SCENESETTER FOR VISIT OF DEPUTY SECRETARY KIMMITT

S E C R E T SECTION 01 OF 03 ABU DHABI 002855

SIPDIS

NOFORN
SIPDIS

DEPT FOR C - ZELIKOW, NEA/ARP, NEA/I
TREASURY FOR DEPUTY SECRETARY KIMMITT

E.O. 12958: DECL: 07/11/2013
TAGS: EAID ECON EFIN IZ AE
SUBJECT: SCENESETTER FOR VISIT OF DEPUTY SECRETARY KIMMITT
AND COUNSELOR ZELIKOW TO UAE: JULY 22-23

REF: A. ABU DHABI 2781

B. ABU DHABI 2695

C. ABU DHABI 2129

D. ABU DHABI 1106

Classified By: Ambassador Michele J. Sison for reasons 1.4 (B & D).


1. (S/NF) Summary: Embassy Abu Dhabi welcomes the July 22-23
visit of Deputy Secretary of Treasury Kimmitt and Counselor
Zelikow to discuss the Iraq Compact. Your visit follows
Iraqi Prime Minister Maliki's July 3 visit to the UAE, where
President Khalifa bin Zayed Al-Nahyan and other senior UAE
officials reiterated their pledges of support to the people
of Iraq and committed to launching three bilateral groupings
addressing security, investment, and military assistance. On
June 15, Deputy Prime Minister Sheikh Hamdan bin Zayed
Al-Nahyan agreed to host an energy sector conference for
Iraqi participants and restated the UAEG's commitment to
forgiving most of Iraq's debts (although he noted that there
was not yet GCC consensus on that issue). The UAE pledged
$215 million in Madrid for Iraqi reconstruction, of which it
has disbursed about $80 million. End Summary.


2. (S/NF) The UAE continues active engagement with Iraq. It
has publicly supported the new Iraqi government and has
provided extensive security assistance, as well as attempted
to influence Iraqi moderates to participate more in the
political process. The UAE mission in Iraq faced recent
terrorist attacks with the killing of two Iraqi employees in
April and the kidnapping -- and subsequent release -- of the
Deputy Charge of Affaires, Naji Al-Nuaimi, in May. Despite
being directly targeted, the Emiratis have stated that they
intend to continue their humanitarian assistance to the Iraqi
people and to contribute to rebuild Iraq.


3. (C) On July 3-4, Iraqi Prime Minster Nouri Al-Maliki
visited the UAE with his Oil, Defense, Electricity,
Environment, and Communications Ministers and his Minster of
State for Foreign Affairs. President Sheikh Khalifa bin
Zayed Al-Nahyan and Vice President/Prime Minister Mohammed
bin Rashid Al-Maktoum both made public pledges of support to
the people of Iraq during the visit. The Iraq-UAE
discussions focused on creating three areas of cooperation:
investment, military assistance, and security.

Investment
--------------


4. (C) In their June 15 meeting in Abu Dhabi, Ambassador
Khalilzad asked Deputy Prime Minister Sheikh Hamdan bin Zayed
Al-Nahyan (HbZ),that the UAE assist in encouraging economic
(especially oil industry) leaders, both regional and
international, to invest and work in Iraq. Khalilzad
suggested that a regional conference might be beneficial and
asked if the UAE would host such an event. Abu Dhabi Crown
Prince Mohammed bin Zayed (MbZ) has approved this idea.
(Note: Several UAE officials have noted that increased FDI in
Iraq will depend on successful Iraqi efforts to improve
stability and security in the country. End note.)


5. (SBU) The UAE and Iraq agreed to focus on UAE investment
in Iraq's energy and telecommunications sectors. The UAE is
well placed to encourage this type of investment and to serve
as a "jumping off point" for investment in Iraq's energy or
telecommunications sector. The major international oil
companies (IOCs) including ExxonMobil, BP, Shell, Total, and
Occidental Petroleum are all represented in Abu Dhabi.
ExonMobil, BP, Total, and Shell all are shareholders in Abu
Dhabi's upstream oil industry. In March, ExxonMobil signed
agreements with ADNOC and the Emirate of Abu Dhabi giving it
a 28% stake in the huge Upper Zakum offshore oil field.
Occidental Petroleum is partnered with Total and the Abu
Dhabi Government owned Mubadala Development Company in the
Qatar-UAE Dolphin Gas pipeline project, the premier
transborder natural gas project in the Middle East. U.S.
companies have a 45% stake in the oil and gas services
industry here and have a significant physical presence that
they can use as a regional base for operations in Iraq.


6. (SBU) In addition, the UAE has a relatively sophisticated
telecommunications infrastructure, with internet penetration
of around 40% and mobile phone penetration of over 96%. The
former monopoly telecommunications company Etisalat has
significant international investments including a 34.7% share
in the Thuraya Satellite Telecommunications Company and
investments in Saudi Arabia, Pakistan, and a new GSM license

ABU DHABI 00002855 002 OF 003


in Egypt. Both Etisalat and the new second
telecommunications provider are largely UAE (or Emirate
level) government owned, with the rest of the shares traded
in the UAE's stock markets. The UAE does not plan to open
its telecommunications sector to foreign service providers
until 2015

Iraqi Reconstruction/Debt Relief
--------------


7. (SBU) In 2004, the UAE pledged $215 million toward Iraqi
reconstruction in Madrid, but it has been extremely difficult
to determine exactly how much of that disbursement the UAE
has made. Although the UAE had informed the Embassy in 2005
that it had disbursed all $215 million on "projects inside
Iraq," the MFA later told us that the UAE had disbursed a
total of $80 million of its pledge. (Ref D). The aid has
included medical services, computers, fuel, desalinization
plants, medicines, foodstuffs, and cash.


8. (SBU) In 2004 the UAE pledged to provide Iraq two ABB 200
megawatt power generators but has not delivered them to date.
Although the UAE had originally looked to have another
country cover the costs of transportation and installation,
we understand that the Emirate of Abu Dhabi has decided to
cover the costs. According to an official at the Abu Dhabi
Water and Electricity Authority, the contract to ship and
install the generators is in MbZ's office for approval. The
Chairman of the Abu Dhabi Water and Electricity Authority met
with the Iraqi Electricity Minister on July 4 and pledged his
support.


9. (c) The UAE has committed to waiving most of the estimated
$3.5 billion Iraqi debt that it holds. Currently, the UAE is
not requiring the Iraqis to make any payments. However, the
UAE has also said it is bound by the GCC to adopt a common
position on Iraqi debt. In his June 15 meeting with HbZ,
Ambassador Khalilzad urged the UAE to take the lead in the
GCC on the issue of Iraqi debt forgiveness, suggesting that
the GCC go at least as far as the Paris Club in forgiving
Iraqi debt. Without answering, HbZ inquired what Saudi
Arabia and Kuwait had committed to do. HbZ then added that
the UAEG does not have any problem with waving debt "in
principle," noting that the UAE had previously committed to
former Secretary Baker to waive most of the debt. However,
"the GCC does not agree with us on this issue." (Comment:
the UAE does not appear to be prepared to play a leading role
in the GCC on this issue, probably because -- in comparison
with Kuwait and Saudi Arabia -- it holds less debt. End
comment.)

Military Assistance
--------------


10. (C/NF) The UAE has also provided the Iraqis with
significant security assistance over the last several years.
For example, the UAE conducted joint training programs with
Germany, under which they have trained 431 Iraqi police and
trained an Iraqi engineering battalion. The UAE has provided
Iraq with engineering equipment, military equipment
(including 100 trucks, 4 light reconnaissance aircraft, 43
French Panhard Armored Personnel Carriers) and $8 million
toward the transfer of M-113 APCs from Jordan.


11. (C) According to Yousef Al-Otaiba, International Affairs
Director for Crown Prince Sheikh Mohammed bin Zayed Al-Nahyan
(MbZ),the military assistance portion of future cooperation
will include a visit to Iraq by representatives of the UAE's
military and defense sectors to examine materiel and funding
needs there. The UAE is particularly interested in creating
linkages between Baghdad and UAE manufacturers of ballistic
vests, ammunition, and the TIGER, an all-terrain vehicle
(similar in purpose to the Humvee) manufactured by the Bin
Jabr Group of Abu Dhabi. (Ref A).

UAE/Regional Efforts
--------------


12. (S/NF) The UAEG has often cited concern regarding Iranian
influence in Iraq. The UAE has reached out to moderate Shi'a
and is encouraging them to engage in the political process
independent of Iran. According to State Security Directorate
(SSD) officials senior Shia'a tribal leaders from southern
Iraq visited the UAE recently to discuss ways to get out from
under Iranian influence. SSD officials told Assistant to the
President for Homeland Security and Counter Terrorism

ABU DHABI 00002855 003 OF 003


(APHSCT) Frances Fragos Townsend on June 19 that the UAE is
also encouraging and facilitating Iyad Allawi's efforts to
reach out to and coordinate with moderate Shi'a. (Ref B).


13. (S/NF) In addition, the UAE's intelligence service is
working with five other countries (Jordan, Egypt, Kuwait,
Turkey, and Saudi Arabia) to support Iraqi "nationalists."
On May 17, Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed
Al-Nahyan (MbZ) told an interagency team led by Principal
Deputy Undersecretary of Defense for Policy Ryan Henry and PM
A/S John Hillen that the "Group of Six" has been able to
provide Iraqi moderates with only about ten percent of the
$50-$60 million that they required each month. Deputy PM HbZ
has also suggested that there be a "collective effort" to
support the Shi'a groups from the south in establishing radio
and television stations. (Ref C).

Arab Monetary Fund
--------------


14. (C) Headquartered in Abu Dhabi, the Arab Monetary Fund
provides credit facilities to member states as well as
technical assistance. As of June 2006, Iraq owed the AMF
approximately $505 million in principal and capitalized
interest, making it the largest debtor to the AMF. The AMF
board of governors agreed that Iraq needs debt reduction. In
our meetings with AMF officials, they have stressed that the
AMF can provide rescheduling of the principal, not
forgiveness. They also note that there has been no movement
on rescheduling to date. (Note: AMF Director General
Chairman of the Board Dr. Jassim Al-Mannai, a Bahraini
national, is married to an Iraqi. End Note.)

Other Treasury Issues
--------------


15. Three Treasury Under Secretaries have visited the UAE in
the last six months:

-- (SBU) On May 22, Under Secretary for International Affairs
Timothy Adams met with Dubai business and banking officials.

--(S) Under Secretary for Terrorism and Financial
Intelligence Stuart Levey visited twice (January 24 and April
30) to chair the first and second meetings of the Joint
Terrorist Finance Coordinating Committee (JTFCC) and (in
April) to discuss possible financial measures to pressure and
isolate the Iranian regime with UAE ForMin AbZ.

-- (SBU) On March 22, Treasury Under Secretary for Domestic
Finance Randal Quarles met with UAEG and Emirate of Abu Dhabi
and Dubai financial officials in outreach targeted at holders
of U.S. Treasury securities.

-- (U) In addition, there are two regional Treasury Advisors
(Banking and Debt) assigned to the Embassy under the Middle
East Partnership Initiative. This September, the regional
Office of Foreign Assets Control attach will be relocating
from Manama to Abu Dhabi.
SISON