Identifier
Created
Classification
Origin
05ABUDHABI4105
2005-09-28 12:09:00
CONFIDENTIAL
Embassy Abu Dhabi
Cable title:  

UAE DESIRES MECHANISM TO REVIEW ASSET FREEZES

Tags:  KTFN EFIN PTER ETRD ECON TC 
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Diana T Fritz 08/28/2006 03:54:01 PM From DB/Inbox: Search Results

Cable 
Text: 
 
 
C O N F I D E N T I A L ABU DHABI 04105

SIPDIS
CXABU:
 ACTION: ECON
 INFO: P/M AMB DCM POL

DISSEMINATION: ECON
CHARGE: PROG

APPROVED: AMB:MJSISON
DRAFTED: ECON:AECURTIS
CLEARED: ECON:OJOHN

VZCZCADI255
RR RUEHC RUEHDE RUEATRS
DE RUEHAD #4105/01 2711209
ZNY CCCCC ZZH
R 281209Z SEP 05
FM AMEMBASSY ABU DHABI
TO RUEHC/SECSTATE WASHDC 1771
INFO RUEHDE/AMCONSUL DUBAI 5445
RUEATRS/DEPT OF TREASURY WASHINGTON DC
C O N F I D E N T I A L SECTION 01 OF 02 ABU DHABI 004105 

SIPDIS

STATE FOR NEA/ARPI RSMYTH
STATE PASS USTR FOR SDONNELLY, DBELL, KCLAYMAN, AROSENBERG
TREASURY FOR RWERNER, JEL-HINDI, WLANGFORD, PBROWN

E.O. 12958: DECL: 09/28/2015
TAGS: KTFN EFIN PTER ETRD ECON TC
SUBJECT: UAE DESIRES MECHANISM TO REVIEW ASSET FREEZES

REF: A. ABU DHABI 4103

B. ABU DHABI 1550

Classified By: (U) Classified by Ambassador Michele J. Sison for reason
s 1.5 (b) and (d).

C O N F I D E N T I A L SECTION 01 OF 02 ABU DHABI 004105

SIPDIS

STATE FOR NEA/ARPI RSMYTH
STATE PASS USTR FOR SDONNELLY, DBELL, KCLAYMAN, AROSENBERG
TREASURY FOR RWERNER, JEL-HINDI, WLANGFORD, PBROWN

E.O. 12958: DECL: 09/28/2015
TAGS: KTFN EFIN PTER ETRD ECON TC
SUBJECT: UAE DESIRES MECHANISM TO REVIEW ASSET FREEZES

REF: A. ABU DHABI 4103

B. ABU DHABI 1550

Classified By: (U) Classified by Ambassador Michele J. Sison for reason
s 1.5 (b) and (d).


1. (C) Summary. During his September 17-19 visit to the
UAE, Bob Werner, Director of the Department of Treasury's
Office of Foreign Assets Control (OFAC),met with Sheikh
Ahmed bin Zayed, General Manager of the Abu Dhabi Investment
Authority (ADIA),to discuss concerns the UAE has raised
during the U.S./UAE FTA negotiations about asset freezing.
Werner explained to Ahmed that the U.S. already has a
mechanism for processing requests that frozen assets be
unblocked. He also emphasized that the U.S. must maintain a
uniform system and that it cannot create a special process
for the UAE. Werner and Ahmed agreed that it would be useful
to have appropriate UAEG and USG officials meet so that the
U.S. can explain the current process. (See ref A for a
readout of other aspects of Werner's visit.) End summary.


2. (C) Background. As a part of the FTA negotiations, the
UAE has requested that two sides sign a side letter
indicating the U.S. will develop a formal mechanism to review
the freezing of UAE assets. The UAE's proposed side letter,
presented during the second round of FTA negotiations in
Washington in May, states, "No party shall continue to hold
any such assets which it contends are subject to seizure for
a period greater than 30 days without establishing the
propriety of such seizure under standards and procedures to
be mutually agreed upon not later than 180 days following the
entry into force of the Agreement (FTA)." (Note: the UAE
often uses the term "seizure" when it means "blocking" or
"freezing" of assets.) The UAE cites as justification for its
request for a mechanism its experience in trying to have the
U.S. unblock $116 million in UAEG assets in the ARBIFT bank
that were frozen in 1992 under the Libya sanctions regime.
The ARBIFT assets remained frozen over six months past the

lifting of the OFAC-implemented sanctions against Libya (ref
B),and UAEG officials were repeatedly frustrated by a
process that they perceived as a confusing and
non-transparent. End background.

Security of Assets
--------------


3. (C) On September 18th, OFAC Director Werner met with ADIA
General manager Sheikh Ahmed and ADIA's Executive Director
Salem Al-Mazroui. Ahmed conveyed that ADIA wants to increase
its investments in the U.S., but that it needs to be assured
that it can protect its interests -- "We have recovered from
the ARBIFT issue, but we are now looking forward." Werner
acknowledged that the UAE's past experience had been
frustrating, and he assured Ahmed that he understood the
UAE's desire for a transparent mechanism. Salem stated that
he hopes the U.S. will be able to respond to the UAE's
request for a side letter because "we believe that since we
have a strategic alliance, our concerns regarding freezes
warrants attention." Werner explained that the U.S. already
has a system in place to process unblocking requests, which,
if fully understood by the UAE, might satisfy their concerns.
He emphasized that the U.S. cannot create a special process
for any one country. He indicated that OFAC would be willing
to participate in a working group that could meet with
appropriate UAEG counterparts in order to better explain the
existing mechanism, if USTR approved the establishment of
such a group. Sheikh Ahmed supported this idea and indicated
his confidence that we can reach an agreement that both sides
will be "comfortable with."


4. (SBU) OFAC Associate Director Jamal El-Hindi and the rest
of the OFAC delegation held a concurrent, more technical,
meeting with ADIA legal advisors William Brown and Robert
Peake. Directors Werner and Al-Mazroui joined the meeting
after concluding their discussion with Sheikh Ahmed. During
this meeting, Brown stressed the importance of the assets
protection issue to Abu Dhabi as part of the FTA
negotiations, based in part on the frustrations experienced
by key persons in Abu Dhabi with respect to the blocking of
ARBIFT.


5. (C) El-Hindi noted that a better understanding between the
parties of OFAC's unblocking process would be beneficial. He
explained that the U.S. mechanism for dealing with requests
to unblock assets was similar in substance, if not in form,
to what the UAE is requesting in its side letter. He stated
that the U.S. applied its procedures in the same manner
"across the board," noting that special procedures were
unlikely. The group discussed how the U.S. mechanism
differed from the UAE proposal, in that it placed the burden
on the party with the frozen assets to demonstrate why the
funds should be unblocked, and that depending on the
circumstance, the process may not result in the unblocking of
assets. El-Hindi noted that under its present procedures,
the USG also had the flexibility to protect assets, as was
done with respect to Kuwait's assets during its occupation by
Iraq. Brown noted that the language of the side letter could
be "massaged" to shift the burden to initiate the request to
the UAE, and he understood that it is not guaranteed that the
outcome will be the release of the assets. He noted that the
main issue for the UAE is to have a transparent process with
a designated point of contact and procedure for review. All
parties agreed that a "small" working group to explain the
process and provide appropriate points of contact would be
beneficial. Brown and Peake emphasized that the group must
be small, with only key representatives from USTR, Treasury,
ADIA, the UAE Ministry of Finance, and possibly the Central
Bank present. They also noted that they think the meeting
should be held before the third round of FTA negotiations.

Comment
--------------


6. (C) Embassy supports the idea of bringing together key USG
and UAEG officials to discuss the unblocking procedure, and
we recommend that USTR invite ADIA, Central Bank, and
Ministry of Finance officials to the U.S. in October to
discuss this issue with USTR and OFAC officials before the
third round of negotiations. This is a critical issue for
ADIA, and by extension the UAEG, because they view their
investments in the U.S. as a key component of their "national
security." We believe that educating ADIA on the process and
convincing them that the system is transparent and durable is
the best way to raise ADIA's comfort level and thus make
progress on this issue.


7. (C) Sheikh Ahmed told Werner that ADIA and ADNOC (the Abu
Dhabi National Oil Company) were the two most important arms
of the UAEG. This comment -- while accurate -- is unusually
candid, since both of these bodies are Abu Dhabi Emirate
bodies rather than federal institutions. ADIA is officially
the Emirate of Abu Dhabi's investment arm. More importantly,
however, it is the Emirate of Abu Dhabi's "checkbook." If
the Emirate's revenues exceed expenditures (as is currently
the case),the excess goes to ADIA. On the other hand, if
Abu Dhabi needs money, it calls on ADIA. As the Emirate of
Abu Dhabi funds the overwhelming majority of the UAEG's
expenditures, ADIA is the UAE's checkbook, but one which the
federal government has no control over. Estimates of ADIA's
overseas assets range from a low of $200 billion to $600
billion.

Bio Notes
--------------


8. (C) Sheikh Ahmed, the 11th of 19 sons of former President
Zayed, is a shy individual who rarely meets foreigners. He
was engaging and dynamic during this meeting and opened up to
Werner. During a discussion about the high price of oil,
Ahmed noted that other countries in the Middle East are
trying to emulate ADIA's investment strategy. He observed
that the UAE has only $160 billion in debt and joked that if
oil prices continue to rise, the UAE will be able to
eliminate that debt in a year.


9. (U) This cable was cleared by OFAC Director Werner and
Associate Director El-Hindi.
SISON