FOLLOWING DUBAI PORTS WORLD CONTROVERSY, U.S.

C O N F I D E N T I A L SECTION 01 OF 02 MANAMA 000584

SIPDIS

SIPDIS

NEA/ARP, EB/CBA FOR BBEHRENS
TREASURY FOR U/S QUARLES AND KRAMANATHAN
COMMERCE FOR THOFFMAN AND CLOUSTAUNAU
STATE PASS TO USTR FOR DBELL, JBUNTIN AND AROSENBERG

E.O. 12958: DECL: 04/09/2016
TAGS: ECIN EINV ECON PREL BA
SUBJECT: FOLLOWING DUBAI PORTS WORLD CONTROVERSY, U.S.
MARKETS REMAIN ATTRACTIVE

Classified By: Ambassador William T. Monroe, reasons 1.4 (b) and (d)

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SUMMARY
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1. (C) The Dubai Ports World (DPW) controversy has receded
from the headlines since Economic Development Board (EDB) CEO
Shaikh Mohammed bin Isa Al-Khalifa's reported criticism of
the outcome was published in the Daily Telegraph. In the
early days following DPW's decision to sell its U.S.
operations to a U.S. buyer, some Embassy contacts indicated
that Gulf Arabs might be inclined to reevaluate future
investment in the U.S. However, more recent reactions
indicate that for the present, these reservations appear to
be mitigated by the size, strength and attractiveness of the
U.S. market as an investment destination. End summary.

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DISGRUNTLED GOB TONE SOFTENS
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2. (SBU) EDB CEO Shaikh Mohammed bin Isa Al-Khalifa's
criticism of the DPW outcome was quoted in the Daily
Telegraph immediately following the collapse of the deal.
When asked if it was fair that many were describing the U.S.
reaction as racist he reportedly replied, "Absolutely, but
it's something we can't speak about. I think it was a shame.
The DP World deal was a good deal. But this is politics."
(Comment: Shaikh Mohammed's comments were noteworthy because
they stood in contrast to his normally reserved demeanor.
End Comment.)


3. (C) However, when U.S. Treasury Under Secretary for
Domestic Finance Randal Quarles met Finance Minister Shaikh
Ahmed bin Mohammed Al Khalifa March 17, he told him the
controversy had no impact in Bahrain. "We haven't seen a
ripple effect," he said.

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BUSINESSMEN OFFENDED BUT ULTIMATELY PRACTICAL
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4. (C) Shortly after the controversy erupted, American
Express Middle East Bahrain Vice President and CFO Romesh
Deora told Emboffs that the ports issue seemed to indicate a
double-standard that injured the credibility of the U.S. free
trade message in the region. The "injured credibility" angle
was picked up by Kanoo Travel Executive General Manager
Abdulla Abu Khamseen, who claimed that the DPW issue "tends
to discredit Bahrainis who have been public proponents of
free trade with the U.S. and adds credibility to anti-U.S.
voices in the debate on the merits of free trade."


5. (C) American Express Advisor for Government and Public
Relations Yousif Al Shatter added "Dubai is all about
business, not politics. The Washington uproar hurt the
people in the Arab world who have the least to do with
politics." He said the failed DPW deal left the impression
with Arabs that the U.S. does not want to do business with
the Arabs. The U.S. takes a piece of the Arab cake, but
Arabs can't take a piece of the American cake. However, he
concluded, "Arabs have no choice but to have commercial
relations with U.S. because of the size of the American
economy and its economic power."


6. (C) Gulf International Bank CEO Dr. Khaled Al Fayez
remarked to Emboffs at a more recent event that although the
outcome of the DPW issue had evoked a strong negative
reaction in the Gulf, it was clear that the President and the
Administration had supported the deal strongly. (Note: Gulf
International Bank manages funds valued at USD 17.9 billion.
End note.) "After 9/11," he noted, "private individuals
pulled their money out of the U.S., but (Arab) governments
did not. Governments, however, did not invest new monies
there. By contrast, in the last 18 months, both public and
private funds were returning to U.S. markets. The reason is
that there is so much money in the Gulf now and the only
market that can absorb these funds is the United States." He
added that Arabs invested some funds in local markets and
some in Asian markets, but those markets were unable to
absorb the amount of money that Gulf Arabs now have to
invest. "The U.S. was a logical destination."


MANAMA 00000584 002 OF 002


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COMMENT
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7. (C) The recent conference on "Free Trade In the Middle
East," which Commerce Secretary Gutierrez attended,
highlighted the business opportunities resulting from the FTA
with Bahrain and potentially with other regional countries.
The DPW controversy rubbed some of the luster off that
conference, which had been uniformly praised in Bahrain.
Whether DPW has any long-lasting impact on Arabs' interest in
investing in the U.S. will be determined by what happens
next. As one contact said, "If DPW was an aberration, the
wounds will heal quickly and business will get back to normal
again."
MONROE