(C) KUWAITI INTERESTS IN IRAQ

1. (C) SUMMARY: The GOK, increasingly confident that the US
is determined to eliminate Saddam Hussein's regime, is more
and more willing to let its public support show, even as it
maintains its formal commitment to Arab League and GCC
opposition to any pre-emptive strike on Iraq. Prominent
Kuwaiti merchant families see vast potential for investment
and trade with a post-Saddam Iraq; given the unfavorable
investment climate at home, they have a lot of liquidity to
draw on. Some still have family ties to southern Iraq and
have been quietly sending financial aid to their kin via
Jordan. END SUMMARY.



2. (C) LETTING IT SHOW: The GOK, increasingly confident
that the US is determined to eliminate Saddam Hussein's
regime, is more and more willing to let its support show
publicly, even as it maintains its formal commitment to Arab
League and GCC opposition to any strike on Iraq. In recent
weeks, the GOK openly hosted two prominent Iraqi opposition
figures: first Mohammed Baqer al-Hakim, head of the Shiite
Supreme Council for the Islamic Revolution in Iraq (SCIRI),
then Jalal Talabani, head of the Kurdish Patriotic Union of
Kurdistan (PUK). Both held meetings with senior
ruling-family members including the First Deputy Prime
Minister and Foreign Minister, Shaykh Sabah al-Ahmed al-Jaber
al-Sabah, who is de facto ruler given the debility of the
Amir and Crown Prince/Prime Minister. The GOK also announced
plans to send observers to the Iraqi opposition conference in
London this week. (Question for Embassy London: were GOK
reps evident?) This trend was accelerated by Saddam's
December 7 address to "the people in Kuwait," which sparked
widespread outrage here (septel). Supposedly an apology, it
was in fact filled with insults, threats and incitement to
violence.



3. (C) THE VISION THING: Kuwait, following the Saudi line
(ref A), will want post-Saddam Iraq to remain a unified
country under Arab leadership, preferably Sunni -- although
the GOK is less dogmatic on that point than the SAG. We
assess that Kuwait will want to be seen as contributing
substantively to the reconstruction of Iraq, if only to
deflect blame for the years of suffering its neighbor has
endured. The GOK already knows it will face intense pressure
to forgive much of Iraq's debt, particularly the UN-endorsed
compensation for Iraq's depredations during the 1990-91
occupation; it will try to avoid opening itself to charges of
seeking to keep the Iraqi people down after the Baath regime
is gone.



4. (C) Some Kuwaitis worry that their country's value to the
US will decline precipitously after regime-change in Iraq,
especially if the USG devotes a huge investment to developing
a 'new Iraq' as a model for the region. This, however, does
not begin to rival their desire for an end to the existential
menace of Saddam -- more than anything else, the Kuwaitis
want us to succeed quickly, with minimal loss of civilian
lives and property. Kuwaitis are probably less worried than
most Arabs about facing US-inspired pressure for
democratization, given their established tradition of a
rambunctious democratically-elected parliament. They also
understand the point that a true democracy is built on strong
institutions that protect minority rights through the rule of
law.

TRADE AND INVESTMENT


--------------------------




5. (C) Conversations with Kuwaiti business leaders reveal
palpable anticipation of trade and investment opportunities
in a post-Saddam Iraq. Kuwaiti merchants and
service-providers are well placed to export supplies and
equipment to Iraq, because of Kuwait's proximity to Basra,
its developed infrastructure, and the family ties that still
bind some entrepreneurs to southern Iraq despite the strains
brought on by the Iraqi occupation and the subsequent
sanctions: some merchant families have quietly been sending
financial aid to their kin in Iraq via Jordan. Some
entertain hopes of successfully asserting title to family
property in southern Iraq. At one time, our sources tell us,
Kuwaitis owned some 38 million date-palms around Basra. They
all were lost during the Iran-Iraq war but Kuwaitis know the
land could bear fruit again some day.



6. (C) Kuwaiti investors have a great deal of liquidity
resulting from higher-than-budgeted oil prices, UN
Compensation Commission payments, and an unfavorable
investment climate at home (ref B) and depressed equity
markets worldwide. An Iraq freed of the Baath regime looks
attractive to them due to its wealth of natural resources
(oil, water, fertile land), its educated workforce, and its
familiarity based on proximity and the two countries' shared
Arab and Muslim heritage. One entrepreneur envisages
building a new port near the border to handle some of the
anticipated trade, given the crumbling state of many existing
Iraqi facilities. Another expects to make a significant
fortune selling paint and milk across the border. We hear
vague but credible reports of retailers stocking up on food
and other consumer items, ready to supply Iraq with products
it wants and needs.



7. (C) COMMENT: The Kuwaitis are depending on us to prevail
against Saddam, and to protect them in the process. The more
we look like winners and liberators, the more secure their
own position becomes. The Kuwaitis' worst nightmare is a US
climb-down that would leave Saddam in power. Next worst
would be a protracted, bloody conflict that inflamed the
passions of the wider Arab and Muslim worlds, even if we
ultimately prevailed.
JONES