2004 REPORT TO CONGRESS ON ALLIED CONTRIBUTIONS

UNCLAS SECTION 01 OF 09 ABU DHABI 005390 SIPDIS STATE FOR PM/B AND NEA/ARP DOD FOR OSD/PA&E AND OASD/ISA/NESA SENSITIVE E.O. 12958: N/A TAGS: PREL MCAP MARR MASS TC SUBJECT: 2004 REPORT TO CONGRESS ON ALLIED CONTRIBUTIONS TO THE COMMON DEFENSE: UAE SUBMISSION REF: STATE 305999 -------------- ¶1. (SBU) INTRODUCTION/SUMMARY -------------- The UAE in 2003 continued its outstanding record as a valuable strategic partner in the Global War on Terrorism and in supporting key U.S. regional strategic policy goals. Among the highlights of the UAE's contributions to the common defense are: -- Providing basing for USAF aerial refueling, intra- theater lift, and Intelligence, Surveillance, and Reconnaissance assets in support of Operation Enduring Freedom (OEF),Operation Southern Watch (OSW),Operation Iraqi Freedom (OIF),and Operation Horn of Africa (OHA); -- Providing other logistical and non-combat support for OEF, OSW, OIF, and OHA; -- Providing strategic lift estimated at $5 million for a Bulgarian infantry brigade deployed to Iraq as part of a Polish-led multinational division; -- Hosting U.S. Navy logistical operation in support of the Fifth Fleet; -- Hosting the U.S. sea services at Jebel Ali Port (Dubai) and at Fujairah, with Jebel Ali being the premier U.S. Navy liberty port in the world and the only one in the region where a nuclear-powered aircraft carrier can be berthed pierside; -- Providing facilities and forces for direct action outside the UAE in support of OEF; -- Direct sharing in costs of U.S. deployments to the amount estimated at approximately $93 million; -- Indirect sharing of costs estimated at approximately $173 million; -- Maintaining an important defense sales relationship with the USG; -- Donating around $100 million to support humanitarian assistance and reconstruction efforts in Iraq and Afghanistan, including over $32 million provided through the UAE Red Crescent Authority (RCA); -- Providing assistance to the Palestinian people in the Occupied Territories, including $5 million in assistance to residents of the Gaza Strip in the first half of 2003 and providing about 300,000 meals during the month of Ramadan; -- Hosting numerous high-level military and civilian delegations, including Defense Secretary Rumsfeld, former USCENTCOM Commander General Franks, new USCENTCOM Commander General Abizaid, Air Force Secretary Roche, Chief of Staff of the Air Force General Jumper, and Vice Chief of Staff of the Air Force Moseley, as well as the State Department's Under Secretary for Arms Control and International Security John Bolton, Assistant Secretary for Political-Military Affairs Lincoln Bloomfield, and Assistant Secretary for Near Eastern Affairs William Burns. -------------- ¶2. (SBU) GENERAL ASSESSMENT -------------- ¶A. TRENDS/DEVELOPMENTS IN ECONOMIC AND POLITICAL FACTORS: -- POLITICAL DEVELOPMENTS: Domestic political circumstances in the UAE have changed little over the past year. The UAEG's loose federal structure, under the leadership of President Zayed bin Sultan Al-Nahyan, remains stable and there are no internal or external opposition groups. In December, President Shaykh Zayed clarified the UAE succession by promoting his son Mohammed bin Zayed as Abu Dhabi Deputy Crown Prince. Mohammed bin Zayed remains Armed Forces Chief of Staff. Shaykh Zayed's eldest son, current Abu Dhabi Crown Prince Shaykh Khalifa bin Zayed, is expected to become the country's next president when his father departs the scene. In October, Shaykh Zayed promoted another of his sons, Hamdan bin Zayed, as Deputy Prime Minister. Hamdan bin Zayed remains the de facto Foreign Minister. In regional and international affairs, the UAE continued to demonstrate its unequivocal support for the Global War on Terrorism. The UAE played a critical role in assisting the continuing investigation into the 9/11 attacks and provided financial documents pertaining to the movement of terrorist funds. The UAE Government implemented a law to criminalize money laundering, to include terrorist financing, in January 2002. To date, the UAE Central Bank has frozen a total of $3.13 million in 18 bank accounts in the UAE since 9/11. The UAE implemented the anti-terrorism financing regulations passed by the UN Security Council. Cooperation across the board -- from the financial realm through to military, security and intelligence as been strong and sustained. The UAE provided logistical support for non-combat operations related to OEF and OIF. As part of OIF, the UAE in late July provided strategic lift costing $5 million for a Bulgarian infantry brigade that was being deployed to Iraq as part of a Polish-led multinational division. Additionally, the UAE provided on short notice its frigate "Al Emarat" as a flagship of a GCC naval force in defense of Kuwait. The UAE continued its generous humanitarian assistance to the Afghan people and in October 2003, the UAEG pledged $215 million in reconstruction assistance to Iraq. The UAE remains committed to cooperation with other GCC States. In October, the UAE and Oman formally resolved a long-standing border dispute. At an October 13 meeting, the defense ministers of the GCC countries approved recommendations from Gulf Arab chiefs of staff to boost the 5,000-strong Peninsula Shield force to 20,000 troops in ¶2004. The GCC members were scheduled to review this decision at their annual summit in late December. The UAE commitment to Peninsula Shield is one full mechanized brigade, and that is expected to remain the same if and when Peninsula Shield is increased. The UAE has continued to back GCC policies on Iran and Iraq. The UAE permitted the basing of USAF tankers in support of OSW, OEF, OIR, and OHA. The UAE's economic and trade relations with Iran continued to grow, but there was no change in political relations, which remain strained. In April 2003, officials from the UAE and Iran expressed their readiness to broaden ties in cultural, political, economic and trade areas, but there were no official visits by senior government leaders during the year. The UAE's attention remains focused on the contested Abu Musa and Tunb Islands, occupied by Iran but claimed by both Iran and the UAE. The UAE continues to take the lead within the GCC in expressing concern about Iran's support for terrorism, its military build-up, pursuit of weapons of mass destruction, and interference in the internal affairs of other countries in the region. The UAE publicly condemned terrorist attacks in Iraq, Saudi Arabia, and Turkey, while offering a strong public show of support for the Iraqi Governing Council and Iraq's interim government. The UAE has provided assistance to the Palestinian people in the Occupied Territories, including $5 million in assistance to the residents of the Gaza Strip in the first half of 2003. The UAE Red Crescent provided humanitarian assistance in 95 countries in 2003. ECONOMIC DEVELOPMENTS: The United Arab Emirates is a confederation of seven emirates. Individual emirates retain considerable control over legal and economic matters, most significantly over ownership and disposition of oil and other natural resources, and resultant revenues. Oil production and revenues from the sale of oil constitute the largest single component of GDP, accounting in 2002 for 30 percent of GDP and equaling roughly 50 percent of export and 90 percent of government revenue. Rising or declining oil prices have a direct effect on GDP statistics. -- The great majority of the UAE's oil export income comes from Abu Dhabi emirate, though Dubai and Sharjah also produce and export a modest amount of oil and gas products. The scarcity of oil and gas reserves in the UAE's northern emirates has led to continued attempts at economic diversification. The non-oil sector of the UAE's economy actually accounts for more than twice the oil sector's direct contribution to GDP and this has helped insulate the country from the full effect of fluctuating oil prices. -- Traditionally, oil revenues, along with careful management of investments, have helped the UAE avoid some of the budgetary problems encountered by other GCC states. The UAE has substantial foreign exchange reserves and the government has no foreign debt. Continued UAE consolidated budget deficits are financed primarily by liquidating or withdrawing interest from overseas assets. There are no figures available for the amount of government assets held overseas, but many experts believe the Government of Abu Dhabi maintains $200 billion to $250 billion under the administration of the Abu Dhabi Investment Authority. The UAEG continues to be reluctant to accept IMF recommendations to reform and rationalize fiscal policy through measures such as reduction of current expenditures and subsidies or instituting taxation. The UAE is, however, working with the IMF to improve the quality of its statistics. -- The Emirate of Abu Dhabi, which finances the UAE's military expenditures, continues to build significant infrastructure, particularly in the power and water sector, where privatization/outsourcing efforts continue. Several large-scale projects, including the UAE Offsets Group's "Dolphin" project (to pipe Qatari Gas to Abu Dhabi and Dubai) and massive greenfield utility developments in Fujeirah and Shuweihat in Abu Dhabi Emirate, are moving to execution. ¶B. TRENDS/DEVELOPMENTS IN AID, PEACEKEEPING OPERATIONS AND HUMANITARIAN ASSISTANCE: -- The UAEG provided generous assistance to Iraq, donating around $100 million to support humanitarian assistance and reconstruction efforts in Iraq, including over $32 million provided through the UAE Red Crescent Authority in 2003. The UAE also pledged $215 million to Iraqi reconstruction (25% representing money already spent, and the rest for new power generation projects. The UAE built a water treatment plant with a 200,000-gallon capacity in Basra, evacuated nearly 40 wounded children and their parents to the UAE for medical treatment, and rebuilt six hospitals in Iraq, to provide a few examples of the type of assistance. The UAE -- via the federal Red Crescent Authority, Dubai Crown Prince Muhammad Bin Rashid Al-Maktoum's Charitable Foundation and Sharjah Charity International rovided robust assistance to the people of Afghanistan, estimated at over $150 million in the last two years. This includes over $50 million in humanitarian assistance and a $50 million assistance-in-kind grant to the Afghan national army. The UAEG is working to identify projects that would fill its $30 million pledge made in Tokyo in 2002. -- Operation Emirates Solidarity, a $50 million program funded by the UAE for demining operations in southern Lebanon, continued in 2003. The two governments are working with the United Nations and private contractors to complete the operation, which was launched in May 2002. Two commercial companies cleared 3.9 million square meters of land, removing and destroying 30,904 anti-personnel mines, 1,476 anti-vehicle mines, and 1,400 UXO between May 2002 and May 2003. It is conservatively estimated that 130,000 mines, left by the various parties who contributed the Lebanese civil war, need to be removed before life in the south of the country can return to normal. The UAEG will spend well above the initial $50 million as they pledge to do more demining in southern Lebanon. -- The UAEG also continued its generous humanitarian assistance program to the victims of violence in the Occupied Territories. The UAE federal Red Crescent Authority, for example, provided $5.2 million in assistance to Palestinians in the first half of 2003 and provided about 300,000 meals during the month of Ramadan to residents of the West Bank and the Gaza Strip. -- The UAEG maintained its generous levels of development assistance in the form of direct grant aid and concessional loans to primarily Arab and Muslim countries, including the Palestinians, Egypt, Jordan, Morocco, Oman and Pakistan. -------------- ¶3. (SBU) DIRECT COST SHARING -------------- All figures in this report are in U.S. dollars. All UAE Dirham figures were converted at the rate of 3.66 Dirhams per one U.S. dollar. ¶A. Rents: The UAEG neither leases nor rents any privately owned land or facilities for use by U.S. forces. ¶B. Labor: The UAE hired laborers and funded construction work at Al Dhafra and Al Minhad Air Bases to upgrade facilities for use by U.S. forces, as well as by Canadian and French forces. This included road-building, force protection fences, gates, utilities upgrade, and project site preparations. It is not possible to estimate the size of this work force or its cost to the UAE. ¶C. Katusa Labor: N/A ¶D. Utilities: Electricity, water and sewer were provided at no cost to the 380th AEW at Al-Dhafra Air Base, and to Minhad Air Base. Utilities at the port facilities at Jebel Ali in Dubai and in Fujairah were included in the annual lease fees paid by the U.S. Navy. The majority of the utilities increase is attributed to the increased tempo of operations from these bases and facilities due to OSW, OIR, OEF, and OHA. For CY03, the estimated figures for Al Dhafra and Minhad are: Electricity: $800,000; Water: $195,000 ¶E. Facilities: Beginning in CY04, the UAE will have costs associated with joint use of facilities of Gulf Air Warfare Center, including office space, ramp and hangar space, support shops, and ranges. ¶F. Facilities Improvement Program: N/A ¶G. Relocation Construction: In CY04, we expect to see support for construction of a new U.S. aircraft ramp at Al Dhafra Air Base funded by the U.S. The cost is $47 million. The UAE has given the U.S. the land, and has given us the land to build a new fuel storage and transfer facility. The UAE did site preparation, provided fill material because of high water table level, built road for U.S. sole use, installed perimeter fence with gates, built new main entrance gate to facilitate U.S. operation, restructured Al Dhafra Air Base force protection measures, provided vehicle search area, demolished existing outdated structures, and installed utilities. The UAE has offered to provide funds from a source not associated with the Defense Cooperation Agreement account to fund the relocation of the main camp at Al-Dhafra Air Base from the west side of the base to the east side. The UAE has provided substantial fill material, grading, and the use of its facilities there (three large warehouses with associated sunshades and other buildings),laying down of a new access road with a private gate for the U.S. facility. The current site will be returned to the UAE once relocation is complete in CY04, using FY03 MILCON already authorized for the construction of semi-permanent structures. The approximate one-time cost to prepare this new foundation and use of the UAE warehouses and sunshades, and other items is: Al-Dhafra AB Main Camp Relocation: $20,000,000 The UAE has offered to provide money from the Defense Cooperation Agreement account to fund the NAVCENT move of its facilities from Fujairah International Airport to Minhad Air Base outside of Dubai. The approximate one-time cost to build this facility and outfit it with suitable equipment is: Minhad AB Furbishment: $22,000,000 ¶H. Vicinity Improvements: N/A ¶I. Miscellaneous: OSD generated donations to support stand-up of the Afghan National Army (ANA) was sizable: ANA Assistance-in-Kind Donation: $50,000,000 -- Total of Direct Cost Sharing: $92,995,000 (estimated) -------------- ¶4. (SBU) INDIRECT COST SHARING -------------- ¶A. Rents: An area of approximately 85 acres was secured at Minhad Air Base in May CY01 for development by the USG as an additional site for the current cargo operation at Fujairah International Airport. In November CY02, the UAE provided 21 acres of land at Al- Dhafra for the USG to construct hangars and ramp space to operate its assets and is now home of KC-10 operations. According to Abu Dhabi Supply and Landing services, the fair market value of the land is 385 Dirhams per square meter. Al Dhafra Air Base Camp/West: $ 44,700,000 Al Dhafra Air Base Camp/East: $ 44,700,000 Al Dhafra East Ramp : $ 12,000,000 Al Dhafra KC-10 West Ramp : $ 12,000,000 Total Rents for CY03: $112,000,000 Facilities: -- The U.S. Navy has been provided a dedicated deepwater (14 meter) berthing space in the Jebel Ali Port Complex for the berthing of its aircraft carriers. As of December 2003, there have been more than 625 port calls in the UAE. Due to the current operations tempo, use of Dubai as a liberty port was substantially increased in CY03. Use of the Jebel Ali Port Complex represents a unique, valuable resource for the Navy. The carrier berth (10/11) and berth 66, where the Navy logistics site is maintained were provided without lease. When ships visit, only port fees were charged. It should be noted that when not in use by the U.S. Navy, the port allows commercial ships to use the berth. Additionally, land has been given to the Navy next to the carrier berth to allow them to set up an R&R facility with shops, fast food outlets and recreational facilities for sailors to use while on port liberty. The following figures were provided by Jebel Ali Port Authority for potential annual revenue gained if land was commercially developed, and if the carrier berth was a dedicated commercial berth. Port Land Site: $1,500,000 50 Days at Berth 10/11: $ 622,000 192 Days at Berth 66: $2,602,000 -- The UAE has provided other invaluable support for OEF and OIF, including the use of facilities in various locations. For example, the U.S. Navy was allowed to use the port of Fujairah, strategically situated on the Gulf of Oman, to offload supplies for transport by land to Dubai, rather than transiting the Straits of Hormuz. Estimated Value of UAE Forward Operation Bases: $20,114,751 ¶B. Tax Concessions/Customs/Tolls/Duties: Fees and charges (numbers in brackets indicate fees levied): -- Landing and cargo fees levied: ($900,000) -- Port fees and cargo handling levied: ($1,500,000) -- Taxes and customs duties waived: $3,000 -- Visa issuance charges levied: ($4,000) -- Overflight authorizations waived: $2,565,000 ¶C. Miscellaneous: -- During every U.S. Navy aircraft carrier port visit, the Dubai police provide 24-hour police security presence at the Navy berth. Following the terrorist attack on the USS Cole in Yemen in October, 2000, the Dubai authorities increased security for U.S. Navy ship visits, providing boat patrols, EOD police dogs and UAE Naval and Coast Guard support, as well as the use of port facilities to support U.S. security detachment personnel observation posts and command center. Security requirements were increased at both Jebel Ali and Fujairah port and airport. The estimated cost for security provided by host government at all three facilities is: Est. Cost for Jebel Ali and Fujairah sites: $320,000 -- Note that while costs cannot be assessed, the UAE Port Authority provides emergency medical and fire fighting services at Fujairah International Airport and Jebel Ali Port. UAE Military Police are also provided at Fujairah International Airport. -- The UAE Air Force provided considerable security to the forces at the Al-Dhafra, Al-Bateen and Minhad Air Bases through the infrastructure of the bases, security personnel and HAWK missile batteries in the area. -- UAE Contributions to the Air Warfare Center (AWC): A joint CENTAF (USAF) and UAE Air Force and Air Defense Initiative to initially provide out of CONUS training for fighter units in the Gulf. UAE has contributed the main schoolhouse ($8 million) to house the facility at Al-Dhafra AB and is now providing additional funds ($26 million) to upgrade other facilities and fill them with necessary furnishings and equipment. Value of AWC Facilities provided: $34,000,000 TOTAL VALUE OF INDIRECT COST SHARING (WHERE CAPTURED): $173,726,751 (estimated) -------------- -------------- ¶5. (SBU) GRANT AID/PEACEKEEPING AND HUMANITARIAN ASSISTANCE -------------- -------------- ¶A. Grant Aid: -- There is very little information publicly available on UAE spending, and only very general categories of spending are published by the UAE Central Bank. Published reports through 1996 indicate that the UAE gave foreign aid equivalent to 3.5 percent of GDP. -- One of the primary vehicles for administering the UAE's foreign aid program, the Abu Dhabi Fund for Development (ADFD),was established in 1971 as an autonomous national development institution of the Government of Abu Dhabi. Overall, 56 countries have now benefited from the ADFD's assistance programs. The ADFD also acts as an administrator of development assistance extended directly by the Government of Abu Dhabi. The primary objective of the fund is to offer aid to undeveloped and developing countries in the Arab World by extending project loans, guarantees, grants for technical assistance or feasibility studies, and equity participation in projects. Its emphasis has been on projects that upgrade infrastructure, improve health and educational facilities and generate employment opportunities. Funding is typically made available in the form of concessionary loans, usually offered at a low interest rate, a long repayment schedule, and long grace period. The ADFD has provided r managed for the Abu Dhabi government bout $19.25 billion in development assistance since 1971. ¶B. UN Peacekeeping and Other Humanitarian Operations: -- UAE Institutional Arrangements for Peacekeeping and Other Humanitarian Operations: The UAE's contributions to international operations are usually handled via the UAE Red Crescent Authority (RCA) and the Zayed Foundation. Both are nominally NGOs and they enjoy close links with UAEG officials and receive highly publicized donations from the ruling family. Established in 1992, the Zayed Foundation is entirely funded by President Zayed and to date has funded humanitarian assistance programs overseas valued at slightly over $100 million. The RCA receives donations from the ruling family and members of the public. The RCS worked closely with the UAE Armed Forces during the Kosovo crisis. Other Humanitarian Operations: -- The UAE -- via the RCA, the MBR Charitable Foundation and Sharjah Charity International -- has already provided over $50 million in humanitarian assistance to the Afghan people. The RCA has constructed a refugee camp in Chaman in Pakistan which houses between 10,000-40,000 refugees, and includes a 50-bed hospital, mosque and playground. The RCA also has established an air bridge to fly humanitarian assistance and medical supplies to refugees on the Iranian-Afghan and Pakistani-Afghan borders and has provided $365,000 in direct funding and equipment for the Afghan Red Crescent Society hospital in Kabul. The RCA is also distributing relief supplies inside Afghanistan. Shaykh Mohammed bin Rashid's Charitable Foundation has established three refugee camps in the Spin Boldak area in eastern Afghanistan while Sharjah Charity International has built one camp in the same region. The camps inside Afghanistan each house between 5,000-10,000 refugees. -- The UAEG donated $50 million for the demining of southern Lebanon. Two commercial companies cleared 3.9 million square meters of land, removing and destroying 30,904 anti-personnel mines, 1,476 anti-vehicle mines, and 1,400 UXO between May 2002 and May 2003. ¶C. Force Contribution for UN Operations: N/A ¶D. Current Contingency Operations: During OIF, the UAE operated a hospital in Baghdad that required military escorts. There were logistical costs associated with establishing a hospital and transportation in Baghdad during combat operations. During OEF, OIF, OSW, and HOA, there were daily overflight operations. The UAE provided a strategic lift to a Bulgarian battalion of their Polish brigade being deployed to Iraq after the Iraq war. ¶E. Military Assistance: N/A ¶F. Counter proliferation Contributions: A USG interagency team visited the UAE in December 2003 to conduct a nonproliferation/export controls workshop on weapons of mass destruction awareness with a wide range of UAEG officials. -------------- ¶6. (U) GROSS DOMESTIC PRODUCT -------------- ¶A. UAE nominal GDP in 2002 was USD 70 billion. ¶B. The UAE Ministry of Planning projects a growth rate of 4.7% in 2003. We believe that this reflects a robust growth in oil prices and the non-oil sector. -------------- ¶7. (SBU) DEFENSE EXPENDITURES -------------- ¶A. Defense Expenditures for 2003, Projected Outlays for 2004-2007 -- There has been no information published on the CY03 defense budget. However, UAEG defense expenditures for salaries and fixed costs average $2 billion per year, and procurement varies according to program requirements and oil prices, according to informed sources. Major Defense Expenditures in 2003: -- As part of the $8 billion F-16 deal, the UAE is purchasing (via FMS) training, weapons and associated support amounting to $1.5 billion. The first aircraft will be delivered to the U.S. training base in March 2004 and then to the UAE in November 2004; -- The UAE is in the process of upgrading its Mirage fighter fleet and has purchased 32 additional 2000 Mirage-9 fighters. Most of the 32 Mirage 2000-9's were delivered in CY03. The contract for the new Mirages, unveiled in CY98, was $3.2 billion. The deal to upgrade the 30 Mirage 2000-5 aircraft already in service is worth $6 billion; Projected outlays for 2004-2007: The UAE is three-quarters of the way through a ten-year program of military modernization (1995-2005) which, according to press reports, should result in the acquisition of $15 billion worth of equipment. Following are elements: -- Negotiations are under way for the French to sell six patrol boats worth $600 million; -- 12 68-meter Baynunah Class Guided Missile Boats programmed for delivery through 2006; -- 6 CH-47A twin rotor heavy lift helicopters that could be used in special operations roles were acquired from Libya. The UAE Armed Forces is currently evaluating the upgrade of these air frames to CH-47F, at an estimated cost of $180 million. -- 1 130-meter ex-Kortenouaer Class Frigate currently under negotiation with the Netherlands; -- An unknown number of 90-meter multi-role Corvettes; -- 3 CASA 295 Fixed Wing Maritime Patrol Aircraft with ASW/SIGINT capability programmed for delivery through 2008; -- 2 206/7-type diesel submarines under negotiation with Germany; -- 1 Oiler/Replenishment Ship, Chinese constructed, with Dutch systems, still to be funded; -- As a follow-on to the F-16 deal, the UAE is considering purchasing aerial refueling tankers, cargo aircraft, and command and control; -- The UAE already is an extensive user of U.S. military training programs; all U.S. military training is paid via FMS cases worth approximately $63 million. ¶B. Defense Personnel: -- Civilians: Negligible -- Active Duty: 62,000 (no projections available for next five years) -- Committed Reserves: Negligible. -------------- ¶8. (U) POINT OF CONTACT -------------- Point of Contact is Joel Maybury, Political Officer Voice: 971/2/443-6691, ext. 2408 Fax: 971/2/443-4771 E-mail: MayburyJF@state.gov Class: MayburyJF2@state.sgov.gov WAHBA