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terview with Marty Miller

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RETRIEVAL #: 281 00007 0002 39

 UNOCAL© Charles O. Strathman
Vice President, Law
Tel: 310.726.7763
Fax: 310.726.7877
criucks@unocal.com

November 6, 2003

VIA FEDERAL EXPRESS

Mr. Scott Allan

301 7th Street, S.
S.W., Room 5125
Washington, DC 20407

RE: Unocal

Dear Mr. Allan:

As we discussed on the telephone, I am forwarding material Unocal submitted to the

Offices of the U.S. Attorney from the Eastern District of Virginia and New York in
connection with the John Phillip Walker Lindh matter. I am reasonably certain this was
the final form of the letter, but you may want to check with one of the U.S. Attorneys'
offices.

If you have any questions, do not hesitate to call.

Best regards,

COS/ir
Enclosure

Unocal 2141 Rosecrans Avenue, Suite 4000, El Segundo, CA 90245

 o
O'MELVENY & MYERS LLP
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OUR FILE NUMBER

November 5, 2003 884,122-6
WRITER'S DIRECT DIAL
310-246-6850
VIA FACSIMILE AND U.S. MAIL
WRITER'S E-MAIL ADDRESS
Randy I. Bellows, Esq. -i dpetrocelli@omm.com
John S. Davis, Esq. j^O ^\\t United States Attorneys '

Office of the United States Attorney J^\

for the Eastern District of Virginia
2100 Jamieson Avenue
Alexandria, Virginia 22314
Facsimile Numbers: (703) 548-0866 and (804) 771-2316

David N. Kelley, Esq.

Deputy United States Attorney
Office of the United States Attorney
for the Southern District of New York
One St. Andrew's Plaza
New York, New York 10007
Facsimile Number: (718) 422-1700

Re: United States of America v. John Phillip Walker Lindh

(E.D. Va. Crim. No. 02-37-A), Defendants' Motion to Dismiss
Counts Eight and Nine of the Indictment for Selective
Prosecution
Dear Sirs:

We represent Unocal in connection with the above-referenced action. We write to

respond to a number of erroneous allegations made by Mr. Lindh regarding Unocal in the
selective prosecution motion that he filed on May 15, 2002.

The main allegation regarding Unocal in Mr. Lindh's motion is that Unocal
"conducted business" with the Taliban, or otherwise supported the Taliban, both before
O'MELVENY & MYERS LLP
Randy I. Bellows, Esq., John S. Davis, Esq., & David N. Kelly, Esq. November 5,2003 - Page 2

and after Federal Regulations barring such conduct took effect on July 6, 1999. See Mot.
at 6-7; 31 C.F.R. §§ 545.101 et seq. (the "Anti-Taliban Regulations"), see id. § 545.302
("Effective date."). Mr. Lindh also suggests that Unocal has future plans to do business
with the Taliban despite the Anti-Taliban Regulations and despite our country's recent
military efforts in Afghanistan against the Taliban and al Qaeda.

Both of Mr. Lindh's assertions are untrue, misleading, and wholly unsupported by
the alleged "evidence" he cites in his moving papers. As is shown below, Unocal never
signed a contract with the Taliban, nor gave the regime any money. Unocal had no
involvement in Afghanistan by the end of 1998—six months before the Anti-Taliban
Regulations took effect. And Unocal not only has no plans of conducting business in
Afghanistan or with the Taliban, it is contractually barred from conducting business in
Afghanistan until 2005.

The History of Unocal's Involvement in Afghanistan

Unocal's involvement in Central Asia traces back to 1995. Around that time,
Unocal had discussions with the government of Turkmenistan and others regarding the
feasibility of exporting the country's natural gas reserves. Bringing these vast gas
reserves to a viable market required transporting the natural gas through Russia, Iran, or
Afghanistan and then Pakistan. The Russian route had been foreclosed by the Russian
government, and American companies were forbidden from doing business with or in
Iran. Thus, the pipeline route through war-torn Afghanistan to markets in Pakistan and
potentially India presented the only viable option.

An off-shore subsidiary of Unocal (Unocal Central Asia, Ltd.), the Turkmenistan

government, and a multinational collection of five companies from Korea, Japan,
Pakistan, and Saudi Arabia agreed to explore the prospect of building this pipeline and
exporting natural gas from Turkmenistan. This seven-member group formed a
consortium in 1997 to conduct these investigations called Central Asia Gas Pipeline, Ltd.,
or "CentGas."

Unocal's involvement in CentGas and any investment that Unocal might make in
the construction of the pipeline were conditioned on the occurrence of certain events.
Unocal never negotiated or entered into any agreements with the Taliban or other
competing factions for power. Indeed, Unocal made clear that it refused to enter into any
such deals with the factions in Afghanistan's ongoing civil war, and instead, insisted that
the project would not proceed until (a) peace and stability were achieved in the country;
and (b) a government formed in Afghanistan that was secure, internationally recognized,
and fairly represented all of its people.
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Of course, these events never occurred. Instead infighting intensified in

Afghanistan, the Taliban rose to power, and the country remained pitched in civil war.
The Taliban, moreover, was never recognized by the United Nations or the United States
as the legitimate ruling government in Afghanistan. However, at the behest of Unocal's
business partners in CentGas, and with the support of the United States government,
Unocal representatives had a limited number of courtesy meetings with members of the
Taliban and other factions in Afghanistan, such as the Northern Alliance, to discuss the
pipeline project. As the Chicago Tribune article with Mr. Lindh's motion confirms, these
courtesy meetings were conducted with the express "support" of the United States State
Department, which wanted to bring "stability to the country." Declaration of Tony West
in Support of Defendant's Motion to Dismiss Counts Eight and Nine of the Indictment
for Selective Prosecution (hereinafter "West Decl.") Exh. 24.

It is important to note, however, that although Unocal participated in these

courtesy meetings, neither Unocal nor CentGas ever negotiated (much less signed) a
contract with the Taliban or the Northern Alliance. See id. ("Unocal tried to educate
many factions in Afghanistan about the benefits of oil and gas pipelines. No deals were
ever made because the country was too unstable.")

The assertion in Mr. Lindh's motion and in the "Pop + Politics" article he submits
as evidence that, "[i]n 1996, Unocal signed an agreement with the Taliban and the
Afghan Northern Alliance, giving Unocal the go-ahead to build a south-bound pipeline
through Afghanistan" is completely false. West Decl. Exh. 10. Unsurprisingly, the
author of the "Pop + Politics" article - whose thesis is that United States military is
presently in Afghanistan, fighting the Taliban and al Qaeda, to serve the President's and
Vice President's pecuniary interests in the defense, oil, and construction industries - cites
no source or other evidence for her unsubstantiated assertions.

As Unocal's public statements, statements to its business partners in CentGas,

United States Department of Energy Reports, and Unocal's actions made clear, however,
Unocal never entered into a deal with any faction in Afghanistan's civil war, and Unocal
repeatedly stated its refusal to enter such an agreement should one be presented (which it
never was). See West Decl. Exh. 14 (September 2001 United States Department of
Energy Report: "Unocal had previously stressed [before 1998] that the CentGas pipeline
project would not proceed until an internationally recognized government was in place in
Afghanistan.")

"Doing business" or "signing agreements" with such factions would make no

sense. To begin with, in order to obtain suitable financing for the massively expensive
pipeline project, lending institutions would require contracts with real governments
solidly in place and recognized by the international community. Lending institutions
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Randy I. Bellows, Esq., John S. Davis, Esq., & David N. Kelly, Esq. November 5,2003 - Page 4

would also require that the region and government evince a likelihood and tendency to
remain stable, so that a return on investment would be possible.

Afghanistan was anything but stable or secure in the second half of the 1990s. As
a result, in the Spring and Summer of 1998, the pipeline project became less feasible
from Unocal's perspective. Although the Taliban was achieving military victories in its
war against the Northern Alliance, the war showed no signs of abating, much less ending
once and for all. Furthermore, the Taliban was coming under increasingly harsh criticism
from the international community for its involvement in the international opium trade and
its persistent human rights abuses. The prospects that the Taliban would control all of
Afghanistan (in particular its northern border with Turkmenistan), or that it would be
recognized as a legitimate government by the world community, was extremely unlikely.
Moreover, it is important to note, the two major markets for Turkmenistan's
natural gas appeared jeopardized. Pakistan - initially, the primary market for the natural
gas - was suffering from its own political and economic turmoil. In addition, Pakistan
was engaged (and to this day is still engaged) in an intensifying border dispute with India.
India, like Pakistan was a principal potential consumer of natural gas from Turkmenistan.
In light of these market developments, and the distinct possibility that civil war and
political turmoil in Afghanistan would not cease any time soon, Unocal's involvement in
the pipeline project was imperiled.

The End of Unocal's Involvement in Afghanistan in 1998

On August 7, 1998, terrorists bombed U.S. Embassies in Kenya and Tanzania.
Osama bin Laden and his terrorist network in Sudan and Afghanistan were identified as
prime suspects. Less than two weeks later, on August 20, 1998, the United States
conducted bombing raids in both countries, striking at least six sites of terrorist activity in
Afghanistan.

That same day, August 20, 1998, Unocal was contacted by news agencies, such as
Dow Jones and Knight-Ridder, asking for comment. Unocal orally responded to such
inquiries stating that, "[i]n light of the U.S. government actions against terrorist facilities
in Afghanistan, Unocal, as the development manager for the CentGas consortium, feels it
is appropriate to suspend all activities involving the proposed pipeline project in
Afghanistan." Exh. A.

The next day, August 21, 1998, Unocal posted the following on its website:

As a result of sharply deteriorating political conditions in the

region, Unocal, which serves as the development manager for the
Central Asia Gas (CentGas) pipeline consortium, has suspended all
O'MELVENY & MYERS LLP
Randy I. Bellows, Esq., John S. Davis, Esq., & David N. Kelly, Esq. November 5,2003 - Page 5

activities involving the proposed pipeline project in Afghanistan.

We are discussing this suspension with the other members of the
consortium.

This decision to suspend activities is consistent with Unocal's

long-held position concerning its involvement in the project. For the
past several months, Unocal has been reviewing this project with
CentGas participants. We have consistently informed the other
participants that unless and until the United Nations and the United
States government recognize a legitimate government in
Afghanistan, Unocal would not invest capital in the project.
Contrary to some published reports, Unocal has not—and will not—
become a party to a commercial agreement with any individual
Afghanistan faction.
Unocal was instrumental in proposing the Central Asia gas
pipeline project in 1995 and in forming the seven-member CentGas
consortium in October 1997. The consortium was formed to
evaluate and, if appropriate, to participate in the future construction
of a gas pipeline from Turkmenistan through Afghanistan to natural
gas markets in Pakistan and, potentially, India.

Unocal will only participate in construction of the proposed

Central Asia Gas Pipeline when and if Afghanistan achieves the
peace and stability necessary to obtain financing from international
lending agencies for this project and an established government is
recognized by the United Nations and the United States. For this
reason, we strongly support the United Nations conflict resolution
process underway in this and other regions.

We believe that the CentGas pipeline would benefit the entire

region by providing vitally needed energy infrastructure,
employment and training, as well as hard currency revenues to the
several countries involved. The proposed pipeline is an example of
a large-scale project that may, after the appropriate conditions are
met, help Afghanistan move from its present devastation toward
economic reconstruction.

Since the pipeline project was first proposed, there have been
a number of complex issues that Unocal has taken very seriously.
Unocal recognizes the legitimate concerns regarding the treatment of
women in Afghanistan. Consistent with our core values and business
O'MELVENY & MYERS LLP
Randy I. Bellows, Esq., John S. Davis, Esq., &. David N. Kelly, Esq. November 5, 2003 - Page 6

principles, Unocal is currently providing humanitarian support and

skills training to Afghanistan through CARE and the University of
Nebraska at Omaha.

Exh.B.
Over the next two months, all reports indicated that the instability in Afghanistan
would only intensify. The Taliban retrenched its positions and refused to extradite or
otherwise turn over Osama bin Laden to international authorities. During these tense
months, Unocal continued to observe its suspension of all activities in Afghanistan.
On November 4, 1998, at a shareholders management committee meeting of
CentGas (in Istanbul, Turkey), Unocal announced its withdrawal from CentGas, giving
its 30-day notice of withdrawal as a shareholder in the consortium, and its 60-day notice
of withdrawal as the consortium's Development Manager. (Two November 4, 1998
letters from Unocal Central Asia, Ltd. to the members of the CentGas consortium
documenting these withdrawals are attached as Exhibits C and D.) After "withdrawing"
from CentGas, Unocal was bound by the CentGas Shareholder Agreement "not to
participate, directly or indirectly, in any project relating to the transportation of Gas from
Turkmenistan through Afghanistan to Pakistan and/or India" until 2005 or until CentGas
disbanded completely. See Exhibit E ("Non-Competition Clause").

One month after noticing its withdrawal from CentGas, Unocal, on December 9,
1998, notified the University of Nebraska at Omaha - which had been providing skills
training and women's teacher training in Afghanistan - and CARE - a U.S.-based relief
foundation providing humanitarian aid in Afghanistan —that Unocal could no longer fund
the university's or the foundation's efforts. Unocal expressed its understanding that any
monies it had advanced in the past to university and the foundation would be exhausted
by the end of the year and by the end of the first quarter of 1999, respectively. (Copies of
these letters are attached as Exhibits F and G.)

Mr. Lindh's Erroneous Allegations

Mr. Lindh asserts that Unocal remained in Afghanistan supporting and
"conducting] business" with the Taliban "after the [July 7, 1999] effective date of the
[Anti-Taliban] Regulations." Mot. at 6-7. Yet each source (save three) cited by Mr.
Lindh that discusses Unocal's involvement in Afghanistan reports that Unocal withdrew
from the region in 1998. See West Decl. Exh. 5 (July, 8, 1999 New York Times article:
"Unocal last year abandoned plans to build a $20 billion pipeline in Afghanistan, and the
project was picked up by an Argentine company."); id. Exh. 6 (July 7, 1999 Agence
France Presse article: "Most economic ventures involving US companies, such as the
trans-Afghan pipeline have been shelved."); id. Exh. 10 ("Unocal opened offices in
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Kazakhstan, Uzbekistan, Pakistan, and Turkmenistan in anticipation of starting the

pipeline, but turmoil in Afghanistan and ensuing conflicts with the Taliban led them to
withdraw from the project in 1998."): id. Exh. 14 (September 2001 United States
Department of Energy Report: "On December 8, 1998, Unocal announced that it was
withdrawing from the CentGas consortium, citing low oil prices and turmoil in
Afghanistan as making the pipeline project uneconomical and too risky. . . . "In April
1999, Pakistan Turkmenistan and the Taliban authorities in Afghanistan agreed to
reactivate the Turkmenistan gas pipeline project, and to ask the CentGas consortium, now
led by Saudi Arabia's Delta Oil (following Unocal's withdrawal from the project) to
proceed."); id. Exh. 24 (Chicago Tribune Oct. 21, 2001 article: "Unocal withdrew from
the international consortium in late 1998 following the bombings of two U.S. Embassies
in Africa;" also noting that Unocal cut off funding to the University of Nebraska at
Omaha shortly thereafter); id. Exh. 26 (Declaration of Mohammad Basheer employee of
University of Nebraska at Omaha "The Unocal Program ran for just one year, from
August 1997 to October 1998. . . . [T]he Unocal Program was terminated due both to
security concerns and to pressure from feminist groups in the U.S. who opposed the
Taliban.").

The two Internet sources and declaration that suggest that Unocal remained
involved in Afghanistan after the Anti-Taliban Regulations took effect in July 1999 are
specious. One Internet report relies on unidentified "sources" and surmise about the
irresistible allure of the pipeline's potential profits to assert falsely that Unocal was trying
to "re-enter" the CentGas consortium and the "Turkmen gas pipeline project in March
2000." WestDecl. Exh. 17. Nothing could be further from the truth. At the time,
Unocal and CentGas were resolving differences regarding Unocal's withdrawal from
CentGas in the aftermath of the aborted deal. These differences were resolved in a July
2000 Mutual Release and Settlement Agreement, in which both sides abandoned their
claims, and CentGas insisted that Unocal continue to honor the Non-Competition Clause,
barring Unocal from participating "in any project relating to the transportation of Gas
from Turkmenistan through Afghanistan to Pakistan and/or India" until 2005.
The second Internet posting - which weaves together a grand conspiracy involving
"the Bush Administration, Unocal, the CIA, the Taliban, Enron, Saudi Arabia, Pakistan,
and the Bush Oil team" - theorizes that, "[although Unocal claims it abandoned the
pipeline project in December 1998, [a] series of meetings held between U.S., Pakistani,
and Taliban officials after 1998, indicates the project was never off the table." West
Decl. Exh. 21. Such theory and conjecture about the inner-workings of the government
are not fact. And the theories postulated are demonstrably untrue.
Lastly, the Declaration of Gary Breshinsky states that, "when I was in Afghanistan
in September 1999,1 saw trucks and Land Cruisers that said 'Unocal' on them. I believe
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I was in Kandahar when I saw these vehicles. I did not know what Unocal was doing in
Afghanistan then, but I definitely saw their trucks and Land Cruisers there, and I believe
that the sanctions had already been imposed." West Decl. Exh. 9. Unocal had none of its
vehicles in Afghanistan in 1999, and never did prior. As it does in many markets where
it is trying to build brand recognition, Unocal broadly disseminates free decals and other
marketing materials. These marketing materials appear in regions where they were
distributed even though Unocal never did business in there or long-since left the region.
Indeed, recent news reports about Afghanistan center on how popular the decal trend is in
Afghanistan. See, e.g., Exh. G Charles Recknagel, Afghanistan: In Kabul, Drivers Wear
Their Hearts On Their Cars, Not Their Sleeves, Radio Free Europe (Jan. 4, 2002) (In
Kabul, the capital of Afghanistan, "there are the cars with brand names for products of
every sort - products usually unavailable in Kabul — emblazoned on their doors. .. . The
trademarks give the cabs a prestigious air of carrying paid-for ads in a city with no
advertising industry . . . . 'The decal passion existed before and during [the Taliban] and
even the Taliban were, if not a lot, at least a little interested in them. They especially
loved trademarks, though usually they didn't know what they meant.'").
Finally, Mr. Lindh cites a handful of other sources that he alleges support his
assertion that Unocal remained in Afghanistan after July 1999 or intends to return there in
the future. However, the sources he cites for this proposition:

• Predate the Anti-Taliban Regulations by several months, see West Decl. Exh.
18 (April 1999 statements made by U.S. Congressman Dana Rohrbacher);

• The sources tangentially refer to "oil companies'" alleged interests in the

region - but do not refer to Unocal specifically, much less state that the
company was doing business with Afghanistan after 1999. See id. Exh. 20
(Aug. 3, 2001 Agence France Presse story about U.S. Assistant Secretary of
State Christina Rocca's meetings in Pakistan with Pakistani and Taliban
officials); id. Exh. 28 (alleging that, "at the behest of U.S. oil companies, the
Bush administration initially blocked FBI investigations into terrorism"); or

• The sources refer to pipeline projects contemplated by other oil companies, not
in Turkmenistan, Afghanistan, and Pakistan where CentGas was operating, but
in neighboring parts of Central Asia where the CentGas project was not even
taking place. See, e.g., Exh. 11 (Nightline broadcast discussing Chevron's and
Texaco's explorations in Kyrgyzstan).

In sum, Mr. Lindh's allegations about Unocal bear much resemblance to the
Internet sources on which he is forced to rely. They are long on theory and speculation,
and totally devoid of substance or fact.
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The reality is that Unocal lost a great deal of money in the CentGas project.
Unocal abandoned the project, and left Turkmenistan, Pakistan, and Afghanistan soon
after Afghanistan was bombed in August 1998. Unocal never signed contracts with the
Taliban, nor gave the regime any money. Unocal had no contacts with the faction - and
certainly did not support the regime - after the Anti-Taliban regulations took effect.
Unocal has no intention to return to Afghanistan. And even if it wanted to do so, it is
currently barred by contract from doing so.
Very truly yours,

Daniel M. Petrocelli
of O'Melveny & Myers LLP

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