FM DISCUSSES GCC-EU FTA, FORUM FOR FUTURE,

1. (C) Foreign Minister Shaykh Mohammed told the Ambassador
April 6 that both sides at the recent GCC-EU Ministerial were
committed to try to conclude an FTA by the end of the year;
local EU and GCC diplomats, conceding that serious issues
remain, are skeptical. The EU reiterated concerns about the
U.S.-Bahrain FTA. The FM said he placed the highest priority
on having the Entrepreneurship Center up and running by
November's Forum for the Future, stating that he wanted to
demonstrate to doubting Arabs that something positive and
concrete has been achieved by cooperation with the West. On
domestic political reform, he said freedom of expression is
important and permitted in Bahrain, but worried about those
whose agenda is to keep Bahrain in a state of crisis which
could open the door to increased Iranian influence. While
viewing the changes in Iraq positively, he expressed concern
that a strengthening and institutionalizing of sectarian
tendencies there could lead to similar sectarian pressures in
Bahrain. On last month's Arab Summit, which he attended with
the Crown Prince, Shaykh Mohammed gave high marks to Mahmoud
Abbas and said President Assad was clear -- in a bilateral
meeting -- on his intention to withdraw from Lebanon. Shaykh
Mohammed urged strong U.S. leadership to press Israel on the
settlement issue.



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GCC-EU MINISTERIAL: FOCUS ON FTA


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2. (C) Foreign Minister Shaykh Mohammed bin Mubarak
Al-Khalifa, just back from the Arab Summit in Algiers and an
official visit to New Zealand, and having just chaired the
15th GCC-EU Joint Ministerial, discussed a range of foreign
policy issues with the Ambassador during an April 6 meeting.
Opening with the GCC-EU Ministerial, Shaykh Mohammed
reiterated what he told the press a day earlier on the GCC-EU
Free Trade Agreement -- that both sides hoped to complete the
agreement by the end of the year. He acknowledged that some
key issues remained, including on services, subsidization of
petrochemicals, and government procurement, but said that
both sides committed to trying to reach agreement this year.
(Note: the joint communique "noted the parties' commitment to
do their utmost to conclude the negotiations at the earliest
possible stage and preferably before the end of 2005." UK
Ambassador Robin Lamb told the Ambassador that there is
"political will" on both sides to complete the GCC-EU FTA as
soon as possible, but that there are still some serious
issues to be resolved. The Kuwaiti DCM told us he was
skeptical that an agreement could be reached by the end of
the year, and that GCC members remain disappointed at the
slow pace of discussions. The next round of negotiations is
scheduled to take place in Brussels June 7-9. End note.)



3. (C) Shaykh Mohammed said that, during the discussions, the
EU criticized the U.S.-Bahrain FTA, saying bilateral
agreements make it difficult to have regional FTAs. Shaykh
Mohammed said that he pushed back, saying that they should
focus on the details of the EU-GCC FTA without getting bogged
down in the issue of bilateral FTAs. Talking to the press
after the meeting, European Trade Commissioner Peter
Mandelson reiterated EU concerns, saying that "the European
Union conveyed its deep concern about bilateral free trade
agreements by individual GCC members and other third
countries. The Union regarded that these agreements risk
undermining the proper functioning of the GCC Customs Union
and hence the EU-GCC free trade agreement negotiations."



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EU STRATEGIC PARTNERSHIP: WE HAVE ENOUGH PARTNERSHIPS


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4. (C) The EU raised during the meeting the "EU Strategic
Partnership with the Mediterranean and the Middle East"
(adopted by the European Council in June 2004). While the
communique suggested that the two sides would explore ways by
which the Strategic Partnership could strengthen relations
between the EU and GCC, Shaykh Mohammed expressed skepticism
about the initiative. GCC members, he said, suggested that
the "Strategic Partnership" might be duplicative of existing
channels of cooperation, such as BMENA and the Forum for the
Future." The EU countered that the "Strategic Partnership"
was a necessary because "we can't have free trade without a
strategic initiative." Shaykh Mohammed, noting that the
initiative is still vague at this point, remained
unconvinced, saying "We have enough of these partnerships."



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ARAB SUMMIT: U.S. LEADERSHIP NEEDED ON SETTLEMENTS


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5. (C) On the Arab Summit, Shaykh Mohammed said the most
important result was the participation of Mahmoud Abbas and
the speech he gave. His participation gave his leadership
credibility. It is important that he now receive the
necessary support. He needs financial support, but Israel
has to help as well. Most important, he said, will be a firm
stand on Israeli expansion of settlements. "How can you work
for peace when one side is sabotaging it," he asked. "This is
where U.S. leadership is required." He praised the statement
by the President the day before reiterating the clear
position of the U.S. that the roadmap calls for no expansion
of settlements. It will be important, he said, for the United
States to continue to make clear its policy on settlements to
Israel, and tell Israel when it is not happy with its
policies.



6. (C) Shaykh Mohammed said that the head of Bahrain's
delegation to the Summit, Crown Prince Shaykh Salman, held a
bilateral with Syrian President Assad, who reiterated his
commitment to withdraw all military and intelligence elements
out of Lebanon. Assad told the Crown Prince he would
implement UNSCR 1559. On Hizballah, he said that was a
Lebanese issue which should be left to the Lebanese.



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FORUM FOR THE FUTURE: WE NEED RESULTS


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7. (C) Shaykh Mohammed spoke at some length on plans for the
November meeting of the Forum for the Future, which Bahrain
will host. He said that he places the highest priority on
having a tangible Entrepreneurship Center in place in Bahrain
by the time of the meeting. "I will be chairing the
meeting," he said, "and I want to tell the people what we
have achieved. I want to tell the Arab world -- to those who
don't believe in cooperation -- that we have achieved
something. The people need results. This is a challenge for
the West to tell the countries of the Middle East that you
are there and will help us."



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DEMONSTRATIONS: PERMITTED, BUT NOT TO THE POINT OF CRISIS


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8. (C) The Ambassador said that the USG was pleased with the
way Bahrain resolved the issue of the al Wifaq demonstration
that took place in Sitra March 25 without government
authorization. Both the government and the opposition, it
appeared, sought a conciliatory solution that defused a
potentially difficult situation. That said, it was important
for the Government of Bahrain to recognize that, while we
greatly appreciate and publicly endorse the positive reform
program introduced by the King, people in Washington do
notice, and express concern, whenever reports come from
Bahrain of a closed human rights center, or arrested on-line
internet providers, or a blocked rally.



9. (C) Shaykh Mohammed replied that the principle of freedom
of expression, including the right to demonstrate, is
important and permitted, but that Bahrain also must worry
about security and stability. A demonstration here or there
is fine, but Bahrain can't continually have demonstrations
and be in a state of crisis all the time. Bahrain has
introduced reforms. It is asking the opposition to join in,
use the reforms, and work for change from within. But these
people want to make change from outside. They have an agenda
to keep Bahrain in a state of crisis, stopping traffic, using
the economy as their hostage. This risks opening the door to
increased Iranian influence. What are the motives of the
opposition? Listen to what they are saying in the mosque
speeches. Demonstrations are allowed in Bahrain, he
reiterated, but not every day, every week.



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IRAQ: WORRIES THAT IT MIGHT BECOME A SECTARIAN MODEL


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10. (C) The Ambassador asked if developments in Iraq, where a
Shia majority just won an election, were having an impact in
Bahrain. Shaykh Mohammed said that the GOB of course views
the changes in Iraq very positively, but is worried that if
sectarian tendencies there strengthen and institutionalize,
it could lead to similar sectarian pressures in Bahrain. He
said he was concerned that, as democracy proceeds in Bahrain,
pressures may develop for some sort of formula for how many
and which positions go to Sunni and to Shia. "We are for
democracy, and it will go forward," he said, but it will not
be good if it develops along sectarian lines."
Unfortunately, he added, there are Shia and Sunni extremists
in Bahrain who will want to play the sectarian card.



11. (U) Baghdad minimize considered.
MONROE