A/S WAYNE BRIEFS UAE LEADERSHIP ON STRATEGIC

C O N F I D E N T I A L SECTION 01 OF 04 ABU DHABI 000073 SIPDIS DEPT FOR COUNSELOR ZELIKOW, NEA/FO, EB/FO TREASURY FOR DEP/SEC KIMMITT AND DAS SAEED E.O. 12958: DECL: 01/08/2016 TAGS: PREL EAID EFIN ECON IZ IR IS SY LE AE PK SUBJECT: A/S WAYNE BRIEFS UAE LEADERSHIP ON STRATEGIC INVESTMENT INITIATIVE REF: 05 STATE 224430 Classified By: Ambassador Michele J. Sison, reasons 1.4 (b and d). ¶1. (C) Summary: On the occasion of a condolence call for the death of Dubai Ruler and UAE Prime Minister and Vice President Sheikh Maktoum, Assistant Secretary for Economic and Business Affairs Tony Wayne and Ambassador Sison met January 6 with several top UAE officials to discuss the Strategic Investment Initiative, the Free Trade Agreement negotiations, and terror finance cooperation (latter two subjects reported septel). UAE officials welcomed further dialogue on the strategic initiative. They also shared some of their own experiences with assistance to Iraq, Lebanon, and the Palestinians, and raised concerns of Iranian influence over Iraqi Shia. End Summary. ¶2. (C) In the course of a condolence call in Dubai January 6 for the death of Dubai Ruler and UAE Prime Minister and Vice President Sheikh Maktoum, Assistant Secretary for Economic and Business Affairs Tony Wayne and Ambassador Sison had impromptu substantive discussions with Maktoum's younger brother and successor, Sheikh Mohammed bin Rashid al Maktoum (MbR),and Minister of State for Foreign Affairs Sheikh Hamdan bin Zayed al Nahyan. They discussed the strategic investment initiative, Free Trade Agreement negotiations, and terror finance cooperation. Later that day, A/S Wayne, Treasury DAS Ahmed Saeed, Ambassador Sison, EB/IFD/ODF Financial Economist Roland de Marcellus, NEA/ARPI Deputy Director Steve Walker, and Acting Consul General Jillian Burns (notetaker) met Sheikh Abdullah bin Zayed al Nahyan, Minister of Information, to discuss these same issues. MbR Expresses Interest in Strategic Investment -------------- - ¶3. (C) MbR interrupted the receiving line of mourners to talk for 40 minutes in a televised photo opportunity with A/S Wayne and Ambassador, joined by Sheikh Hamdan. Wayne and Ambassador presented the concept of the strategic investment initiative, to include a sustained dialogue with the Gulf, with initial focus on our first four priorities -- Iraq, Palestinian Authority, Lebanon, and Afghanistan. The goal would be an investment in the stability and prosperity of the states themselves using assistance to promote these ends. The U.S. wants to build with Gulf states the kind of ongoing broad discussion we have with other partners, such as the EU where we discuss our assessments of the needs, of problems, and of the resources we will make available. We would be looking for UAE,s views on the needs for these four countries/territories, how to strengthen the mechanisms used for assistance, how to best coordinate our efforts, and what kind of conditionality should accompany the aid. ¶4. (C) Sheikh Mohammed said he believed in a strong partnership with the U.S. He and Sheikh Hamdan expressed interest in the idea of enhanced engagement with the U.S. and a sustained and frank dialogue. MbR stressed the importance of holding out economic promise as one of the means of combating terrorism and stabilizing the region. He indicated he and other officials would have ideas on all four priority regions. On Iraq, he stressed the importance of Sunni inclusion and cited progress with the U.S. approach after what he saw as initial U.S. hesitance to reach out to Sunnis. He warned of the danger of Iran spreading its influence to Shia oil-rich areas in Iraq and upper Gulf. Sheikh Hamdan emphasized the UAE's continuing support for former Iraqi Prime Minister Iyad Allawi, reporting that Allawi had telephoned the night before to brief on a meeting of Iraqi Sunnis. Allawi will return to Abu Dhabi within the week for further consultations. Noting the presence of Dubai-based Iraqi cleric Ahmad al Kubaysi at the condolence session, Ambassador urged UAE assistance in having Kubaysi issue statements calling for the cessation of violence in Iraq and encouraging peaceful resolution of political differences. Sheikh Abdullah Also On Board -------------- ¶5. (C) In a subsequent private meeting, A/S Wayne laid out for Sheikh Abdullah U.S. goals for a dialogue with the UAE on strategic investment for Afghanistan, Iraq, Lebanon, and the Palestinian Authority. A/S Wayne mentioned our ongoing process of coordination, beginning with the invitation to the UAE CDA in Washington, Wayne and Saeed,s visit, and the planned upcoming visit by Treasury Deputy Secretary Kimmitt and Counselor Zelikow. In preparation for that meeting, A/S Wayne suggested expert-to-expert level meetings either by phone or by videoconference to deepen mutual understanding on the four priority countries/territories. He also sought UAE,s views how to best conduct this dialogue )- either bilaterally with each Gulf partner or as a U.S.-GCC dialogue. A/S Wayne mentioned that in the course of 2006, there would be international/donors conferences for Afghanistan, Iraq, and possibly Lebanon and the Palestinian Authority. Wayne stressed the importance of success of these conferences and the need for ongoing coordination and consultation. ¶6. (C) Sheikh Abdullah welcomed the idea of a dialogue. He raised the idea of ) in addition to country-by-country discussions ) pulling out issues common to all four priorities, such as education and health, to tackle thematically. He cited the proposal for Wadi Arabia University, with Israel, Jordan, and the Palestinians all donating land, as a particularly innovative idea. Abdullah was critical at the lack of improvement in the health conditions in Afghanistan and lamented living conditions in the West Bank. Abdullah also questioned limiting the dialogue to just four priorities. He said it is likely there will be countries that will need similar attention in the future. ¶7. (C) A/S Wayne explained that Washington had concluded if we can get these four areas right, it will make a significant difference. A/S Wayne commended UAE's generous assistance made to Pakistan after the earthquake. He also noted that some issues are country-specific, such as the new compact between Afghanistan and its donors, which will be presented at the London conference in late January. Not Always Easy to Help -------------- ¶8. (C) Sheikh Abdullah mentioned some difficulties UAE had faced in offering assistance to Iraq, Lebanon, and the Palestinians. -- Iraq: Abdullah cited the problems the UAE had faced when it hosted German training of Iraqi security forces. Iraqis wanted the training in Iraq, the Germans did not, so instead the Iraqis claimed the training was not up to standard. -- Lebanon: The UAE was helping Lebanon with equipment (not specified) and has offered training -- but doubted Lebanon would accept. Abdullah also mentioned that in response to a recent request from Lebanese Prime Minister Siniora for oil products, the UAE had decided instead to transfer to the GOL $50 million (Note: This is similar to the UAE's past assistance to Jordan to cover oil costs.) UAE has had problems in the past with its assistance to Lebanon, such as when UAE offered demining assistance. The Israelis would not turn over maps, claiming the Lebanese Forces had laid the mines but later lost the maps. The Lebanese Minister of Defense tried to get them to waste significant parts of their budget on things they did not need, including a headquarters in Beirut and Hizbellah tried to limit the extent of de-mining. -- Palestinian Authority: The UAE had made sizable donations to the Palestinians, but faced problems. For instance, the PA had changed the location of the $100mn Sheikh Khalifa residential housing project three times, claiming problems with disputed ownership of the land. A/S Wayne commented that one goal of the dialogue would be to share such experiences to find better ways of getting things done. Challenge of Lebanon -------------- ¶9. (C) On Lebanon, A/S Wayne stressed the need for a framework for a new Lebanon donors' conference to ensure Lebanon follows through on pledged reforms, unlike after Paris II. DAS Saeed stressed that the IMF was the only organization with the capacity to monitor the large sum of money that Lebanon needs. Saeed was optimistic that the market would react positively to IMF involvement, and interest rates on debt would go down. Abdullah was skeptical that the GOL was willing to make the necessary reforms. In his view, the GOL did not believe the international community would follow through with sustained pressure out of fear of the fragility of the government, caused by pressures from Syria, Hizballah, Israel, and internal factional conflict. A/S Wayne agreed the GOL was fragile and that Syria was a huge problem. DAS Saeed said Lebanon provided an opportunity to prove the effectiveness of good coordination. Wayne added that sometimes the parties want outside pressure as cover for doing good things, and Abdullah agreed this was the case with former Palestinian Minister of Finance Salam Fayyad. (Note: Abdullah recently confirmed to us that the UAE leadership had provided $1mn to Fayyad's Huriyyeh party after Abu Mazen had personally interceded.) If We Forgive Iraqi Debt, Will the Money end up in Iranian Coffers? -------------- ¶10. (C) A/S Wayne raised the issue of Iraq debt forgiveness, asking for an update of UAE activity. He cited Minister of State for Finance Khirbash,s stated position that the UAE would work with the Iraqis to forgive the debt. Wayne expressed appreciation for UAE willingness to work according to Paris Club terms. Sheikh Abdullah indicated that the Iraq debt issue was not fully resolved yet internally within the UAE political structure. He called it a very sensitive issue, given the significant concern over "who calls the shots in Iraq today," and the extent of Iran,s role there. He wondered if the GCC would get credit from the Iraqi people if they cancel the debt or would Iran manage to get a hold of the funds in their renewed attempts at calling for war reparations, to the tune of $100 billion. DAS Saeed said the U.S. would not have canceled Iraqi debt if we suspected in any way that it would end up in Iran. Abdullah indicated the UAE was waiting to see what kind of regime emerged in Iraq ) particularly whether or not it would be a "copycat" of Iran,s regime ) before finalizing their decisions on any agreement. GCC-Iran relations, Saudi Arabia -------------- ¶11. (C) When asked about the December 19 GCC communique, which had been tepid on the subject of Iran, Sheikh Abdullah claimed its tone actually sent a signal of the issue's importance. He said UAE and Kuwait wanted something stronger in the communique, but King Abdullah asked to leave it out to give him a chance to follow up with Iran. He said it was an unusual gesture that the Iranian Supreme Leader sent his advisor and former Foreign Minister Velayati to Riyadh with a letter to King Abdullah. He heard it was quite a positive letter, in which the Supreme Leader assured the king that he could deal with President Ahmadinejad. Sheikh Abdullah commented that that has yet to be seen. Sheikh Abdullah also reiterated the Gulf's concerns about the environmental safety of the Bushehr nuclear reactor and danger of fallout. ¶12. (C) Sheikh Abdullah also briefed on his trip the previous week to Riyadh to discuss the issue of UAE's Peninsula Shield Rotation Brigade. He said the GCC countries were considering bringing their troops home and just maintaining a command and control center in Riyadh that could recall troops for exercises or emergencies. (Note: Since the 1991 Gulf War, every GCC country has provided troops to Hafr al Batin in order to protect Saudi Arabia from Iraqi invasion.) Comment -------------- ¶13. (C) Overall, the UAE leadership seemed receptive to the idea of a strategic investment dialogue, noting that greater coordination with the U.S. would be desirable. They look forward to more details from our side. Embassy recommends that between now and a visit by Counselor Zelikow and DepSec Kimmitt, DVC or telephonic consultation with the UAEG )- possibly at the level of MinState Finance Khirbash and MFA Director International Cooperation Ambassador Abdul Jalil -- be arranged. ¶14. (U) A/S Wayne has cleared on this telegram. Dubai cable being sent out by Abu Dhabi due to the Eid holiday. SISON