WikiLeaks: How the Cola war was won in Libya

WASHINGTON (Reuters) - An unpublished U.S. diplomatic cable obtained by WikiLeaks tells the previously undisclosed story of how an American corporate powerhouse -- the $35-billion Coca-Cola Co. -- got caught up in a fierce fraternal dispute between two of Libyan leader Muammar Gaddafi's sons.

The contretemps among the freres Gaddafi over a local bottling plant escalated into a heavily armed confrontation resembling a Hollywood gangster film, as a classified 2006 U.S. cable put it.

"You know the movie 'The Godfather'? We've been living it for the last few months," a businessman involved in the dispute was quoted in the cable as telling an official from the U.S. diplomatic mission in Tripoli.

The cable, which was made available to Reuters by a third party, centers on a bottling plant in Tripoli that was shut down for three months. It had been seized by troops loyal to Mutassim Gaddafi, a son of Muammar, who at the time was feuding with one of his brothers, Mohammed. (Another State Department cable suggests a third Gaddafi son, Saadi -- better known as the family's professional soccer player -- may also have been involved in the squabble, though no details of his role are given.)

Eventually, the American diplomatic mission in Tripoli, known then as the U.S. Liaison Office, sent a firm protest to the Libyan government. The document states that around the same time, Mohammed Gaddafi, possibly under pressure from his sister Aisha, a family peacemaker, apparently agreed that shares owned by the Libyan Olympic Committee, which he led, would be sold to a third party.

Shortly afterward, the cable says, Mutassim's men left the Coke plant, ending the family standoff, but not before employees of the plant received threats of bodily harm and a Gaddafi cousin was stuffed in the trunk of a car.

U.S. FREEZES FAMILY ASSETS

The Coca-Cola confrontation is among numerous tales about endless squabbling within the Gaddafi clan recounted in State Department cables. Among other things, the incident underlines the difficulties faced by foreign companies operating in Libya even after the U.S. and United Nations began to scale back sanctions following Muammar Gaddafi's decision in late 2003 to abandon his nuclear weapons program.

A spokesman for Coca-Cola acknowledged there had been "some uncertainty" surrounding Coke distribution arrangements in Libya during the period described in the cable. But the problem was "resolved amicably" by the end of 2006, the spokesman said, and since then, Coca-Cola had been operating normally in Libya until the onset of the current unrest.

A spokesman for the State Department said: "We will decline to comment on any particular cable. The U.S. has taken aggressive action in recent days to freeze the assets of the Qaddafi family. Thus far, more than $30 billion in assets have been blocked."

WORKERS THREATENED, PLANT MATERIALS DESTROYED

Back when Libya was isolated by economic sanctions, its Coca-Cola supply was limited to consignments of the beverage bottled at a plant in Tunisia and transported to Tripoli and Benghazi.

After U.S. and international trade embargoes on Libya began to ease, the Tripoli plant was established. It was co-owned by what the cable describes as a British company called Ka'Mur -- whose name was a reference to two embargo-era Libyan soft-drinks -- and by the Libyan Olympic Committee, headed by Mohammed Gaddafi.

Immediately after this joint venture was set up, the State Department cable says, the embargo-era Libyan distributor of bottled Coke sued the group behind the newly-opened plant, alleging breach of contract. A complaint was also sent to Coca Cola International alleging that the bottling plant operators had "stolen the franchise" from the previous distributors, according to the cable. The bottling plant operators counter-sued.

Then, on December 28, 2005 -- two weeks after the Tripoli plant began turning out locally-bottled batches of Coke -- "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," according to an account of the incident a businessman gave to U.S. diplomats.

The U.S. mission in Libya learned from other sources that the troops were loyal to Mutassim Gaddafi, who, after the Coca-Cola dispute was resolved, was named Libya's national security adviser.

According to the State Department cable, Mutassim bore a grudge against his brother because he had "taken over" the embargo-era domestic soft-drink business in the late 1990s when Mutassim had been exiled to Egypt for "insubordination" against their father. (Another cable says the "rumor" was that Mutassim had been linked to a coup attempt.)

COUSINS ASSAULTED

Sporadic violent incidents continued to erupt in the weeks after Mutassim's forces occupied the bottling plant.

Early in the siege, a businessman affected by the squabble told American diplomats, the occupation force would allow plant managers to enter the building alone or in pairs. But later employees were barred from the facility.

During the weeks that followed, according to the State Department account, anonymous callers threatened three Coca-Cola employees, all Jordanian citizens, with "political problems" and bodily harm. Complaints to police, and later to Muammar Gaddafi himself, were met with indifference. The Libyan leader, according to the cable, "declined to get involved personally" yet urged plant owners to do "everything within (their) power to resolve the matter according to Libyan law."

Then, shortly before the plant reopened, Mutassim's men "abducted and assaulted" one of Mohammed Gaddafi's in-laws to "send a signal," according to the cable.

Earlier that day, it reported, one of Mohammed's associates, after hearing Mutassim "raging," phoned one the bottling plant's founder to warn him to "leave the city immediately" because Mutassim's men were coming to get him.

That night, a posse of Mutassim's associates turned up outside his brother's home and began shouting for Mohammed Gaddafi to come outside. When they got no response, the cable reports, Mutassim's men grabbed "one of Mohammed's cousins," who they proceeded to stuff into the trunk of one of their cars. The cable does not report the cousin's ultimate fate.

About a month later -- soon after the bottling plant had reopened -- two more violent incidents involving Mutassim Gaddafi occurred, according to the cable.

On one occasion, according to a witness who talked to American diplomats, Mutassim personally "assaulted" an unnamed cousin of Mohammed Gaddafi ("on his mother's side", according to the cable) who was a member of the Libyan Olympic Committee headed by Mohammed. A day earlier, the cable said, Mutassim had assaulted another of Mohammed's cousins. (The cable does not make clear whether either of these cousins might have been the cousin who earlier had been stuffed in a car trunk.)

It was in the wake of these episodes that one of the U.S. diplomatic mission's contacts offered the comment comparing his situation to "The Godfather." In a "hushed voice," the cable reports, the contact advised his American interlocutor that while he had heard "stories" about doing business in Libya, he had "never imagined" that what had occurred was still possible.

"ALL PARTIES" WANTED STORY HUSHED UP

After the bottling plant returned to operation, according to the State Department's account, some contacts of U.S. diplomats said that a settlement between Mohammed and Mutassim Gaddafi had been brokered by their sister Aisha, described in other cables as a frequent arbiter of disputes among her fractious siblings. But other embassy contacts said that Mohammed Gaddafi decided on his own to lessen tensions with Mutassim by selling the Olympic Committee's shares to a third party.

The U.S. mission in Libya claimed some credit for helping to defuse the standoff. The cable says that because the principal company involved in operating the Tripoli bottling plant was not an American entity, U.S. diplomats were limited in what they could do.

But in an effort to "protect the broad interests of a brand representing several million USD in annual sales to a U.S.-based company," U.S. diplomats did contact influential Libyan officials to urge that the brotherly dispute be resolved: the U.S. mission sent what the cable describes as 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."

Two days later, the plant reopened.

The State Department cable describes the Coca-Cola conflict as a "case study in the involvement of Qadhafi (sic) family members directly influencing the flow, pace and nature of economic activity. Family members squabble over personal financial interest with little regard to the possible impact on foreign investors or international public opinion."

The Coca-Cola case, the cable adds, "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."

Apart from a brief mention on a website operated by Libyan dissidents, the cable adds, it was "noteworthy that the news was kept out of the press," since "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."

(Editing by Jim Impoco and Claudia Parsons)