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