UAE MINSTATE FINANCE KHIRBASH ON JAN 30-FEB 1 FTA

UNCLAS SECTION 01 OF 02 ABU DHABI 000235

SIPDIS

SENSITIVE
SIPDIS

STATE FOR NEA/ARPI, EB/TPP/BTA
STATE PASS USTR FOR AUSTR DONNELLY AND DOUG BELL

E.O. 12958: N/A
TAGS: ETRD ECON EFIN CVIS AE
SUBJECT: UAE MINSTATE FINANCE KHIRBASH ON JAN 30-FEB 1 FTA
NEGOTIATIONS

REF: ABU DHABI 192


1. (SBU) Summary: Ambassador met Minstate Finance Dr.
Khirbash on January 25 to discuss the upcoming January
30-February 1 London FTA negotiating round. She stressed our
interest in working with the UAE to conclude an FTA that
addressed its concerns but was also consistent with the
principle that all levels of government and all sectors (with
narrow exceptions) would be within the scope of the
agreement. Ambassador and Dr. Khirbash agreed on the need to
maintain momentum in London. Dr. Khirbash said that he would
propose moving the most contentious issue (jurisdiction) to
the "political level" so that negotiators could focus on
making progress on other areas. Ambassador told Dr. Khirbash
that we had received an official proposal from the MFA the
day before on visas/movement of persons and the FTA. She
stressed that visas are not within the scope of the FTA, but
that we had transmitted the UAE draft text to Washington for
comment (septel). End Summary.


2. (SBU) On January 25, Ambassador and Econchief met with
Minstate Finance Dr. Mohammed Khalfan bin Khirbash and A/US
Khalid Al-Bustani to discuss the upcoming January 30-February
1 London FTA negotiating round. Ambassador told Dr. Khirbash
that we wanted to be sure that the negotiators maintained
their momentum during the upcoming round. She noted that she
had spoken with MinEcon Sheikha Lubna Al-Qasimi, and that
Sheikha Lubna had said that she hoped the discussion would
not get &deadlocked.8 (Note: Sheikha Lubna and Dr.
Khirbash are the UAE FTA co-chairs. End note.) Dr. Khirbash
agreed, adding that he knew both governments were committed
to moving forward on the FTA. He said that he had briefed
Dubai Ruler and UAE Vice President Sheikh Mohammed bin Rashid
Al-Maktoum (MbR) on January 22 about the results of the
January 16-17 FTA investment discussions and on the upcoming
negotiating round. He said that MbR was following the
negotiations with keen interest and that he had the
government,s support and trust for negotiating this FTA.


3. (SBU) Dr. Khirbash identified four areas that he said had
proven to be tough: telecoms, investments, financial
services, and the related issues of jurisdiction (i.e.
natural resources),security of assets, and taxation. He
added that jurisdiction looked like the major sticking point.
He told Ambassador that his proposal was to shift the issue
of jurisdiction to the "political level." This would allow
the negotiators to focus on resolving other issues and --
hopefully -- ensure that they maintained their momentum. He
said that he planned to propose this to Minister of
Information and Abu Dhabi ruling family member Sheikh
Abdullah bin Zayed Al-Nahyan and intended to talk to AUSTR
Donnelly on Friday.


4. (SBU) Al-Bustani noted that the UAE would propose having
the lead negotiators meet on Monday January 30, in advance of
the investment talks, and look for ways to get the investment
negotiators on track and not allow the talks be held hostage
to jurisdiction. Al-Bustani stated that the negotiators
should be able to highlight areas of difficulty to lead
negotiators, who could either solve them ) or refer them to
capitals. Al-Bustani reiterated the UAE,s commitment to
work through difficult issues and urged that we look at these
issues in a spirit of partnership rather than a reason to
stop negotiations. He said that when negotiators heard
&let,s quit8 in response to problems or difficult
discussions, it left a bad feeling. Ambassador stressed that
the USG wanted to work with the UAE in order to find an
approach that addressed the UAE,s concerns and is consistent
with the basic premise of an FTA that all levels of
government and all sectors are within the scope of the
agreement (subject to narrow exceptions) -- a comprehensive
document.


5. (SBU) Dr. Khirbash said that while both sides,
negotiators tended to focus on details, it was important for
our respective governments (and lead negotiators) to look at
the &bigger picture8 and the practical benefits of an FTA.
Speaking frankly, he acknowledged that the original London
high-level meeting had been tough, but that the London
negotiating round had been a "fantastic example" of
partnership. If we can repeat this effort, he said, he was
optimistic of making good progress in the round.


6. (SBU) Turning briefly to specifics, Dr. Khirbash cited
telecoms and defense procurement. On telecoms, he said that
the U.S. needed to understand that the UAE had just broken
its telecom monopoly with a new company, which would only be
fully operational by the end of 2006. For this reason, he

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said, the UAE did need time before opening up the sector.
(Note: The new telecom company is government owned, although
the UAE plans to issue an IPO for a minority stake.)
Al-Bustani brought up the issue of defense procurement,
explaining that this was an issue of offsets. Ambassador
(drawing from USTR provided points) said that defense
procurements, with exceptions for sensitive items and
national security, are intended to be included in an FTA.
She added that she understood the UAE,s concerns about their
offsets requirements, but noted our understanding that
offsets only applied on procurements over $10 million, so
that there certainly should be areas where an FTA could cover
defense procurements. Al-Bustani said that the Ministry of
Defense would be sending a person to the procurement
discussions. Ambassador informed Dr. Khirbash that UAE MFA
had passed a draft MOU on visas to Econchief on January 24,
with the request that it be signed in parallel with the FTA.
Ambassador reiterated that we were not in a position to sign
anything on visas in the context of an FTA. She added that
we have passed the MOU back to Washington for feedback on its
substance, but cautioned Dr. Khirbash that he should have no
expectation that AUSTR Donnelly would be able to give any
feedback on the document in London. (Note: MOU faxed to
desk. Text of MOU being sent Septel.)
SISON