Identifier
Created
Classification
Origin
06BEIRUT2087
2006-06-22 12:56:00
SECRET//NOFORN
Embassy Beirut
Cable title:  

(S/NF) MGLE01: SINIORA PRESSES AHEAD ON ECONOMIC

Tags:  PREL EAID EAIR PTER KPAL KDEM BEXP LE 
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VZCZCXRO7283
PP RUEHAG RUEHBC RUEHDE RUEHKUK
DE RUEHLB #2087/01 1731256
ZNY SSSSS ZZH
P 221256Z JUN 06
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC PRIORITY 4230
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHROV/AMEMBASSY VATICAN 0602
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHMFISS/CDR USCENTCOM MACDILL AFB FL
RHEHNSC/NSC WASHDC
S E C R E T SECTION 01 OF 06 BEIRUT 002087 

SIPDIS

NOFORN
SIPDIS

NSC FOR ABRAMS/DORAN/WERNER/SINGH
PARIS FOR ZEYA
LONDON FOR TSOU
DEPT PASS USTR

E.O. 12958: DECL: 06/21/2016
TAGS: PREL EAID EAIR PTER KPAL KDEM BEXP LE
SUBJECT: (S/NF) MGLE01: SINIORA PRESSES AHEAD ON ECONOMIC
AGENDA, PALESTINIANS; SKEPTICAL ABOUT "ISRAELI NETWORK"

BEIRUT 00002087 001.2 OF 006


Classified By: Ambassador Jeffrey D. Feltman for reasons 1.4 (b) and (d
).

SUMMARY
-------

S E C R E T SECTION 01 OF 06 BEIRUT 002087

SIPDIS

NOFORN
SIPDIS

NSC FOR ABRAMS/DORAN/WERNER/SINGH
PARIS FOR ZEYA
LONDON FOR TSOU
DEPT PASS USTR

E.O. 12958: DECL: 06/21/2016
TAGS: PREL EAID EAIR PTER KPAL KDEM BEXP LE
SUBJECT: (S/NF) MGLE01: SINIORA PRESSES AHEAD ON ECONOMIC
AGENDA, PALESTINIANS; SKEPTICAL ABOUT "ISRAELI NETWORK"

BEIRUT 00002087 001.2 OF 006


Classified By: Ambassador Jeffrey D. Feltman for reasons 1.4 (b) and (d
).

SUMMARY
--------------


1. (C) Ignoring an unseemly, ongoing food fight among
Maronite politicians sparked by President Lahoud's
non-invitation to the Francophone summit, Prime Minister
Siniora used a 6/21 meeting with the Ambassador to portray
his government as moving ahead on a number of fronts,
including economic reform, electoral reform, and high-level
appointments. He denied that he was substituting economic
stimulus (through huge infrastructure and real estate
projects) for economic reform, and added that he would insist
on transparency and access for foreign investors to all such
projects. He said a Boeing bid to supply MEA would be
welcome, and that he would instruct MEA management to treat
the bid "fair and square." He also accepted the Ambassador's
requests to consider signing a non-surrender agreement, a
TIFA, and a new bilateral assistance agreement.


2. (S/NF) Summary, continued: Siniora said that the
Lebanese government would file a complaint against Israel in
the UN Security Council for its alleged role in a May 26
bombing in Sidon that killed a Palestinian Islamic Jihad
official and his brother -- but only if it could present a
solid, well-documented case. He suggested that he had some
doubts as to whether the Lebanese military's case for an
Israeli role in the incident was really closed. Siniora said
a commitment to improving living conditions in the
Palestinian refugee camps was part of his strategy for
disarmament of Palestinian militias present outside the
camps. He offered to help counter allegations that any U.S.
funding for improving camp conditions was part of a strategy

to permanently resettle Palestinian refugees in Lebanon
("tawteen"). End summary.

FRANCOPHONE SUMMIT, MARONITE FIGHT
--------------


3. (C) Called on by the Ambassador and emboff on June 21,
Siniora said he was taking a relaxed attitude to the
much-ado-about-nothing controversy stirred up by Romania's
decision to invite him, rather than President Lahoud, to the
upcoming Francophone summit. This had led a number of
Siniora's erstwhile Maronite allies in the "March 14"
coalition to accuse him of somehow weakening the institution
of the (Maronite-held) institution of the presidency.


4. (C) Siniora said his public line was that "the people who
send the invitation know how it's done, and they know the
situation" in Lebanon. The resulting domestic controversy
was "all a fight among the Maronites." The underlying cause
of it was the need of certain Maronite politicians to posture
and maneuver for a position of advantage from which to
attempt to succeed Lahoud in office.

MEA: A BID FROM BOEING IS WELCOME
--------------


5. (C) The Ambassador told Siniora that the USG fully
supports Boeing in its bid to supply airliners to Middle East
Airlines (MEA). However, the Ambassador planned to dissuade
Boeing's representative from meeting further with Lebanon's
pro-Syrian, Lahoud-tied ambassador to Washington, Farid
Abboud, unless Siniora thought that might be unwise. In
other words, did Abboud have any influence with those who
will ultimately decide which airplane manufacturer MEA will
choose?


6. (C) Siniora welcomed Boeing's intention to submit a bid
to MEA, saying that the Lebanese government wanted MEA be the
beneficiary of competition in the marketplace. Ambassador
Abboud is in a "really miserable position," not one from
which he could advocate for Boeing even if he wanted to.
Indicating that it would be better for all for Abboud to be
dropped from the discussions (a message we will deliver to
Boeing),Siniora said he would speak with MEA Chairman

BEIRUT 00002087 002.2 OF 006


Mohammad al-Hout about Boeing's planned bid. "I will tell
him to play fair and square," he said. (Comment: Boeing
faces an uphill battle, for two reasons: first, MEA's
9-plane fleet is currently entirely Airbus. Second, Boeing
cannot deliver new planes until 2012, and MEA's leases on
four Airbus jets expire in 2007. We are working with Boeing
to help find ways to fill the gap and keep Boeing
competitive. End comment.)

MAKING HIGH-LEVEL APPOINTMENTS
--------------


7. (C) Noting that the cabinet was seemingly now in a
position to make important, long-delayed, high-level
appointments, the Ambassador asked Siniora if there was any
possibility of Ambassador Abboud being replaced. "I'm not
that optimistic," Siniora replied.


8. (C) A more realistic goal, Siniora suggested, was the
appointment of a civil aviation security board, which he had
made a priority (and which is key to enforcing security
regulations at the airport). In "a real breakthrough,"
candidates are being selected through a merit-based
evaluation process. Siniora claimed that even he would not
know which candidates have been selected until an
announcement is made. His government was also making rapid
progress on the appointment of a Telecommunications
Regulatory Authority (TRA) (comment: formation of which has
till now languished since legislation authorizing it was
passed several years ago). Siniora had personally
interviewed 44 candidates for the TRA, and all were "really
very good."

PUSHING AHEAD WITH PRIVATIZATION...
--------------


9. (C) Another area where Siniora intended to "move quickly"
was privatization. Specifically, he wanted to press for
privatization of the Intra Investment Company ("Intra"),the
major shareholder of, among other things, MEA and the Casino
du Liban. Siniora noted that the Lebanese Central Bank holds
about 35 percent of Intra's shares, while the Lebanese
government itself holds about 10 percent.


10. (C) A central bank should not normally be in the
business of running what would otherwise be private
companies, Siniora said. In addition, "to me, Intra is a
symbol of corruption." For the past 40 years, "they've been
milking Intra" in order to "feed" corrupt politicians and the
Lebanese-Syrian security and intelligence apparatus.


11. (C) Since the shares were on the Central Bank's balance
sheet, it was ultimately a Central Bank decision. Although
the Central Bank has so far proposed selling only 25 percent
of Intra's shares, Siniora said that he would push for more.
In any case, Siniora added, 80 percent of the proceeds of
sales of Central Bank-owned shares would go to the Lebanese
treasury.

... AND WITH ECONOMIC REFORM IN GENERAL
--------------


12. (C) Siniora said his government was pursuing three main
courses of action in economic reform. First, it was
finalizing the economic reform program, completing work,
"hopefully," by the end of this week. It was also preparing
to publicly launch the new budget. Later, in time for the
one-year anniversary of the Siniora cabinet's taking office
in late July, it would conduct a "complete inventory of
what's been accomplished" over the past year.


13. (C) When it came to obstacles standing in the way of his
economic policy agenda, "my problem," Siniora said, "is in my
group." (He was referring to the "March 14" parliamentary
majority.) A "not-in-my-backyard" attitude among many "March
14" members was becoming a problem. A recent example was
Telecommunications Minister Marwan Hamadeh's complaint that
the government's waste management policy threatened to turn
the Chouf and Aley into the country's dumping grounds.

BEIRUT 00002087 003.2 OF 006


(Comment: The Chouf and Aley are where the bulk of the
constituency of Druze leader Walid Jumblatt, of whose
parliamentary bloc Hamadeh is a member, lives.)


14. (C) Siniora denied that he was abandoning an economic
reform program based on fiscal adjustment and liberalization
in favor of Lebanon spending its way out of low growth
through massive infrastructure and real estate development
projects. Such large projects were on track, but funding
would come "one hundred percent" from the private sector, he
said.


15. (C) The Ambassador expressed concern about harmful
appearances of conflict of interest with some of these
projects. (Comment: This is a particular concern with
"LENOR," a proposed redevelopment of the coastal areas of
Beirut's northern suburbs. Its principal advocates within
the government are also among its largest shareholders:
Deputy Prime Minister and Defense Minister Elias al-Murr,
Minister of the Displaced Nehmeh Tohme, and Minister of
Public Works and Transport Mohammad Safadi. End comment.)


16. (C) "I want things to be entirely transparent," Siniora
said in reply. The government would not give the go-ahead to
any project on the basis of favoritism. All of these large
projects would be "one hundred percent" open to international
bidding, and he would not accept any bids that were simply a
negotiated carve-up by political power-brokers. This also
applied to the telecommunications sector, Siniora insisted.

TIFA IN THE WORKS
--------------


17. (C) The Ambassador told Siniora that the USG is seeking
to have a Trade and Investment Framework Agreement (TIFA) in
place for the "Made in America" export promotion exhibit,
scheduled to take place in Beirut in September. Siniora said
he would discuss the matter with Economy and Trade Minister
Sami Haddad (comment: whose response on the draft TIFA we
are currently awaiting).

ELECTORAL REFORM: SO FAR, SO GOOD
--------------


18. (C) On electoral reform, Siniora said he would allow two
more weeks for a cabinet session devoted to discussing the
draft electoral law recently submitted by a blue-ribbon
national commission. Resistance to the draft law had so far
not been as great as Siniora had anticipated. He had
recently had a "very good" meeting with the Maronite
Patriarch, by the end of which, Siniora claimed, he and the
Patriarch had agreed on "every issue." (Comment: Of all the
leaders in the Christian community, whether temporal or
spiritual, the Maronite Patriarch will likely have the most
influence on the degree of support, or lack of it, the draft
electoral law.)

NON-SURRENDER AGREEMENT
--------------


19. (C) Noting reports of possible Lebanese government
interest in signing the Rome Treaty and joining the
International Criminal Court, the Ambassador reiterated USG
interest in signing a non-surrender agreement with Lebanon.
This has become a matter of urgency, he told Siniora, because
it now has implications for future U.S. military assistance
to Lebanon. He urged Siniora not to sign the Rome Treaty
before addressing this issue.


20. (C) Siniora asked several questions about the
compatibility of a non-surrender agreement with the Rome
Treaty. He then passed background materials on a
non-surrender agreement, provided by the Ambassador, to his
advisor Rola Noureddine for action. For the time being, he
advised the Ambassador, the Embassy should not raise this
issue with Foreign Minister Salloukh.

BILATERAL ASSISTANCE AGREEMENT
--------------

BEIRUT 00002087 004.2 OF 006




21. (C) The Ambassador provided Siniora with some background
on the current bilateral assistance agreement between the
United States and Lebanon, which dates back to the 1950s. A
new agreement may be necessary to accommodate present-day
requirements of assistance, such as duty-free access for
donated equipment. In response, Siniora suggested, "let's
look at the proposal in a very discreet manner."

PHARMA PROBLEMS WITH HEALTH MINISTRY
--------------


22. (C) The Ambassador described to Siniora problems
recently experienced with Health Minister Khalifeh on the
issue of intellectual property rights (IPR). Khalifeh has
refused to meet with a pharmaceutical industry IPR task
force, and has become abusive in his meetings with
pharmaceutical industry representatives, the Ambassador said.
Khalifeh has not followed through on the Prime Minister's
proposal to form a task force with the industry to look at
ways to address IPR issues.


23. (C) Siniora expressed surprise at his minister's
behavior, suggesting that, regardless of the minister's
differences with the pharmaceutical industry, it made no
sense to refuse to meet with them. He tasked Noureddine with
following up on the matter.

ISRAELI "SPY RING" WILL GO TO
UNSC -- IF THERE IS A SOLID CASE
--------------


24. (S/NF) The Ambassador asked about the Lebanese
military's claims to have broken an Israeli-controlled
network allegedly behind a May 26 bombing in Sidon that
killed Palestinian Islamic Jihad official Abu Hamzeh and his
brother. Siniora said he understood that one person, a
Mohammad Rafeh, has been detained by the Lebanese authorities
and is being interrogated; he has reportedly been revealing a
great deal of information about the alleged Israeli network.
Consequently, at the last cabinet meeting, Siniora and his
ministers agreed on a proposal (offered by Foreign Minister
Salloukh) that Lebanon file a complaint against Israel in the
UN Security Council.


25. (S/NF) Siniora said he agreed to this on the condition
that any such complaint had to be "well prepared and
documented." He suggested that the Lebanese authorities were
not yet in a position to do so, noting that he had so far
received only oral briefings on the investigation's progress.
He got the impression that certain participants in the
cabinet session were trying to "prepare" linkages between the
May 26 Sidon incident and the 14 cases of assassinations,
assassination attempts, and bombings that the UN
International Independent Investigation Commission (UNIIIC)
has been mandated to assist the Lebanese authorities in
investigating.

LAHOUD, OTHERS USE IT TO MUDDY THE WATERS
--------------


26. (S/NF) Siniora said that, even though Deputy Prime
Minister and Defense Minister Murr refuted the idea of
linkages between the May 26 incident and the 14 other cases,
President Lahoud appeared to be advocating it, and this idea
had been spread by the news media. Siniora said he was not
in a position to say whether or not the accusation of Israeli
responsibility for the Sidon assassinations was correct, much
less whether there was any connection between it and the
other 14 cases. "We need a serious exchange of information
with the international community" in order to make a
determination. In the last cabinet meeting, he had
discouraged any attempts to "falsify" information in order to
make it look as if linkages really existed.


27. (S/NF) Siniora then had told the cabinet that it would
be "a great help" to share what had been discovered in the
course of the investigation of the May 26 incident with the
UNIIIC. This had not yet taken place. "We'll see if it can

BEIRUT 00002087 005.2 OF 006


be done," he said. It had to be done through the "proper
channels," which would most likely be state prosecutor Said
Mirza.

INVESTIGATION LEAVES SINIORA WONDERING
--------------


28. (S/NF) Siniora briefly described the findings of the
investigation as he understood them. Mohammad Rafeh had
recently brought an automobile to his home town of Hasbaya in
the western Biqa'a Valley, and covered it for some time with
a sheet or tarp. Later, he drove it to Sidon, where he
replaced one of the doors. (There was no sign of the
original door.) Finally, he drove the car to the site of the
attack on Abu Hamzeh and his brother, and got into another
vehicle, a van, parked nearby. While in communication with
an Israeli military aircraft, Rafeh caused an explosive
device -- presumably in the car's newly-installed door -- to
be detonated. Siniora noted reports that Abu Hamzeh was very
close to the leadership of Hizballah.


29. (S/NF) Siniora admitted that he found curious the
account of how Mohammad Rafeh had been discovered. The
authorities arrested Rafeh after his sister, in Hasbaya, was
reportedly overheard saying "that's my brother's car" while
watching video footage of what was left of the car, following
the explosion that killed Abu Hamzeh and his brother, on a
television news report. Supposedly, she had recognized the
smoldering hulk of the automobile by the license tag still
attached to it. Siniora thought it unlikely that one would
recognize a blow-up vehicle, glimpsed briefly on a television
screen, by its license tag.


30. (S/NF) "Okay, I don't know," Siniora said, suggesting
that he had suspended judgment about the veracity of the
account until the investigation proceeded further. "We'll
have to wait and see," he said.

PALESTINIAN MILITIAS: SINIORA'S PLAN
--------------


31. (S/NF) The Ambassador pointed out that the deadline for
confinement of Palestinian arms and armed personnel to the
refugee camps -- agreed on during the National Dialogue talks
-- was only about three months away. He expressed
disappointment that Interior Minister Fatfat, during recent
meetings in Washington, had seemed to indicate that Lebanon's
ability to meet the deadline depended entirely on cooperation
from the Syrian government.


32. (S/NF) Siniora said that "definitely, Syria has a role
to play" in dealing with those Palestinian rejectionist
groups with paramilitary bases outside the refugee camps. A
solution required making "more noise" about the continued
violations of Lebanese sovereignty that these Palestinian
groups commit. It also required coordination with the heads
of state of other Arab governments, particularly those of
Egypt and Saudi Arabia, and with the Arab League's
Secretary-General. "Nothing will come of it," Siniora

SIPDIS
candidly admitted, but it was imported to continually convey
the message that "we," the Lebanese, "are the victims" in
this case.


33. (S/NF) Finally, Siniora said, he intended to press ahead
with a message to the Palestinian refugee population in
Lebanon that "I am serious" about improving living conditions
in the camps. Siniora said, "I need to strengthen my hand,"
in order to counter the unhelpful message of his opponents,
who tell the Palestinians that Siniora's government offers
them no incentive to disarm.


34. (S/NF) The Ambassador told Siniora that, should the USG
be able to respond positively to the PM's request that we
participate in funding efforts by the UN Relief and Works
Agency to improve living conditions in the camps, we would
need him to help counter accusations that it was doing so as
part of strategy of "tawteen," permanent resettlement and
nationalization of Palestinian refugees in Lebanon. "Sure,"
Siniora answered. He would make it clear that international

BEIRUT 00002087 006.2 OF 006


support for improving living conditions in the camps was at
his request. "I will assume responsibility," he said.
FELTMAN