Exclusive: Arcadia may have rigged Yemen exports: cable

By Brian Grow and Joshua Schneyer

ATLANTA/NEW YORK | Wed Jun 1, 2011

ATLANTA/NEW YORK (Reuters) - Oil trading firm Arcadia Petroleum, sued by regulators last week for allegedly manipulating U.S. oil prices, used hardball tactics in Yemen to buy the country's oil exports at below market prices, until authorities revamped their sales process to break the trading house's "long-standing monopoly", according to a confidential State Department cable.

The September 2009 cable says that an internal government shift in control over the country's valuable oil exports, meant to open up oil bidding to more international buyers, threatened Arcadia's sway over Yemen's exports.

It also put at risk an alliance between Arcadia and its "local agent" in Yemen, tribal leader Hamid al-Ahmar, the cable says. Arcadia, in an interview, denied the allegations in the cable, saying it did not employ al-Ahmar as an agent, although it did work with some of his companies in the oil trading business. The company said it always paid official market prices for Yemen's export oil.

NEW OIL BOSSES

In a bid to increase transparency, the government of Yemen in March 2009 yanked control of oil export pricing away from officials in the country's Ministry of Oil, and handed it to an oil council controlled by the son of President Ali Abdullah Saleh, including officials from several government departments.

The shift was meant to end Arcadia's buying of a large portion of Yemen's government-priced export crude at "below-market value", according to the cable, which was obtained by Wikileaks.

Oil traders in Asia who have also been involved in Yemen exports confirmed to Reuters the change in policy. Before the change, many potential buyers would not bid for Yemeni crude because they saw the market as stacked in favor or Arcadia, even though it had a nominally competitive bidding process, the traders said.

"Arcadia almost always won oil export tenders because Arcadia had an "agent" in Yemen. Other international companies such as BP and Chevron were reluctant to participate in the bidding," said an Asian crude oil trader with a major buyer.

The 2009 pricing shift was "a crackdown on corruption and some (government) officials who were in charge of oil export tenders were fired," the trader added.

Stephen Gibbons, CEO of Arcadia's Singapore office, said that al-Ahmar was not the company's agent in Yemen. "He is not our agent and wasn't actually earning anything from us. He has companies in Yemen which we have worked with," Gibbons said.

Cited in the cable, al-Ahmar bragged to an economic official from the U.S. Embassy that he earned $50,000 per month from Arcadia, but the amount was "an infinitesimally marginal part of my income." Global oil trading firms often hire a local agent to secure access to domestic supplies, or improve the odds of winning tenders.

Many of the firms staff small, local offices in countries where they do business, and rely on local agents for access to senior officials and decision-makers. A strong relationship with officials can be an important factor in getting access to coveted supplies.

OTHER SCARE TACTICS?

But the State Department cable, citing a highly-ranked government official, says al-Ahmar and Arcadia took this further and "scared away potentially more competitive bidders by threatening to kidnap their representatives."

On Wednesday, Reuters contacted the official cited in the cable, who repeated the allegation that Arcadia made kidnapping threats in Yemen. Neither the official nor the cable provided specific details of the alleged threats.

Reuters agreed not to name the official at the request of the State Department. "This kidnapping stuff is ludicrous. I completely refute that. It is the kind of thing that could come from competitors, or from the enemies of al-Ahmar," Arcadia's Gibbons said. "This is Yemeni politics. Remember that al-Ahmar is a bitter enemy of (President) Saleh."

The government is currently locked in a near civil war with rebels aligned with al-Ahmar, though at the time he was described in the cable as a powerful leader of the Hashid tribe and a businessman.

The State Department cable was signed by former Ambassador Stephen Seche and sent to six U.S. embassies, the Departments of Treasury and Commerce, and officials at the Joint Chiefs of Staff.

Since the cable was sent in 2009, Arcadia, which is controlled by Norway's billionaire shipping magnate John Fredriksen, has played a diminishing role as a buyer of Yemen's oil exports. The cable says the revised bidding process attracted several other foreign bidders, including China's Unipec, Swiss-based Trafigura and British oil giant BP (BP.N).

COMPETITIVE THREAT

The increased competition challenged "the crude oil sale monopoly long held by London-based Arcadia Petroleum Limited and (Hamid al-Ahmar)," according to the cable. It was made available to Reuters by a third party.

The State Department declined to comment. The cable says that the prices Arcadia received were influenced by al-Ahmar's powerful connections as the company's agent. Arcadia denied that.

"We have had no advantage on prices. There is an open and clear bidding process. Official selling prices have applied to us and everyone else who lifts crude from Yemen," said Gibbons.

Located on the southern tip of the Arabian Peninsula, Yemen is a relatively small oil producer and exporter relative to its neighbors in the Middle Eastern Gulf. But oil sales are the lifeline of the economy, making up 75 percent of government financing and more than 90 percent of export earnings, according to the Department of Energy.

MONOPOLY PLAY

Al-Ahmar and Arcadia allegedly did not stand idly by. In July 2009, "Arcadia sought to wipe out its competition by buying Yemeni oil at an artificially high price designed to temporarily scare away competitors," the cable said.

Arcadia allegedly bid $1.02 per barrel above the world-market price for Brent crude, when it had previously bid 2 to 3 cents below world prices, according to the cable.

The trade generated an extra $3.4 million profit for the Yemeni government that month. The London-based company was pushed into the spotlight earlier last week when the U.S. Commodity Futures Trading Commission sued it, along with two other firms owned by Fredriksen and two oil traders, in federal court in Manhattan, for allegedly manipulating the U.S. oil market in 2008.

Arcadia is among the world's largest private oil trading firms and typically markets around 800,000 barrels per day of crude and oil products worldwide. Its Yemen crude "book" has been among the company's most prominent trading positions, along with Nigeria, where Arcadia has long-term contracts.

Arcadia has continued to bid for and buy Yemen crude from the government since the change in policy in early 2009, most recently buying 3 million barrels last month.

However, Yemen has awarded most of its recent monthly export tenders to oil refiner Unipec, a unit of China's state-run oil giant Sinopec.

Obama, upping pressure on Yemen, sends aide to region

June 02, 2011

Reuters

WASHINGTON: President Barack Obama has dispatched a top aide to Saudi Arabia and the United Arab Emirates to discuss the deteriorating situation in Yemen, the White House said on Wednesday.

“We strongly condemn the recent clashes in Sanaa and the deplorable use of violence by the government against peaceful demonstrators in Taiz,” the White House said, announcing the visit of Obama’s top counter-terrorism adviser John Brennan.

US relations with Saudi Arabia have been strained by unrest sweeping the Arab world, which saw Washington ditch long-standing allies, including Egypt’s autocratic ruler Hosni Mubarak, in order to side with pro-democracy demonstrators.

In Yemen, both are pushing for a transfer of power amid escalating violence that could spread instability in a region strategically vital for global oil supplies.

Yemeni government troops gunned down protesters in the southern town of Taiz during violence this week in which at least 19 people died, while world powers continued to press President Ali Abdullah Saleh to end his three-decade rule.

“These tragic events underscore the need for President Saleh to sign the GCC-brokered transition proposal and to begin the transfer of power immediately,” the White House said.

The Gulf Cooperation Council has so far failed to broker Saleh’s departure but the White House urged it keep trying.

“That is the best way to avoid further bloodshed and for the Yemeni people to realize their aspirations for peace, reform and prosperity,” the White House said in a statement.

Brennan began his trip in Sudan, where violence between North Sudan and the south has flared over the contested oil-rich Abyei border region, ahead of the south’s planned succession from the north in July.

He met Sudanese officials in Khartoum on Wednesday to stress Obama’s “deep concern” about the situation in Abyei, which was seized by northern forces on May 21, and also to discuss a review of Sudan’s inclusion in the State Department list of state sponsors of terrorism and cooperation against al Qaeda.

Tens of thousands have fled the fighting around Abyei, which has sparked international fear that the two sides could return to full-scale civil war.

Assistant Secretary of State Johnnie Carson, the administration’s top diplomat for Africa, said Brennan would be conveying a warning that Khartoum’s behavior in Abyei may complicate the situation.

“They have to meet the legislative requirements for being taken off” of the list, Carson told reporters at a news briefing. “But there is no doubt that the events of the last several weeks do undermine people’s confidence in the commitment to follow through on the roadmap that was laid out some months ago.”

Dozens Dead As Fighting Escalates In Yemen's Capital

by NPR Staff and Wires
June 1, 2011
Scores of people died in fierce overnight fighting Wednesday as Yemeni government forces battled tribesmen for control of the capital city of Sanaa.
Republican Guard shelling and pre-dawn street battles reportedly lasted until 5 a.m. and left at least 41 people dead. The tank shelling and gun battles broke out after tribal fighters seized control of northern parts of Sana'a. Forces loyal to Saleh remain in control of the southern part of the city, protecting key facilities.
Meanwhile, Islamist fighters loyal to al-Qaida seized the southern town of Zinjibar, raising concerns about the consequences of a collapse of government authority in Yemen.
Witnesses in Sana'a told The Associated Press that Presidential Guard units shelled the headquarters of an army brigade responsible for guarding sensitive government institutions. Army officers who have defected to the opposition say the government suspected the brigade commander was about to join forces with the movement to oust Saleh.
Opposition army officers, speaking on condition of anonymity in line with army rules, said the armored brigade commander, Brigadier-General Mohammed Khalil, was neutral and without political affiliation but had apparently angered Saleh.
The 41 dead included combatants from both sides of the conflict, said the medical officials, who spoke on condition of anonymity for fear of reprisals.
A resident who lives close to the fighting and would only give his first name, Zaher, told the AP that columns of smoke and fire billowed from Khalil's brigade headquarters and explosions could be heard.
Several ambulances were seen ferrying injured people to the al-Gomhuria General hospital, Zaher said.
The fighting followed the breakdown of a truce that had been declared Friday, after dozens of tribal fighters died in previous clashes.
Fierce clashes in the southern city of Taiz have left scores more people dead in recent days.
Yemen's already weak government has been rocked by four months of protests. Saleh has refused to cede power despite carefully negotiated exit deals hammered out by other Persian Gulf countries.
NPR's Peter Kenyon reported from Cairo, Egypt, for this story, which contains material from The Associated Press.

Yemen security official: Islamists kill 5 soldiers

By AHMED AL-HAJ Associated Press

May 31, 2011

SANAA, Yemen — Radical Islamists who overran a south Yemen town killed five soldiers in an ambush on Tuesday, security officials said, while fresh clashes broke out in the capital between security forces and fighters from the country's most powerful tribal confederation, edging the country toward civil war.

Almost four months of mass street protests across Yemen calling for democratic reforms and the ouster of longtime president Ali Abdullah Saleh have rocked the stability of this impoverished corner of the Arabian Peninsula. Saleh's security forces shot dead four protesters in the southern city of Taiz Monday, medics said, bringing the two-day death toll there to at least 25.

The upheaval in Yemen has sparked fears that militant groups will take over. Al-Qaida in the Arabian Peninsula operates in its weakly governed provinces along with a number of other radicals, like the ones who overran the town of Zinjibar near Yemen's south coast over the weekend.

A Yemeni security official said militants ambushed an army unit driving toward the town Tuesday, killing five soldiers and injuring 12. The militants fired on the army convoy from behind, forcing them to speed into an ambush where other gunmen fired on their cars.

The soldiers killed two militants before fleeing the area, the official said, speaking on condition of anonymity because he was not authorized to speak to reporters.

Hundreds of armed Islamists stormed the town last week, seizing banks and government offices before setting up barricades to solidify their control. Shelling by army units outside the city failed to dislodge them over the weekend while sending residents fleeing.

Resident Hilmi Ali, 21, said army shelling over the weekend appeared to fall randomly over the town, striking a mosque and four houses in his neighborhood and killing seven of his neighbors.

The Islamists overran a police administration building and intelligence office and could be seen over the weekend driving police cars around town, Ali said. Dozens of families fled.

"We walked on our feet to leave the city," he said by phone from the city of Aden.

It remains unclear whether the Islamists who seized Zinjibar are connected to al-Qaida. Other armed Islamist groups have sought refuge in the area, including some who fought in Iraq and Afghanistan, and others who fought with Saleh's government in a 1994 civil war with the south.

Before Tuesday's ambush, the Interior Ministry said 22 soldiers had been killed since Friday. It remains unclear how many civilians and militants have been killed.

In the capital, Sanaa, fresh gunfights and rounds of artillery fire broke out Tuesday between government troops and fighters loyal to the country's most powerful tribal leader, marking the collapse of a fragile cease-fire.

The fighting brings head-to-head two of Yemen's most powerful men: Sheik Sadeq al-Ahmar, head of the country's Hasid tribal confederation and Saleh, who has heavily stocked the security forces with relatives and allies during his 33-year rule.

Clashes resumed overnight after the failure of a days-old cease-fire that ended last week's clashes, which killed 124 people. Tribal fighters withdrew Sunday from the Local Administration Ministry, one of more than a dozen ministries and government buildings they'd seized in the Hassaba neighborhood, also home to the family compound of Sheik Sadeq al-Ahmar, the Hasid leader.

Abdel-Qawi al-Qasi, a spokesman for al-Ahmar, said that Saleh's force broke the agreement by not withdrawing from buildings they had occupied, especially those around al-Amhar's house.

Clashes erupted early Tuesday and continued through the morning, with tribal fighters seizing a number of new buildings, including the upper house of parliament, the headquarters of Saleh's ruling party and a key street leading to the airport.

"Any place that poses any danger to us and they are firing at us from, we will take it," al-Qasi said.

Al-Qasi said the tribesmen had also seized the Interior Ministry. Yemeni state TV called the fighters "gangs" and denied they'd seized the building.

At least one person was killed — a man who was driving through the neighborhood, said witness Abdel-Waid Ali. Official information on casualties was not immediately available.

President Ali Abdullah Saleh has clung to power despite daily protests, defections by key allies and intense pressure from the United States and powerful neighbors like Saudi Arabia to transfer his powers.

His security forces have waged a brutal crackdown that has included sniper attacks on unarmed protesters, and he has several times pledged to step down under a deal with the opposition only to back out at the last minute.

Beyond the capital, violence also roiled the southern city of Taiz, which has been a hotbed of anti-government protests since the early days of the uprising.

Medics said government troops fired on protesters Tuesday, killing four and bringing the two-day death toll to at least 25.

Soldiers backed by tanks and bulldozers moved in over the weekend, smashing a tent camp the protesters had held in a central square and destroying a field hospital that had been set up in anticipation of such an attack.

On Tuesday, the U.N.'s human rights office in Geneva said it received reports from Yemen that more than 50 people have been killed by pro-government forces in Taiz since Sunday. U.N. High Commissioner for Human Rights Navi Pillay cautioned that the reports "remain to be fully verified."

Pillay said in a statement that "such reprehensible acts of violence and indiscriminate attacks on unarmed civilians by armed security officers must stop immediately."

Government forces opened fire again Tuesday on demonstrators who had regrouped for marches on several main streets, said activist Boushra al-Maqtali.

Protesters set fire to tires and threw stones at the police, who fired rubber bullets, live ammunition and tear gas to disperse them, said another activist, Ghazi al-Samie.

"The city is boiling," al-Samie said. "All shops have been closed and government employees did not go to work and armored military vehicles blocked all the roads leading to the city to prevent people from nearing districts to join the protesters."

Cease-Fire in Yemen Capital Breaks Down

By NASSER ARRABYEE and J. DAVID GOODMAN

May 31, 2011

SANA, Yemen — The field of battle expanded again in Yemen on Tuesday as a cease-fire between government forces and opposition tribesmen in the capital broke down, renewing fears that the country’s continuing political stalemate could drag it into civil war.

The fighting came a day after the government pounded a major coastal city with airstrikes to dislodge Islamic militants and, to the west, smashed the country’s largest antigovernment demonstration in clashes that killed at least 20 protesters.

Artillery explosions and machine-gun fire echoed across the center of the capital, Sana, late Monday and Tuesday morning as fierce fighting shattered a tenuous truce that lasted less than two days.

Black smoke rose over the Hasaba neighborhood as security forces attacked a compound belonging to the family of Hamid al-Ahmar, the strongest tribal rival of President Ali Abdullah Saleh, and tribesmen loyal to the Ahmars retook a government building near the compound that they had vacated as part of the truce deal on Sunday.

Violence broke out in Sana a week ago after Mr. Saleh refused to follow through on his promise to sign an agreement leading to his resignation following months of street protests against his rule. It was the third time since the uprising began in January that Mr. Saleh had agreed to transfer power, and the third time that he had reneged.

Both sides blamed the other for breaking the cease-fire as fighting flared in Hasaba, where many government ministries are located. Witnesses said a local police station was burned to the ground before dawn on Tuesday. The two sides traded artillery fire near the state-run television headquarters.

“Last night’s clashes were the fiercest so far,” Mohammed al-Quraiti, a neighborhood resident, told Reuters. “My children and I couldn’t sleep all night because of the heavy shooting.”

Street battles in the capital reopened a central front for Yemen’s security forces, which have moved forcefully to contain a diverse group of distinct opponents, including tribal fighters, militant Islamists and nonviolent antigovernment protesters.

The latter group found themselves the target of a harsh crackdown in the city of Taiz late Sunday and early Monday as security forces and plainclothes gunmen swept through a main square, dispersing the thousands of protesters seeking the ouster of Mr. Saleh. The United Nations High Commissioner for Human Rights said it had received reports that as many as 50 people were killed in the ensuing clashes, The Associated Press reported. The United States Embassy in Sana condemned the “unprovoked and unjustified attack.”

On Tuesday, protest leaders responded to the crackdown with calls for mass demonstrations. “We are determined to carry our protests to five squares instead of the one that was cleared,” said Riyadh Adeeb, an activist in the city. “We will know how to defend ourselves this time.”

A large number of Republican Guard troops deployed around the city and were using gunfire to scatter those who tried to protest, witnesses in the city said. By the late afternoon, more than 100 women had massed in a central square, challenging security forces nearby to use force against them, a breech of social norms. “This place, Wadi al Qadhi, may become the new sit-in square if women stand firm in their place,” Mr. Adeeb said.

But the opposition women were soon dispersed by female police officers and women supporters of Mr. Saleh, a witness said; there were no reports of injuries.

In the southern coastal city of Zinjibar, five Yemeni soldiers died in fighting on Tuesday, Yemen’s state-run television reported. Hundreds have fled the city where Islamic militants took control over the weekend.

Nasser Arrabyee reported from Sana, and J. David Goodman from New York.