers,

BRATISLAVA 00000112 002 OF 002


Eco-Invest announced it would construct a new pulp factory in
Russia one week after Jahnatek visited Moscow. The partial
owner of 17 Slovak companies, including Markiza TV, Filo is
increasingly perceived as one of PM Fico's primary
benefactors. It is in unclear what SPP or Eco-Invest
interest in Libya might be.

- Dusan Rychtarik is General Director of Letecke Opravovne
Trencin, an aircraft repair and manufacturing company which,
in its pre-1989 form, held long-term contracts with the
Libyan government. (Many Slovak air force officers were also
instructor pilots in Tripoli until the mid-1990s). LOT would
like to revive contracts both for repair of aging aircraft
and for sales of new equipment.

- Jan Brandner is Director of the Letecke Opravovne Banska
Bystrica branch.

- Stanislav Elias is Director and reportedly partial owner of
Kupele Bojnice, a Slovak spa. Embassy sources indicate that
the GOS has been courting Middle Eastern investment in its
spa industry as part of the Slovak government's outreach to
the region's governments and businesses. In January, the
Ministry of Economy made a similar sales pitch to a visiting
Saudi prince. Historically, Slovak spas have attracted
clients from Middle Eastern countries, but fewer in recent
years. Slovak spa (and sports team) owners are often
co-owners of other companies, so spa (or sports team)
ownership can be offered on investor-friendly terms in
exchange for other business favors.

- Jan Kukucka is a board member for SES Tlmace, Slovak's top
designer and producer of steam boilers for power and heating
plants using fossil, liquid and gas fuels. SES Tlmace
recently won a major construction contract for building
boilers in the Chinese Shen Tou Power plant, which is being
built for Beijing in anticipation of the 2008 Olympics. SES
Tlmace is looking for similar contracts in Iraq. Kukucka
also accompanied Fico on his recent China trip.

- Milan Spano serves as CEO of EBD, a contracting firm
appointed by the GOS to coordinate terms of Slovak company
sales to Middle Eastern companies, particularly Iraq. EBD
has had some recent success in identifying Slovak water
treatment companies of interest to the Iraqi government and
related firms. Spano believes these and other Slovak
companies have greater potential in Libya, based on the
country's needs, finances, and security situation. EBD is
actually a Florida-based firm and Spano is an American
citizen, despite his poor English skills.

- Milan Michalik is a Board Member of BEZ Group, a
diversified Slovak company that purchased a water
purification system manufacturer in 2006. BEZ Group has been
trying to break into the Middle Eastern market for municipal
water purification, but has not had any visible success thus
far.

Commercial Results
------------------

4. (SBU) According to initial Slovak press reports, Libyan
Prime Minister El Babdadi Ali Mahmudi confirmed on February
23 that Slovakia and Libya reached preliminary agreement that
Slovak companies would obtain contracts for repairing Libyan
airplanes. The details will be negotiated by experts on both
sides, and no connection to debt repayment was specified.
Mahmudi also confirmed Libya's interest in investing up to 50
billion USD in Slovakia over the next 20 years in the form of
real estate, tourism/spas, construction and the oil industry.
In addition, Libya offered Slovakia the opportunity to bid
on tenders for various government contracts that reportedly
total over 30 billion USD. The specific contracting
opportunities were not specified.

5. (SBU) Comment. Given the range of Slovak business
interests who see dollar signs in Libya and the massive
hypothetical sums being casually discussed, it is not
surprising that Fico commented on the Bulgarian nurse
situation as he did. He wanted to send a message to both
Kaddafi and Slovak businesses that commercial interests are
the most important component of his foreign policy, then
clean up any potential messes with the international
community afterward. Since Fico appears to walk away from
Libya with significant preliminary agreements in hand, it
will likely strengthen Fico's inclination to believe that
potential commercial opportunity trumps even rhetorical
attention to human rights issues during his foreign visits.
In any case, Slovakia and Libya will likely draw closer
economically based on Fico's visit. End Comment.

VALLEE

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