PRESIDENTIAL ADVISOR SUPPORTS MODERATE OIL PRICES,

C O N F I D E N T I A L SECTION 01 OF 02 ABU DHABI 004468

SIPDIS

DEPT FOR NEA/RA, NEA/ARP, INR/EC, EB/IEP
USDOE FOR INT'L AFFAIRS - COBURN
USDOE FOR OFFICE OF THE SECRETARY - RHONDA HUDOME

E.O. 12958: DECL: 12/08/2014
TAGS: EPET ENRG ECON PGOV TC
SUBJECT: PRESIDENTIAL ADVISOR SUPPORTS MODERATE OIL PRICES,
IMPROVING STANDARDS OF LIVING IN NORTHERN EMIRATES

REF: DUBAI 5253


(U) Classified by Ambassador Michele Sison for reasons 1.4
(B) and (D).


1. (C) Summary: Presidential Advisor and Supreme Petroleum
Council Member Al-Suwaidi told Ambassador December 8 that the
UAE supports a stable oil price that was fair to both
producers and consumers. He said that overly high prices
were not in the UAE's long-term interest and added that the
UAE had plans to expand production capacity substantially if
the economics justified it. In addition, Al-Suwaidi spoke
about the need for the UAEG to take steps to share political
power and to address the economic differences between
emirates. End Summary.


2. (C) Ambassador called on Abu Dhabi Supreme Petroleum
Council member Mohammed Habroush Al-Suwaidi on December 8.
Al-Suwaidi is the most powerful and influential advisor to
Sheikh Khalifa on financial and budget issues. He is a
key-behind the scenes player in almost all of Abu Dhabi's
main financial institutions and is, in many ways, the keeper
of Abu Dhabi's purse. Habroush is a Member of the Abu Dhabi
Executive Council, which decides all important Abu Dhabi
Emirate governance issues. He is the chairman of the
National Bank of Abu Dhabi, where the ruling Al-Nahyan do
their banking and chairs Abu Dhabi's overseas investment
authority ADIA. His position on the Supreme Petroleum
Council (SPC) is also important, because the SPC effectively
sets UAE oil production policy.


3. (C) Al-Suwaidi reaffirmed the UAE's policy of supporting
"reasonable and sustainable oil prices" that benefited both
consumers and producers. He stressed that exceptionally high
oil prices were not in the UAE's (or OPEC's) long-term
interest. He added that, just as OPEC needed to abide by
quota restrictions to stop exceptionally low prices, its
members had the obligation to increase production to meet
demand. Al-Suwaidi explained that Abu Dhabi's policy was to
have enough spare capacity to meet unexpected increases in
demand. He noted that the UAE, unlike many of its OPEC
partners, had never completely nationalized the oil sector,
allowing it to benefit from the experience of the
international oil companies, which are its joint venture
partners.


4. (C) In answer to the Ambassador's question, Al-Suwaidi
said that -- in the long term -- Abu Dhabi had a plan to
expand oil production capacity to 4 -4.5 mb/d. He stressed,
however, that this was just a plan. Actual expansion would
depend on the economics. (Note: ADNOC sources have told us
that ADNOC has a plan to increase production to 3 mb/d by
2008, again depending on economic justification.) Al-Suwaidi
told the Ambassador that Abu Dhabi could increase production,
both in operating fields and in currently undeveloped fields.
Al-Suwaidi assured Ambassador that Abu Dhabi was committed
to evaluating the bids for the 28 percent stake in the Upper
Zakkum field, in a fair manner. (Note: Exxon/Mobil is a
leading candidate for this project.)


5. (C) Al-Suwaidi also talked briefly about the need for the
UAE to begin to give its citizens more political power and
authority. He noted that, in some ways, the UAE had more
political participation 30 years earlier; with a much smaller
population, the Majlis system could deal with more issues
directly. He admitted that the UAE was a more complicated
country to run than it had been 30 years ago. This had
reduced some of the opportunities for direct participation,
but he stressed that the UAE would need to slowly take steps
to share power. He noted, in a globalized world, UAE
residents saw that their counterparts elsewhere had political
participation and would soon want it in the UAE.


6. (C) Al-Suwaidi also talked about the need for Abu Dhabi
and (to a lesser extent Dubai) to do more to address the
sharp income inequality between Abu Dhabi/Dubai/Sharja and
the four poorer northern emirates. He praised Sheikh Zayed's
policies of managing the UAE's wealth for all of its
residents (and for future generations),but added "we need to
do more." He added that he thought that UAE President
Khalifa was committed to helping the citizens of the poorer
northern emirates, as were Dubai's rulers.



7. (C) By way of illustration, Al-Suwaidi talked about his
travels throughout the emirates. Thirty years ago, he said,
he traveled from emirate to emirate, without seeing much
difference among them. He described a more recent trip he
took to the northern Emirates as like traveling to a
different country. He viewed the continuing differences in
wealth between the individual emirates as a problem that
needed to be dealt with. If wealth is too concentrated, he
noted, "people will get jealous." He stressed, however that
the solution was not for Abu Dhabi to transfer all its wealth
to the poorer emirates, but to ensure that all Emiratis have
"a secure minimum standard of living." This, he concluded,
was his advice to the President, advice that he thought the
President agreed with.


8. (U) In other oil related news, the UAE's semi-official
daily "Al-Itihad" also carried an editorial on the upcoming
Cairo OPEC meeting. It noted OPEC's efforts to provide
stability and to promote world economic growth. OPEC
increased production to address the recent high prices.
Currently, however, OPEC is facing falling prices, increased
consumer country reserves, and a fall in the value of the
dollar and needs to think about its own interests. The
editorial cited UAE Energy Minster Al-Hamili as stating that
topics for the upcoming Cairo OPEC meetings would include the
possibility of ending quota busting by members and looking at
the possibility of cutting quota production if prices
continue to drop. He also said that OPEC members would look
at raising the OPEC price band from the current USD 22-28 to
USD 30-38. Al-Hamili also stated that the UAE has a policy
of supporting stability in the markets in such a way as to
meet the needs for both producing ad consuming countries and
to encourage international growth.
SISON