A/S WAYNE BRIEFS QATARI OFFICIALS ON STRATEGIC

C O N F I D E N T I A L SECTION 01 OF 03 DOHA 000048

SIPDIS

E.O. 12958: DECL: 01/08/2016
TAGS: PREL ECON EAID EINV EFIN KPAL IZ AF LE QA
SUBJECT: A/S WAYNE BRIEFS QATARI OFFICIALS ON STRATEGIC
INVESTMENT INITIATIVE

REF: STATE 231703

Classified By: Ambassador Chase Untermeyer for reasons 1.4 (b) and (d).


1. (C) Summary. The Qatari Minister of State for Foreign
Affairs and Finance Minister welcomed in principle the USG
proposal presented by EB A/S Wayne for strategic investments
in stability in the region. They were well-prepared and
provided updates on their current assistance to the four
priority need in the region -- Iraq, Afghanistan, Lebanon,
and the Palestinian Authority. The Qataris did not commit to
greater assistance but expressed willingness to engage in a
deeper dialogue and consider new vehicles for assistance.
COMMENT: The door appears open with the Qataris on the
initiative, but it will require further follow-up. End
Comment and Summary.


2. (C) A/S Wayne and delegation met with Minister of State
for Foreign Affairs Ahmed bin Abdulla al-Mahmoud, in the
absence from Qatar of Foreign Minister Hamad bin Jassim Al
Thani, on January 5; al-Mahmoud was accompanied by staff from
the Office of American and European Affairs. A/S Wayne
outlined the Strategic Investment Initiative, noting that
Washington works closely on reconstruction and assistance
issues with European countries and Japan and would like to
start such an action-oriented dialogue with our friends in
the Gulf. The dialogue would ensure that the necessary
political decisions regarding investment and reconstruction
would be well-informed. Coordination is needed. He noted the
donor conferences planned or expected for the first months of
2006 for Afghanistan, Iraq, Lebanon, and the Palestinians.
The dialogue would also help deliver a "consistent message"
to the countries that receive funding.


3. (C) A/S Wayne and Treasury DAS Ahmed Saeed described the
initiative as a "strategic investment in regional stability"
with a multi-year time horizon and focused on Iraq,
Afghanistan, Palestinian territories, and Lebanon. They
invited the Qataris to discuss the initiative further with
U.S. officials, perhaps by tele- or video-conference. A
follow-up visit of senior U.S. officials will come at the end
of January.


4. (C) A-Mahmoud replied positively, welcoming the initiative
as a way to strengthen the relationship with the United
States. "Your approach is a good one," he said. He called the
bilateral relationship "strategic" for Qatar. But he said
that Qatari leaders have been "embarrassed" when, in their
view, Washington has not followed through after promising
some action. He said this happened in October 2005 when the
Foreign Minister arranged for a dialogue in Doha with Iraqi
Sunni leaders and the U.S. did not respond. (Note. The son of
the head of the Muslim Ulema in Iraq, Harith al-Dari, was in
Qatar in October.) "If we agree on something, let's continue
with it," he urged. He said Qatar was open to considering
specific U.S. proposals.


5. (C) Al-Mahmoud said Qatar was trying to find opportunities
for sustainable investment. In the Palestinian Territories,
he said Qatar is thinking of investing in a bank to do small,
community business loans and in a possible road to link Gaza
and the West Bank. He said the Foreign Minister is planning a
visit to the territories early in 2006. Al-Mahmoud said $265
million has been donated to the Palestinians "so far" and
that Qatar has paid in its full pledge to the Arab League. He
said an investment company, International Salaam Company, was
announced at the recent Amman conference; it will be
capitalized at $250 million from private Qatari and
Palestinian sources and will focus on reconstruction and
investment projects in the territories. As an aside, he urged
the U.S. to maintain the pressure on Israel to allow
elections in East Jerusalem. Given that democracy is the
centerpiece of U.S. policy in the Middle East, he argued,
prohibiting the Palestinians from exercising their democratic
rights would undermine the U.S. in the region. A/S Wayne said
we was aware President Abbas had called for additional budget
support during his recent visit to Doha and stressed that the
short-term need is real.


6. (C) On Lebanon, al-Mahmoud said that Qatar has donated
$134 million, including $60 million to support the currency,
since 1974. This total includes 23 cars provided by Qatar for
an Arab League meeting in Beirut in 2002.


7. (C) On assistance to Afghanistan, al-Mahmoud said the Amir
pledged $10 million "to assist the people" at the December
2005 Organization of Islamic Conference meeting. At the 2005
Tokyo donors' conference, Qatar had pledged to do more. By
May 2005, $20 million financial and in-kind assistance had
been provided by Qatari charities. Also in May, a conference
in Doha for Afghan police raised $360 million for
Afghanistan. Qatar has also recently announced it will host a
conference to support the police infrastructure in the
country. A/S Wayne described the Afghanistan Compact as "a
very good document on Afghanistan's needs" which was arrived
at in an interactive process instructive to the Strategic
Investment Initiative. He urged Qatari officials to
familiarize themselves with the Compact and be ready to
support it at the London conference as well as announce
further support.


8. (C) Al-Mahmoud also discussed Qatar's assistance to Iraq.
Prefacing his remarks with "Your success in Iraq is our
success," he provided the following breakdown of
disbursements of the $100 million pledge at the Madrid
donors' conference:

-- $15 million to UNESCO for higher education
-- $15 million for vehicles for the Iraqi government
-- $10 million to World Bank Fund
-- $5 million to train 1,464 police officers
-- $20 million for pre-fabricated buildings and a hospital
-- $3.5 million to train 10 persons in civil aviation
-- $1.5 million for the 2004 Iraq conference in Doha

Al-Mahmoud said this was in addition to Qatar Red Crescent
assistance to Iraq.


9. (C) Debt relief was discussed and a Qatari commitment was
made during the visit of Special Envoy James Baker in 2003,
al-Mahmoud said. At this stage, the Iraqis have not provided
an interlocutor to deal with on the issue. He said the Amir
might "respond to the request" on debt relief after Eid
al-Adha (the holiday period ending January 15).


10. (C) A/S Wayne described a donors committee and working
group in Baghdad which the U.S. Government has encouraged to
look sector by sector and perform a needs assessment. The
committee will be useful for coordination and determining
specific needs. Al-Mahmoud admitted that Qatar does not have
diplomatic representation in Iraq for security reasons.


11. (C) A/S Wayne suggestd that the U.S. side would be
pleased to have more detailed phone- or video-conference
discussions on each of the four key countries with Qatari
experts. The Qatari Americas Director said they would
consider whether to have the conversation bilaterally or
GCC-wide.

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Minister of Finance
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12. (C) A/S Wayne outlined the SII (paragraphs 2-3) for
Minister of Finance Yousef Hussain Kamal, who said that
stability and security are prerequisites for investment. A/S
Wayne made the point that for security and stability to take
hold, people have to have prospects for prosperity. He gave
the example of prosperity beginning to appear in the former
Yugoslavia after a combination of sustained political and
economic support.


13. (C) Minister Kamal appeared briefed on the concept of the
SII and saw it along the lines of an investment vehicle. He
asked, is it investment or aid? Will it be structured as a
joint venture or a holding company? DAS Saeed explained that
the World Bank trust funds and other IFI involvement
represents a possible vehicle for use by the SII, but that
the notion of strategic investment implies higher level
cooperation and coordination. The minister expressed
dissatisfaction that prior Qatari assistance had disappeared
and that a better model would be a public-private joint
venture with 30-40% held by the private sector; they would be
first in line to obtain returns. He said government
participants -- the other 60-70% -- would likely accept a
zero rate of return because the vehicle would enhance
stability. He also expressed the view that the World Bank and
IMF could be involved in this vehicle.


14. (C) Kamal said the investment vehicle should be set up as
a business, with private sector leaders, such as former
executives from Citigroup or Microsoft, on the board of
directors. "You don't want government people on the board,"
he said. But governments should be like the "General
Assembly," approving the broad direction of the venture. He
welcomed the principle of the initiative, saying Qatar "does
a lot of assistance," but in the end, there is no
follow-through or results. Kamal said that, while he is the
Secretary General of the Supreme Council for Investment,

SIPDIS
reporting to the Amir, all follow-up on the SII will be with
the MFA.


15. (C) Welcoming the minister's recommendations, A/S Wayne
said we definitely want to encourage private sector growth
and activity and we want to involve the private sector in our
efforts. Identifying benchmarks, using the international
financial institutions to identify needs, and discussing
disbursement mechanisms are all important.

16. (C) A/S Wayne noted that the GOQ had recently purchased a
bank in Lebanon. Kamal said the price was $246 million and
that the GOQ considers it a long-term investment. "This is
the Amir's strategy," he said. "It will be our arm in
Lebanon." Qatar makes investments in the Arab region as a
way to encourage the private sector to do the same. He added
that Qatar donated 100 police cars to Lebanon and NGOs are
helping the schools. A/S Wayne concluded by noting our belief
that the IMF can play a very important role in a sustainable
reform program for Lebanon.
UNTERMEYER