PDAS CHENEY CONSULTS WITH SHEIKH HAMDAN ON KSA,

1. (S) Summary: NEA Principal Deputy Assistant Secretary
Cheney consulted with Deputy Prime Minister/Minister of State
for Foreign Affairs Sheikh Hamdan bin Zayed (HbZ) on June 26
on debt relief for Iraq, Saudi Arabia, political reform,
assistance for the Palestinians, and free trade. With
respect to Saudi Arabia, HbZ said there was considerable
tension over their common border and depicted the Saudis as
bullies. He told Cheney that the UAE leadership was
committed to political reform, but would need time to
increase public awareness about the coming changes. Cheney
said the U.S. understood that each country would move at its
own pace, but stressed the importance of moving. HbZ and
Cheney exchanged views on ways to respond to Palestinian
needs. HbZ noted the experiences gained by the UAE in
constructing housing for Palestinians in Gaza. Cheney said
she would suggest to Quartet Special Envoy for Gaza
Disengagement Wolfensohn that he meet with UAE officials to
learn from their experiences in providing humanitarian
assistance in the West Bank and Gaza. End Summary.



2. (SBU) On June 26, HbZ met with NEA PDAS Cheney over lunch
and reviewed regional issues and discussed progress on
political reform in the UAE. HbZ, who had sat in on Cheney's
meeting with President Khalifa earlier in the day, was
accompanied by his office director, Sultan Al Romeithi; Labor
Minister Al Kaabi; MFA Under Secretary Abdullah Rashid Al
Noaimi; MFA Assistant Under Secretary for Political Affairs
Tariq Al Haidan; UAE Ambassador to Washington, Al Asri Al
Dhahri; American Affairs Desk Officer Rowda Al Otaiba; and
his sons Mohammed and Zayed. PDAS Cheney was accompanied by
the Ambassador; PAO and Pol Chief (notetaker).

IRAQI DEBT REDUCTION


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3. (C) After lunch, HbZ and Cheney moved to another parlor
with a smaller group to discuss Iraq debt reduction and UAE
relations with Saudi Arabia. Cheney asked about the UAE's
position on Iraq debt reduction and noted UAE silence at the
International Conference on Iraq in Brussels. Despite the
UAEG having committed to former Secretary Baker that it would
write off nearly all of Iraq's debt and having given
assurances that it would proceed on terms no less generous
than those of the Paris Club, HbZ said that the GCC still
needed to establish a common policy on Iraq debt. In the
absence of a unified GCC position, he could not say whether
they would forgive 50 percent or 90 percent. He underscored
his point saying that it is unacceptable to us to take
instruction from the U.S. or anyone else. Hamdan said it was
"in the interest of Iraq" that the GCC help them with debt
reduction. Cheney asked when he expected the GCC would adopt
a common position. HbZ replied that the GCC foreign
ministers are scheduled to meet in September, and the GCC
heads of state in December. He suggested that it would be
helpful for the USG to send a signal to GCC leaders before
the September meeting. Cheney said the USG had been--and
would continue to send this message. She stated that that it
would be helpful to have a decision before the September GCC
foreign ministers meeting.

UAE/SAUDI BORDER DISPUTE


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4. (S) HbZ raised the highly sensitive UAE-Saudi border
dispute, telling Cheney that the Saudis wanted to discuss
joint sovereignty over their common maritime border. HbZ was
emphatic that the UAE would not accept joint sovereignty "no
matter what the consequences." He said that the Saudis had
"enough problems" without stirring up trouble over the border
issue. The Saudis had been obstructionists on a number of
issues of importance to other GCC states, including the
Qatar-UAE causeway, the Qatar-UAE gas pipeline, and the
Qatar-Bahrain bridge, Hamdan complained. The Saudis were
unhappy with the causeway project because they do not like
the fact that it bypasses them. HbZ predicted that the
Saudis' efforts to block commercial cooperation, economic
development, and health issues would doom the GCC. The UAEG
has tried since 1975 to share its concerns about the border
but the Saudis have not listened, HbZ said. Hamdan said he
would travel to Riyadh in July to meet again with Saudi
Interior Minister Prince Nayef to follow up on Nayef's June
19 visit to Abu Dhabi, but he was not optimistic about those
talks. "It might be a half-day and then I return," he said.
One of the critical issues is the border dispute, including
that of the Zararah oilfield. HbZ underscored that he was
raising the border issues with us to keep us abreast of the
issue and not as a request for action yet.



5. (SBU) Comment: Under terms of the 1974 border treaty
between Saudi Arabi and the UAE, the UAE gave up its claim to
the Zararah oil field (in exchange, Saudi Arabia dropped its
claims to the Buraimi oasis region, located near the eastern
edge of UAE territory and recognized the UAE). The Zararah
field (known in Saudi Arabia as the Shaybah oilfield) spans
the UAE-Saudi border and contains 15 billion barrels of
proven oil reserves and 25 trillion cubic feet of untapped
gas reserves. Although 10 to 20 percent of the oil reserve
lies within UAE territory, the 1974 agreement specified that
oil finds along a common border would go to the country where
the largest part of the field was located, thus giving Saudi
Arabia economic rights to the entire reservoir. Earlier this
year, tension emerged between the UAE and Saudi Arabia over a
decision by the UAE and Qatar to build a causeway connecting
the two countries over the Khor Al Odeid waters. Under the
1974 agreement, Abu Dhabi had surrendered this strip of land
that linked it to Qatar. Abu Dhabi insists it gave up the
onshore stretch but not the territorial waters.



6. (U) Comment continued: In Sheikh Zayed's waning months
and since his November 2004 death, UAE officials have
resurfaced long simmering criticism of the 1974 treaty signed
by Sheikh Zayed under duress to obtain Saudi recognition.
The UAE feels it negotiated the 1974 treaty from a position
of weakness. The 1974 agreement was the price the UAE
(established in 1971) had to pay to obtain Saudi recognition
and a measure of security. The UAE proposed amending to the
treaty to allow the UAE to develop Zararah up to 10
kilometers inside the Saudi border. We understand that the
Saudis may be proposing to split cross-border hydrocarbons
evenly. End Comment.

REFORM IN THE UAE


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7. (C) During their lunch meeting, PDAS Cheney asked HbZ for
his views about expanding democracy in the UAE. HbZ said
that the UAE was "firmly committed" to move toward elections
at the local, consultative level, as well as at the federal
level. However, he emphasized that this would be part of a
"common strategy to move together" as one country so as to
avoid each of the seven emirates proceeding separately. HbZ
said that Emiratis currently have an open majlis system that
allows them to visit their sheikhs and leaders to discuss
their concerns with them. The leadership is committed to
create a more formal participatory form of government that
would include elections, he said. "We are working on it," he
assured Cheney. HbZ said that the matter was being studied
but that it would take time before the government would
introduce political reforms. He did not specify a timeframe.



8. (C) Commenting on democratization in other Gulf countries,
HbZ gave a positive assessment of Oman, Bahrain, and Qatar,
but expressed concern about Kuwait because of the strong
influence of fundamentalists who "burden" the government and
"impede" the development of Kuwaiti society. As for Saudi
Arabia, HbZ said he was concerned that fundamentalists could
control election outcomes, which could have disturbing
consequences in the region.



9. (C) HbZ told Cheney that he had had a favorable reaction
to the Secretary's recent travel to the Middle East. He
applauded the Secretary's efforts to explain what the U.S.
was doing to improve its image in the world. He said he
appreciated the Secretary,s speech in Cairo. HbZ said the
people of the Middle East wanted to realize their aspirations
and dreams, but their governments needed to proceed
judiciously. There cannot be a one-size-fits-all approach to
reform because each society is unique.



10. (C) HbZ said he believed that governments still had a
long way to go to increase awareness of public issues as a
prelude to democratic changes. PDAS Cheney underscored a
point the Secretary made in her Cairo speech that change
should not be, and cannot be, imposed on societies from
outside. Change will come at a pace "that makes sense for
the individual countries," Cheney said.

ASSISTANCE FOR THE PALESTINIANS


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11. (C) HbZ and Cheney also discussed the UAE's bilateral
assistance to the Palestinian Authority. HbZ, who presides
over the UAE Red Crescent Society and its program of
humanitarian support for the Palestinian people, noted the
UAE,s donations of general care and specialized care
hospitals, medicine, and salaries for health care workers.
He said that the UAE prefers to work directly with the
Palestinian Authority and the Israeli government, rather than
through other NGOs. Cheney asked HbZ if the UAE had
experienced difficulties convincing Palestinians to move into
the houses that the UAE had built. HbZ said the UAE had
encountered problems with Palestinians not wanting to move
far away from their communities in Rafah, but that the
problem had been solved elsewhere.



12. (C) Cheney offered to brief Quartet Special Envoy for
Gaza Disengagement Wolfensohn about the UAE's positive
experience in providing assistance to the Palestinians in
Gaza and recommend that he meet with the UAE's leadership to
consult further. HbZ liked the idea and said Wolfensohn
should meet with MFA, Red Crescent, and Abu Dhabi Development
Fund officials.

FREE TRADE AGREEMENT


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13. (C) At the lunch, Cheney briefed HbZ on Middle East Free
Trade Area (MEFTA) progress. She said that it was important
for the U.S. to open up markets, which would have a positive
impact on economic development. The U.S. wants to encourage
intraregional trade and bilateral trade. Cheney noted that
the U.S. bilateral trade agreements were more advantageous to
trading partners than European trade agreements because the
Europeans did not give full access to their markets when the
agreements were concluded. HbZ acknowledged that the Gulf
Cooperation Council has been waiting 17 years for a trade
agreement with the EU without result because the Saudis have
not been helpful. HbZ asked if Cheney thought the GCC
should, as the Saudis have been advocating, move only as a
bloc. Cheney said no. She explained that the USG would
continue to negotiate individual FTAs and encourage
neighboring countries to "dock" on to each other's agreements
in order to facilitate intraregional trade.



14. (U) This message was cleared by PDAS Cheney.
SISON