(C) GOK STILL AWAITING QATARI GAS; UNLIKELY TO

C O N F I D E N T I A L KUWAIT 005756

SIPDIS

STATE FOR NEA/ARP, NEA/NGA
COMMERCE FOR OIO/ANESA

E.O. 12958: DECL: 12/17/2013
TAGS: EPET ENRG ETRD PREL KU SA QA IR
SUBJECT: (C) GOK STILL AWAITING QATARI GAS; UNLIKELY TO
SOURCE FROM IRAN

Classified By: CDA John G. Moran for reasons 1.4 (b) and (d)


1. (C) Summary: Despite increased publicity surrounding a
possible Kuwaiti-Iranian natural gas deal, the GOK is
unlikely to conclude an agreement with Iran, according to a
well-placed Kuwait Petroleum Company (KPC) official. Rather,
Kuwait is betting that Qatar will eventually serve as its
primary source of natural gas, once a stalled agreement with
that country begins moving again. End Summary.


2. (C) During a December 16 meeting with Poloff, Kuwait
Petroleum Company Washington Office Director and former KPC
Legal Counselor Shaykh Nawaf Saud Nasser Al-Sabah said it was
extremely unlikely that Kuwait would conclude any agreement
with the Government of Iran for badly needed natural gas.
Shaykh Nawaf, who was on the negotiating team that visited
Iran for initial talks on a possible deal in 2002, said the
GOK is unwilling to commit itself to any agreement with Iran
that does not involve a third party, due to political
concerns; Iran has consistently refused to accept such an
offer. Shaykh Nawaf said the government remains hopeful that
an agreement with Qatar, which would provide 1 billion cubic
feet of gas per day, but has been on hold since the fall of
2002, would move forward shortly.


3. (C) Shaykh Nawaf said KPC and the Qatari government had
agreed to terms to start transferring Qatari gas in 2002, but
ran into "political problems" when the Saudi government
refused to allow the required pipeline to run through its
territory. In this context, Shaykh Nawaf reminded Poloff
that Saudi Arabia and Qatar have been involved in a bitter
dispute over what the Saudis claim is anti-Saudi reporting by
the Qatari-based Al-Jazeera cable network. He said the
Qataris had approached Kuwait in an effort to get the GOK to
lobby the Saudis, but the GOK had refused to do so, not
wanting to appear to support Qatar in the standing
Saudi-Qatari dispute.


4. (C) Shaykh Nawaf said Saudi Foreign Minister Prince Saud
al-Faisal told then-FM (now PM) Shaykh Sabah Al-Ahmed
Al-Sabah during a 2002 visit to Riyadh that the Saudi
government "will never agree to the (natural gas) agreement
as long as Qatar is involved." Despite this statement,
Shaykh Nawaf predicted that Saudi Arabia would eventually
allow the agreement. "They cannot block it forever," he said.


5. (C) In an attempt to clear things up, said Shaykh Nawaf,
PM Shaykh Sabah Al-Ahmed raised the issue of the gas deal in
the presence of Saudi Crown Prince Abdullah and Qatari senior
leadership. Although CP Abdullah verbally agreed that there
was "no problem," according to Shaykh Nawaf, the SARG "would
not return phonecalls" of Qatari officials hoping to reach a
breakthrough with Saudi Arabia.


6. (C) Shaykh Nawaf said that ExxonMobil executives hoping to
push the deal forward had recently contacted FM Shaykh Dr.
Mohammed Al-Sabah and asked him to approach his Saudi
counterpart on the issue. The executives claimed the SARG
had agreed to stop blocking the deal if Dr. Mohammed would
come appeal to them in person. Dr. Mohammed declined his
support, according to Nawaf, who remarked "the FM would not
be dictated to by (ExxonMobil)."


7. (C) Shaykh Nawaf said the possible Iranian deal was never
meant to serve as the primary source for Kuwait gas, which is
needed to fuel power generation in the country. Rather, he
said, the Iranian gas was meant to complement the supply from
Qatar. However, if the situation remains as is, Kuwait may
be forced to accept an Iranian deal.


8. (C) Comment: With power supplies reaching their limits and
rumors of possible brownouts next summer, Kuwait is
scrambling to construct power plants. Given this state of
affairs, one would expect the GOK to take a more proactive
stance vis-a-vis Iranian gas. The fact they are not reflects
their distrust of the Iranian regime, and their confidence
that Saudi Arabia will eventually give in.
MORAN