CONTINUING SAUDI CONCERNS ABOUT BAHRAIN FTA

C O N F I D E N T I A L MANAMA 000176

SIPDIS

STATE PASS USTR/NOVELLI

E.O. 12958: DECL: 02/07/2015
TAGS: ETRD PREL ECON BA SA
SUBJECT: CONTINUING SAUDI CONCERNS ABOUT BAHRAIN FTA

REF: MANAMA 145

Classified By: Ambassador William T. Monroe. Reason: 1.4 (B)(D)


1. (C) Bahrain officials have indicated both publicly and
privately to us that the crisis with Saudi Arabia over the
U.S.-Bahrain Free Trade agreement has ebbed, and that it is
full speed ahead on ratification and implementation. Saudi
Ambassador to Bahrain Abdulla Al-Kuwaiz, in a February 6
discussion with the Ambassador, probed extensively on
possibilities for delay in implementation, suggesting that --
from the Saudi point of view -- concerns remain.


2. (C) After stating flatly that Saudi lawyers have
determined that the FTA violates GCC agreements, Al-Kuwaiz
asked when exactly the FTA would come into effect. Once the
U.S. Congress ratified it, how long before it actually was
enacted? Was there a time limit by which the Bahrain
parliament had to ratify? Was there a way to delay
implementation for, say, one year, to give Saudi Arabia more
time to deal with outstanding trade-related issues? The
Ambassador, in replying, stressed the importance the USG
attached to the FTA, and the significance it had for our
bilateral relationship with Bahrain. He reminded Ambassador
Al-Kuwaiz that both the President and Secretary had
highlighted in recent remarks the importance we gave to
economic and political reform in the region. He expressed
the hope that Saudi Arabia, rather than focusing on its
concerns with the Bahrain FTA, would concentrate on moving
forward on its own trade agenda with the U.S., including the
WTO.


3. (C) Comment: It is unclear whether Al-Kuwaiz's comments
reflected official policy, or simple probing by a local
Ambassador. Nonetheless, Washington and Riyadh may wish to
reengage with the SAG to reinforce our desire that the FTA
move forward expeditiously. End comment.


4. (C) On a separate Saudi-Bahrain issue, Al-Kuwaiz reviewed
the history of the 50,000 b/d Saudi oil grant to Bahrain that
was ended recently and continues to be a sore point for the
Bahrain leadership (reftel). Al-Kuwaiz said that the grant
was given on annual or biannual bases with no promise that it
would continue indefinitely. He said that there was
resistance to renewing the grant at a time when Bahrain has a
budget surplus and Saudi Arabia suffers unemployment and
other economic difficulties. Nonetheless, the SAG has
advised the GOB that it will consider restoring at least some
of the grant if Bahrain shows its budget numbers and
demonstrates its need for the extra revenue. So far, he
said, the GOB has not responded.


5. (C) Finally, Al-Kuwaiz said that he had no details on last
week's two-day visit to the UAE by Bahrain's King and Prime
Minister, but presumed it was related to economic assistance
from the UAE. In the past, he said, this aid had been based
on the special relationship between King Hamid and Shaikh
Zayed, and had been channeled from palace to palace. UAE
Shaikh Khalifa, as Crown Prince, had pushed for the
establishment of a joint governmental committee to regularize
the assistance. So far, however, no money had been passed
through the joint committee mechanism. Al-Kuwaiz surmised
that the King and PM traveled to Abu Dhabi to ensure that,
with Shaikh Khalifa now in charge in the UAE, the aid flows
continued.
MONROE