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Cablegate: President Sarkozy's Trip to Libya Sets High Hopes For

VZCZCXRO3412
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHFR #3193/01 2071647
ZNR UUUUU ZZH
R 261647Z JUL 07
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC 9164
RUCPDOC/DEPARTMENT OF COMMERCE WASHDC
RUCNMEM/EU MEMBER STATES

UNCLAS SECTION 01 OF 02 PARIS 003193

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STATE ALSO FOR E, EB, EB/TPP, EUR/ERA, AND EUR/WE
COMMERCE FOR ITA

E.O. 12958: N/A
TAGS: ETRD ECON FR
SUBJECT: PRESIDENT SARKOZY'S TRIP TO LIBYA SETS HIGH HOPES FOR
LUCRATIVE CONTRACTS

NOT FOR INTERNET DISTRIBUTION

1. (SBU) Summary: Having achieved the desired political effect of
burnishing his image as a man who can help resolve intractable
issues, French President Nicolas Sarkozy used his July 25 visit to
Libya following the release of five Bulgarian nurses and a
Palestinian doctor to boost economic and trade relations with that
country. A number of framework agreements were signed during the
visit, including a memorandum of understanding to build a Libyan
nuclear reactor for water desalination. French nuclear giant Areva
expects to benefit from the warmer relations, as does oil group
Total and engineering group Alstom. Sarkozy's effort to derive real
commercial gain from his newfound relationship with Libyan leader
Qadhafi is partly intended to make up ground believed lost to the
United States and others since Libya's rehabilitation in late 2003.
He likely expects that his efforts will yield more benefits than
former President Chirac obtained following his 2004 visit to
Tripoli, though French businesses may still find Libya a daunting
place to do business. End Summary.

Building on past efforts
------------------------
2. (U) Franco-Libyan relations have been steadily improving since
a 2004 accord on a Libyan compensation deal for the victims of a
French DC-10 airliner bombing over Niger, which killed 170 people,
including 54 French, in 1989. The deal paved the way for a November
2004 visit by then-President Jacques Chirac and a large delegation
of French businessmen hoping for a bonanza of new contracts. The
two countries resumed defense cooperation in February 2005 and
struck an accord on civilian nuclear research in March 2006. French
aerospace manufacturer Dassault also signed an agreement to service
12 Libyan Mirage F1 jets.

3. (U) French exports to Libya have doubled since Chirac's trip,
reaching 433.6 million euros (600 million dollars) last year.
France imported 1.9 billion euros worth of goods from Libya over the
same period, almost exclusively hydrocarbons (representing three
percent of all French oil supplies). However, France remains a
modest trading partner and French firms never achieved the success
they hoped for following Chirac's visit. France is currently
Libya's sixth supplier, far behind Italy and Germany, with Libya
accounting for just 0.1 percent of French exports and 0.45 percent
of imports.

New ambitions
-------------
4. (U) "We can do a lot more and a lot better with Libya," Elysee
Spokesman David Martinon said on the eve of Sarkozy's official
visit. In Tripoli French Foreign Minister Bernard Kouchner signed a
memorandum of understanding to furnish Libya with a nuclear reactor
for water desalination. Sarkozy noted that the project could take
months, if not years, to complete and indicated that French nuclear
company Areva would be involved. Prior to Sarkozy's visit, Areva
confirmed that it had been approached to build nuclear plants,
adding that talks which had begun last year were still at a
preliminary stage. France and Libya also signed a global framework
agreement reinforcing bilateral cooperation in many sectors,
including health, education, scientific research, technology,
combating terrorism and organized crime, defense and security as
well as economic and financial cooperation.

5. (U) Other French groups are expected to take advantage of the
improved bilateral relationship. French oil giant Total intends to
take part in the recently-launched tender process for the
exploration of 41 gas blocks. The French heavy engineering group
Alstom, which makes high-speed trains and energy turbines, said
meanwhile that any warming in Franco-Libyan ties would likely
constitute a positive signal for its commercial development. In the
banking sector French group BNP Paribas won a tender for the
privatization of 19 percent of the capital of the Sahara Bank at a
cost of 145 million euros. Libya has also shown interest in the
Rafale, the Dassault fighter that has not yet been sold outside
France.

Comment
-------
6. (SBU) President Sarkozy clearly hopes that his visit, and
France's role in the nurses' release, will reap dividends in terms
of new contracts and commercial relationships. French companies
have the political signal they were waiting for to move aggressively
in seeking out opportunities in Libya. The French business
community is aware, however, that with the exception of Total, it
lags behind the United States and many EU partners in its efforts
there. Sarkozy, who has publicly eschewed the notion that he
intends to link France's bilateral relationships to his personal
relationships with foreign leaders, probably hopes nevertheless to
derive some gain from his current honeymoon with Qadhafi. As French

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businessmen found after Chirac's visit, however, a good relationship
at the highest level is no guarantor of commercial success.

STAPLETON

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