Eb A/S Sullivan Meets Norwegian Deputy Fm Stubholt On Margins Of Eiti Conference

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¶1. (SBU) Assistant Secretary for Economic and
Business Affairs Dan Sullivan met October 20 on the
margins of the Extractive Industries Transparency
Initiative (EITI) Conference with Norwegian Deputy
Foreign Minister Liv Monica Stubholt to discuss
EITI and a range of international and bilateral
issues, including energy investments in Russia,
Iran and Iraq and a number of irritants in U.S.-
Norwegian commercial relations. They were in
agreement on the importance of EITI’s goals and
principles, with Stubholt calling Norway’s offer to
host a permanent EITI secretariat a sign of its
deep commitment to the process. On energy,
Stubholt emphasized that Norway’s recent efforts to
open Barents petroleum resources to development
could contribute to U.S. energy security. Both
sides expressed concern about Western petroleum
firms’ recent troubles in Russia, particularly
Gazprom’s decision to exclude foreign firms from
ownership stakes in the Shtokman field. A/S
Sullivan cautioned Stubholt about Norwegian oil
companies’ investments in Iran but welcomed
Norwegian assistance to Iraq’ petroleum sector,
possibly in connection with the Compact for Iraq.

¶2. (SBU) Turning to bilateral matters, Stubholt
appealed for U.S. flexibility on climate change
language for the upcoming Arctic Council
Ministerial statement. A/S Sullivan raised several
bilateral commercial irritants, including weak
pharmaceutical patent protections, “blacklisting”
U.S. firms from Norway’s Government Pension Fund,
and discriminatory vehicle taxes, but Stubholt
signaled that Norway would give little ground.
Wrapping up the meeting, Stubholt reacted
positively to A/S Sullivan’s request for support
for Guatemala’s UNSC bid and for U/S Sheeran’s
candidacy for a head of the World Food Program.
End Summary.

Strong Agreement on Benefits of EITI

¶3. (SBU) A/S Sullivan and Stubholt agreed on the
importance of EITI in enhancing transparency in the
energy and mining industries in the developing
world. Noting the important role that U.S. and
Norwegian petroleum companies played in the energy
sectors of many developing nations, they concluded
that the United States and Norway shared a common
interest in EITI’s success. Stubhholt stressed
that Norway’s willingness to host a permanent EITI
secretariat in Oslo demonstrated its strong

commitment to the initiative. (Note and comment:
Germany has also offered to host the EITI
secretariat. Norway, as a leading exporter of

hydrocarbons and an exemplary model of transparency
in the energy sector, would appear to be the more
logical choice. End note and comment.)

Barents Oil/Gas Could Enhance U.S. Energy Security
——————————————— ——

¶4. (SBU) Stubholt briefed A/S Sullivan on Norway’s
efforts to open the petroleum resources of the
Barents Sea region to exploration and development.
She stressed that developing High North energy
resources could contribute to U.S. energy security
by offering additional sources of supply,
particularly of natural gas, to the U.S. market.
A/S Sullivan noted that he had met with Statoil

executives the day before to discuss the company’s
plans in the Barents and was particularly impressed
with the cutting-edge offshore technologies that
had made development of remote subsea Arctic
resources a reality. (Note: Statoil will begin
exporting LNG from the Barents Sea’s “Snoehvit”
field to Cove Point, Maryland next year. End

Troubled Times for Energy Investors in Russia
——————————————— –

¶5. (SBU) Turning to Russia, Stubholt expressed
disappointment at reports that Gazprom had decided
to exclude Western partners from ownership shares
in the vast Shtokman natural gas field. She noted
that neither Statoil nor Norsk Hydro, the two
Norwegian petroleum companies on Gazprom’s short
list of potential partners in the project, had
heard anything official from Gazprom. She thought
the companies would “stay in for the long haul” in
Russia in spite of the disappointing news and could
perhaps take advantage of opportunities to develop
Shtokman on a contractual basis if they could not
take an ownership stake. The recent hurdles facing
Western oil companies in Sakhalin were an even more
troubling development, as Russia seemed to be
changing the rules of the game after significant
investments had already been made. A/S Sullivan
agreed, noting that much work had gone into
negotiating a set of energy security principles
with Russia for this summer’s G-8 Summit in St.
Petersburg, but Russia had fallen far short in
implementing them.

Caution on Energy Investments in Iran

¶6. (SBU) A/S Sullivan cautioned Stubholt that
Norwegian petroleum firms’ investments in Iran
raised serious concerns under the Iran-Libya
Sanctions Act (ILSA). He noted that Congress had
recently renewed that Act in conformity with
previously existing principles, but that there had
been a concerted, though unsuccessful, effort to
strengthen the sanctions. He urged Stubholt to
bear ILSA in mind because the issue of investments
in Iran had assumed a very high profile in
Washington. Stubholt responded that all petroleum
companies, Norway’s included, were increasingly
aware of geopolitical concerns and exercising
greater corporate responsibility in making
investment decisions.

Hope for Energy Investments in Iraq

¶7. (SBU) A/S Sullivan cited Iraq as another
example of a nation where petroleum companies could
exercise significant influence. He noted that
Kurdistan and the central government had drafted
competing petroleum investment laws and cautioned
that making investments under regional laws risked
encouraging separatist tendencies. Stubholt
agreed, stressing the need for governments and
petroleum firms to consult closely on investments
in Iraq. (Note: A small Norwegian petroleum firm,
DNO, has concluded a deal with Kurdish authorities
to develop an oil field on northern Kurdistan. So
far, the Norwegian majors have held back on
investing in Iraq but have participated in Norway’s
bilateral assistance program for the Iraqi oil
sector. End note.)

¶8. (SBU) A/S Sullivan briefed Stubholt on the
Compact for Iraq and suggested that Norway could
contribute by providing technical assistance to the
Iraqi oil sector. Stubholt responded that Norway
was following the Compact with interest and a
“positive attitude.” She noted that Norway had
already allocated about 30 million NOK
(approximately USD 4.5 million) for bilateral
assistance to Iraq’s Ministry of Oil, though the
program was not moving as quickly as it could.

Appeal for Arctic Council Attention and Compromise
——————————————— ——

¶9. (SBU) Stubholt urged greater U.S. attention to
the Arctic Council, a forum for addressing Arctic
issues whose members include the United States,
Norway, Finland, Sweden, Denmark, Iceland, Canada
and Russia. She requested A/S Sullivan to convey
an appeal to appropriate U.S. officials to
compromise on climate change language in a draft
ministerial statement to be issued in late October.

No Traction on Bilateral Commercial Irritants
——————————————— –

¶10. (SBU) A/S Sullivan raised three bilateral
commercial concerns — Norway’s weak patent system
for pharmaceuticals, the Government Pension Fund’s
divestment from U.S. firms for allegedly unethical
behavior, and new taxes on light trucks that have
decimated the market for such U.S. vehicles in
Norway. On pharmaceutical patents, Stubholt
insisted that Norway was in compliance with its
Trade Related Aspects of International Property
Rights Agreement commitments and had struck an
appropriate balance between patent protections and
ensuring reasonable drug prices. She disputed that
Norway’s weak pharmaceutical patent protections
tended to undermine innovation and was adamant that
Norway would not change its system to address U.S.
concerns. A/S Sullivan reiterated that adequate
IPR protections were the “heart and soul” of the
American culture of innovation and urged remedial

¶11. (SBU) Regarding the “blacklisting” of U.S
firms by the Pension Fund, Stubholt argued that the
government’s ethical investment guidelines complied
with international standards and were administered
by an independent commission whose decisions were
non-political. She noted U.S. concerns about
procedural deficiencies in the guidelines and the
preponderance of U.S. firms on the Fund’s
blacklist, concerns which the Ambassador laid out
in a recent speech that received prominent press
play. She acknowledged the importance of examining
any flaws in the process that might exist and
suggested the government might conduct an
assessment of the guidelines and consider changes
“after an appropriate time.”

¶12. (SBU) Stubholt did not respond on the light
truck tax issue.

Support for UNSC and WFP Candidates

¶13. (SBU) A/S Sullivan wrapped up the meeting by
requesting Norway’s support for Guatemala’s UN
Security Council candidacy and for Under Secretary
Sheeran’s candidacy for head of the World Food
Program. Stubholt responded positively on both
counts, noting with respect to the latter that

Norwegian Prime Minister Jens Stoltenberg enjoyed
an excellent working relationship with U/S Sheeran.

¶14. (U) Assistant Secretary Sullivan has cleared
this cable.