SCENESETTER FOR COUNSELOR ZELIKOW'S FEB. 28 -

C O N F I D E N T I A L SECTION 01 OF 02 KUWAIT 000594

SIPDIS

SIPDIS

EMBASSY CAIRO PLEASE PASS TO COUNSELOR ZELIKOW
OFFICE OF COUNSELOR ZELIKOW FOR DAVID AIDEKMAN
NEA/FO FOR GORDON GRAY
LONDON FOR TSOU

E.O. 12958: DECL: 02/21/2016
TAGS: ECON EAID ENRG KU IZ IR
SUBJECT: SCENESETTER FOR COUNSELOR ZELIKOW'S FEB. 28 -
MARCH 1 VISIT TO KUWAIT

REF: A. KUWAIT 0399


B. KUWAIT 0167

C. KUWAIT 0524

D. KUWAIT 0462

E. KUWAIT 0201

F. 05KUWAIT 5299

G. KUWAIT 0578

H. KUWAIT 0397

I. KUWAIT 0425

J. KUWAIT 0559

K. KUWAIT 0465

L. KUWAIT 0467

M. KUWAIT 0490

Classified By: Ambassador Richard LeBaron for reasons 1.4 (b) and (d)


1. (U) We look forward to your visit to Kuwait. We have
requested meetings with Deputy Prime Minister and Minister of
Foreign Affairs Shaykh Dr. Mohammad Al-Sabah Al-Salem
Al-Sabah, Minister of Energy Shaykh Ahmad Fahd Al-Ahmad
Al-Sabah, and Minister of Finance Bader M. Al-Humaidhi. Your
visit is an excellent opportunity to discuss the Strategic
Investment Initiative, regional security, and energy issues.

Strategic Investment Initiative
--------------


2. (C) The GOK's initial reaction to the Strategic
Investment Initiative (SII) proposal has been positive but
guarded. SII was introduced by Secretary Rice at the Forum
for the Future conference in Bahrain; A/S Wayne and Treasury
DAS Ahmed Saeed briefed GOK and Kuwaiti aid officials during
their follow-up work in Kuwait on January 7, 2006. Kuwaiti
officials are receptive to, and agree with, the USG view that
financial investment will bolster the region's stability and
is crucial. However, the GOK views the four proposed
beneficiaries, i.e., Iraq, Afghanistan, Lebanon, and the
Palestinian Authority (PA),as requiring unique approaches.
The GOK may be hesitant to group them together under one
institutionalized approach, fearing a loss of political and
financial flexibility in promoting its interests. For
example, the GOK does not provide direct aid to the PA
because of concerns about corruption, and prefers to work
through the Islamic Development Bank; they see Lebanon's
political crisis as the major problem there, not economic
need; aid to Afghanistan, they note, is hampered by the GOA's
arrears on an unresolved 1977 loan; and aid to Iraq is
constrained by GOI inefficiency, a poor security environment,
historical suspicion, and previous loan arrears. (Refs A and
B.)

Advanced Energy Initiative
--------------


3. (C) Kuwait's OPEC Governor Ms. Seham Razzouqi told us
recently that Kuwait "did not appreciate" the comments in the
recent SOTU address about U.S. "addiction to oil" and a need
to reduce dependency on oil imports from the Middle East.
She asked for further clarification on these points,
especially how the major producers should interpret the
Advanced Energy Initiative after being encouraged to increase
investment in production capacity over the past year.
Razzouqi's remarks echo comments from other oil sector
participants. (Refs C and D.)

Iraq - Kuwait Relations
--------------


4. (C) Kuwait and Iraq are slowly rebuilding their
diplomatic and economic relationship, in fits and starts.
Kuwait has informally selected the Chief of the Humanitarian
Operations Center (HOC) retired Lt. General Ali Al-Mu,min as
its Ambassador to Iraq but has not yet publicized the
decision or set a date for a mission to open in Iraq. The
Iraqi Charge d,Affaires in Kuwait, Hamid Al-Sharifi,
recently met with the Ambassador to discuss Iraq's debt to
Kuwait and other issues. The Iraqi Embassy in Kuwait is
still under renovation.


5. (C) Iraq owes Kuwait approximately $11 billion in
pre-Gulf War debt. Kuwait has agreed to meet the Paris Club
commitment of 80% debt reduction, but will need legislative
approval for the debt relief, a politically charged issue.
Since the Madrid Conference, Kuwait has also committed $575
million in aid to Iraq, in the form of $135 million in grants

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and $440 million in soft loans, to be administered by the
Kuwait Fund for Arab Economic Development. However, only $15
million has been disbursed so far. (Refs E, F, and B.)

Kuwait and Iran
--------------


6. (C) Kuwait walks a fine line with its large neighbor
across the Gulf, enjoying extensive economic and commercial
ties but remaining wary on the political front. Dr. Yacoub
Al-Hayati, one of Kuwait's five members on the Gulf
Cooperation Council's (GCC) Advisory Committee, told Poloff
in a February 19 meeting the GCC was hesitant to directly
confront Iran over its nuclear program for fear of being
labeled by Iran as pro-Israeli. He also explained that the
association between Israel's nuclear program and Iran's was
"logical" to Arab publics and made it particularly difficult
to publicly criticize Iran's nuclear program without
criticizing Israel's at the same time. According to
Al-Hayati, however, if "directed" by the international
community, the GCC would be more "unveiled" with the Iranian
government in its opposition to Iran's nuclear program. (Refs
G and H.)

Kuwait and the Palestinian Authority
--------------


7. (C) Kuwait's Speaker of Parliament and an MFA official
have both recently told us that Kuwait supports engagement
with Hamas, but the GOK has made no official statement
concerning the continuation of its own aid to the PA. There
are reports that Khaled Meshaal will visit Kuwait soon. (Refs
I and J.)

Kuwait's Recent Succession and New Cabinet
--------------


8. (SBU) After the death of Shaykh Jabir Al-Ahmed Al-Sabah,
there was a brief internal struggle for power among the
Al-Sabah family. The previous Prime Minister, Shaykh Sabah
Al-Ahmed Al-Sabah, became the Amir, after Crown Prince Shaykh
Sa'ad Al-Abdullah Al-Salem Al-Sabah was voted medically unfit
for the position by the National Assembly. Vice President
Cheney visited Kuwait and met with then Prime Minister Shaykh
Sabah on January 17 to convey condolences.


9. (C) Amir Shaykh Sabah approved on February 9 a new
Cabinet, which was particularly notable for the appointment
of a second Shi'a minister and one of the leaders of the
Islamic Constitutional Movement (ICM),the political arm of
the Muslim Brotherhood in Kuwait. The appointments likely
indicate Shaykh Sabah's desire to build unity in the new
Government by co-opting Kuwait's different political
communities. The re-appointments of the Minister of Planning
Dr. Ma'souma Al-Mubarak, Kuwait's first female minister, and
Minister of Information Dr. Anas Al-Rashaid are also
significant and may indicate Shaykh Sabah's support for their
reform policies. While there were a number of changes in the
Cabinet, few are likely to significantly affect Kuwaiti
government (GOK) policy, which will still be directed by
Shaykh Sabah. (Refs K, L and M.)


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Visit Embassy Kuwait's Classified Website:
http://www.state.sgov.gov/p/nea/kuwait/
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LEBARON