MANAGING A NEW IRAQ

C O N F I D E N T I A L SECTION 01 OF 02 KUWAIT 000509

SIPDIS

STATE FOR NEA/NGA, NEA/ARP

E.O. 12958: DECL: 02/03/2013
TAGS: ETRD PREL MARR IZ KU
SUBJECT: MANAGING A NEW IRAQ

Classified By: CDA Frank C. Urbancic for Reason 1.5 D.


1. (SBU) SUMMARY: During a private dinner with two prominent
Kuwaiti businessmen -- one Islamist, the other liberal -- the
topic of conversation centered on doing business in
post-Saddam Iraq. This pair of 40-something
movers-and-shakers was extremely interested to know who will
run economic and commercial affairs in the immediate
aftermath of a regime change, as they position themselves and
their family enterprises for potential windfalls. They both
hoped that whatever management structure is put in place, it
is done so quickly, transparently, and in a manner that does
not unfairly benefit any single country (namely the United
States). Their interests and concerns might be seen as a
barometer for the thinking of a larger segment of
well-established, trade-minded Kuwaitis at this time. END
SUMMARY.


2. (SBU) THE DINNER GUESTS: EconOff met February 1, 2003, at
the luxurious home of Faisal al-Zamel, an Islamist Kuwaiti
businessman and investor in his mid-40s, who received an MBA
from the University of Connecticut, specializing in banking.
Al-Zamel is a board member of the Arabi Holding Group, an
international shareholding company, and chairman and general
manager of several Kuwaiti firms. He is affiliated with the
Kuwait Finance House, Kuwait's lone Islamic bank, and writes
a regular column for Al-Watan newspaper with a decidedly
Islamist bent. The Al-Zamel family is extensive throughout
the Gulf, especially in Kuwait and Saudi Arabia, where
Al-Zamel Industries does large-scale business in oil, real
estate, construction, and other ventures.


3. (SBU) Joining Al-Zamal as dinner guest was Loay Jassem
al-Khorafi, son of Kuwaiti's Speaker of Parliament Jassem
al-Khorafi, and a member of one of the more influential
business families in Kuwait. Among its multi-billion dollar
global interests, the al-Khorafi Group operates the Kuwait
Food Company (of which Loay is a board member),the Mars Alam
International Airport in Egypt, and is opening a Four Seasons
Hotel in Syria. Loay al-Khorafi is chairman and managing
director of Kuwait Metal Pipe and Oil Service Company, a
manufacturing venture he hopes will be doing business soon
in, as he puts it, "new Iraq."


4. (C) TABLE TALK: The question of who will manage
post-Saddam Iraq lies front and center in the minds of
al-Zamel, al-Khorafi, and the Kuwaitis they routinely speak
to during their daily affairs and in their nightly forays to
diwaniyas (informal gatherings of Kuwaiti men). Over fresh
fish and kababs, Al-Zamel relayed how he had heard on the
diwaniya circuit a plan being hatched in which the US will
manage military and security operations, while Britain
manages civilian aspects of a new Iraq. If true, he thought
the British were well suited for this role, as they have a
long history in the region, seem to comprehend the culture,
and are respected for their ability to have run governments
and civil societies far better than the Ottoman Turks. He
added that there was much the USG could learn from British
rule in the Middle East, but was afraid, as were many of his
compatriots, that American leaders do not understand the
region and will make similar mistakes to those made in Iran,
Afghanistan, and other countries that came under American
influence.


5. (C) Al-Zamel's historical commentary served as a prelude
to the crux of the dinner conversation: concern over the
management entity that will run post-Saddam Iraq. Al-Khorafi
said he desires doing business there, but only if he feels
secure with those in power. This notion rules out any Iraqi
entity, which he said could not be trusted to uphold a
contract. Al-Khorafi pointed out how throughout its history
Iraq has depended on a series of dictators to hold its ethnic
and religious factions in check, yet there was presently no
individual on the horizon capable of running the country.


6. (C) His question, then, was who would manage Iraq. The
US? Britain? The UN? He stressed that it was critical for
there to be a management structure in place and publicly
known immediately after the turnover of power. Otherwise, he
feared confusion would ensue, with the potential for
political and economic chaos. Further, he and his associates
fear that should a US-led structure prevail, business tenders
would naturally favor American companies. For this reason,
Al-Khorafi would prefer to see a UN-led coalition remove
Saddam, rather than unilateral action by the US, which might
usher in American domination of Iraq. (NOTE: Several months
ago, al-Khorafi publicly blamed the USG of meddling in
Kuwaiti business affairs after a US company was awarded a
tender his own company had sought, only to later apologize
for the accusation. END NOTE.)


7. (C) The two Kuwaitis said that a decision should be made
now on who will manage economic and commercial affairs in
Iraq, but agreed that it would be difficult for the US or the
UN to do so, as this would make it appear like Saddam's
removal was a fait accompli. They hoped that such
discussions were being conducted behind closed doors.


8. (C) Al-Khorafi said that Kuwaiti businessmen were starting
to feel hampered by the uncertainty caused from the threat of
warfare to the north. He said that just that day the Kuwaiti
stock market, which has continued to prosper throughout the
global market crisis, suffered its largest single-day drop.
(NOTE: The local stock exchange did plummet 89.3 points
February 1, coinciding with the announcement by Kuwait's
Deputy Premier and Interior Minister Shaykh Mohammed
Al-Khaled Al Sabah that the country was increasing its alert
status and placing 4,000 fully-armed special forces on
Kuwaiti streets, as well as with President Bush's statement
that conflict could occur in "weeks, not months.") Al-Zamel
added that during his visits to diwaniyas he had been hearing
Kuwaitis say they were exchanging dinars for dollars as a
cautionary move.


9. (C) JUST DESSERT: Over sweets and Arabic coffee,
Al-Khorafi said he does not believe there will be armed
conflict in Iraq, but rather a coup led by one or more
members of Saddam's inner circle. (NOTE: His father the
Speaker has expressed this same view. END NOTE.) When
confronted with the choice of being killed by invading forces
or dying at the hands of Saddam for trying to flee the
country, al-Khorafi thought that at least one of his deputies
would decide instead to assassinate Saddam and beg for mercy
from the international community. Al-Khorafi added that he
had heard wealthy Iraqis were looking for ways to move their
money out of the country, where they or their families might
later retrieve the wealth.


10. (C) Even if Saddam is removed in this manner, an
international entity must still enter the country and
establish a new government, al-Khorafi said. Returning to
his point that no one person can rule Iraq, he thought that a
partition of the country was inevitable. He wondered aloud,
however, how the southern section of Iraq would be permitted
to form its own nation state, since the center and northern
sections would not want to forfeit the rich southern oil
fields, plus Iran would not accept a new oil-rich and
Shia-dominated country on its border.


11. (C) Both al-Zamel and al-Khorafi said that Iran is the
key to the region. They suggested that the USG needs to use
both "carrots" and "sticks" to keep Iran in check. A useful
"carrot" was the promise of economic aid, should Iran reform
politically. A useful "stick" was threatening Iraq's
partition, a scenario Iran was firmly against.


12. (C) COMMENT: While these remarks directly reflect the
opinions of just two Kuwaiti businessmen, they can also be
seen as incorporating a much wider view held by an extremely
influential segment of society; if not forming a consensus,
these ideas at least frame a serious debate now taking place
in the country. Given their proximity to Iraq and their
previously well-established network of economic ties to that
country, Kuwaitis are especially keen to learn the shape
their northern neighbor will take under a new regime. The
more transparent the process, and the more Kuwait feels it is
being treated by America as a partner rather than merely a
stepping stone, the more likely its support and goodwill are
apt to endure. We note the irony of (Kuwaiti) Arabs (a)
dismissing the prospect of any Iraqi entity being able to
rule Iraq effectively, and (b) assuming partition is
inevitable; but living with contradiction, ambiguity, and
uncertainty is a Kuwaiti hallmark.
URBANCIC