REQUEST FOR MOVEMENT ON ARBIFT

UNCLAS SECTION 01 OF 02 ABU DHABI 001969

SIPDIS

SENSITIVE

STATE FOR: NEA/ARP, NEA/ENA, L, L/NESA, E, EB,
EB/ESC

TREASURY PLEASE PASS OFAC

E.O. 12958: DECL: N/A
TAGS: EFIN ETTC PREL TC
SUBJECT: REQUEST FOR MOVEMENT ON ARBIFT


1. (U) This is an action request. Please see para

5.


2. (SBU) In a June 7 meeting, Ministry of Finance
Assistant Under Secretary for Revenue and Budget
Khalid Al-Bustani provided EconChief with a copy of
a letter from the UAE Minister of State for Finance
and Industry to OFAC head Richard Newcomb regarding
ARBIFT. Al-Bustani asked EconChief whether there
had been any progress in releasing the $125 million
in assets frozen in the USA.


3. (SBU) Al Bustani stressed that the UAE considers
ARBIFT a UAE bank not a Libyan bank. He noted that
the bank is incorporated in the UAE as a UAE
national bank, its client base is in the UAE, and
its management team is Emirati. In addition, Al-
Bustani stated that the assets frozen in the U.S.
were not Libyan assets, but Emirati assets. Al-
Bustani acknowledged that the Libyans own a sizable
minority share of ARBIFT at 42.25 percent, the same
share as the UAE, with the Algerians owning the
remaining 15.5 percent. (Note: The UAE federal
government owns the UAE share. ARBIFT is the only
retail bank owned by the UAE federal government.
End Note) Al-Bustani stated that the freeze hurt
the UAEG. Seventy five percent of the Bank's paid
up capital was frozen, requiring the UAEG to
support the bank in order to keep it operational.


4. (U) Begin Text of Letter dated May 17, 2004

Dear Mr. Newcomb:

Further to our previous correspondences and
meetings regarding the Arab Bank for Investment and
Foreign Trade (ARBIFT) frozen assets in the United
States of America.

As you are aware, the UAE interest has been greatly
effected by the OFAC decision to place the bank
since 12 November 1992 under embargo list due to
the US Treasury's perception of the Bank as being a
"National of Libya." As we have explained that the
bank is a UAE incorporated company, it operates
under the supervision of the UAE Central Bank, the
bank senior management are UAE nationals and,
therefore, it cannot be classified as a Libyan
entity.

In this context, I would like to refer to your
meeting with Mr. Khalid Ali Al Bustani Assistant
Under Secretary for Revenue and Budget in
Washington on 29/4/2004 regarding the bank frozen
assets. We have been encouraged by your response
regarding [a] possible solution [to] the bank's
outstanding problem.

Therefore, I would like to reiterate the UAE's
request for releasing the frozen assets of ARBIFT
and solicit your support to bring an end to this
matter.

Yours Sincerely,

Dr. Mohammed Khalfan Bin Kherbash
Minister of State for Finance and Industry


5. Comment and Action Request: With the recent
easing of U.S. economic sanctions against Libya to
allow the resumption of commercial activities,
financial transactions, and investments, the UAE is
again requesting us to resolve this longstanding
bilateral irritant. Our understanding is that
ARBIFT has been removed from OFAC's SDN list now
that prospective transactions are authorized, but
that its assets are still frozen. The UAE's
position remains that the frozen assets are not/not
Libyan assets and, therefore, should be released.
Post would appreciate any update that we can give
the UAEG on the status of the issue and on any
possible solutions. Post would appreciate learning
whether there are any steps the UAEG could take or
information that it could provide to demonstrate
that the assets do not belong to Libya and should
not be frozen. End comment and action request.

Wahba