SCENESETTER FOR VISIT OF NEA A/S WELCH TO MUSCAT

S E C R E T SECTION 01 OF 03 MUSCAT 001670

SIPDIS

NOFORN
SIPDIS

E.O. 12958: DECL: 12/06/2016
TAGS: PARM PREL PTER KDEM KMPI KNNP KWMN SMIG ECON
MUNC, MU
SUBJECT: SCENESETTER FOR VISIT OF NEA A/S WELCH TO MUSCAT
(DECEMBER 11-13)

REF: A. MUSCAT 1641 (NOTAL)

B. MUSCAT 1630

C. MUSCAT 1628

D. MUSCAT 1599

E. MUSCAT 1514

Classified By: Ambassador Gary A. Grappo for Reasons 1.4 (b, d)

Summary
--------------


1. (C) Embassy Muscat and I warmly welcome your visit to
Oman. Oman remains a dependable friend and ally and
cooperates with us on a wide range of subjects, although it
prefers to maintain a low profile. Regional threat issues
are a prominent concern for the Omani leadership; however,
Oman's perspective on the threat posed by Iran often is
different than that of the USG and even its GCC partners.
Omani officials and the Sultan in particular, will be eager
to hear your views on Iran and other key regional issues
including Iraq, Lebanon and the Israeli-Palestinian conflict.
Oman continues to be one of the most stable countries in the
region. Efforts to increase citizen participation in
government continue, but at a slow pace. Fueled by high oil
prices, Oman is enjoying solid economic growth and a healthy
budget surplus. The U.S.-Oman Free Trade Agreement should
give a boost to Oman's ambitious economic diversification
efforts. Your visit will present an opportunity to help prod
the Omanis to move forward with efforts to combat trafficking
in persons, and to improve their cooperation on MEPI programs
outside the economic sphere. End Summary.

Regional Security Issues
--------------


2. (C) While neither the political nor military leadership
wants to describe Iran as a threat (they are quick to remind
us that "Iran is not an enemy"),Omani officials have
indicated -- including during Gulf Security Dialogue meetings
in October (ref E) -- that they are very concerned with
Iran's nuclear ambitions. They realize, for example, that a
nuclear-capable Iran would likely spur Saudi Arabia, Egypt
and other countries to pursue their own programs. Yet Oman
is determined to protect its good relations with Iran, and
continues to advocate dialogue, rather than confrontation, to
discourage Tehran's nuclear activities. Senior Omanis advise
us that bringing UN Security Council pressure against Iran
may strengthen hard-line attitudes while closing the door to
IAEA inspections. Nevertheless, Oman may slowly be coming
around to viewing sanctions as the only recourse to halt
Iran's nuclear weapons ambitions. Minister bin Alawi has
previously urged the Iranians to adopt a more cooperative
approach.


3. (C) The Omani leadership remains concerned with Iraq's
future and will want to hear your views on the situation
there. More importantly, they will likely press you on what
new directions the U.S. may take in Iraq in the wake of the
November election for the U.S. Congress and the release of
the Iraq Study Group report. Though not a major financial
donor (Oman pledged USD 3 million at the Madrid conference),
Oman has supported our efforts to promote security and
political stability in Iraq. Iraq's Foreign Minister met
with his Omani counterpart in Muscat on November 14, 2005;
the Omani government has completely forgiven Iraqi debt.


4. (C) Omani officials are also troubled by events in
Lebanon and a perceived lack of movement in the
Israeli-Palestinian peace process. The same holds true for
Afghanistan/Pakistan, especially as Oman is seeing an
increase in illegal smuggling of people (mostly migrant
workers) and drugs coming from Afghanistan/Pakistan, often
with Iranian involvement. Oman closed the Israeli Trade
Mission in Muscat in 2000 during the Second Intifada, but
supports the Roadmap process and still maintains good
communications with Israeli officials.


5. (C) Oman and Saudi Arabia are the only GCC states that
have not yet signed NATO's Istanbul Cooperative Initiative
(ICI). Omani officials in Brussels, however, maintain
regular - though infrequent - contact with NATO International
Staff members, and representatives from Oman will participate
in a NATO-ICI conference in Kuwait City on December 10-11.
Minister bin Alawi told the Ambassador December 6 that Oman
remains interested in ICI events and activities and would
participate &as appropriate,8 but is not yet prepared to
join formally.

Counter-Terrorism and Non-Proliferation
--------------

MUSCAT 00001670 002 OF 003




6. (S/NF) The Sultanate has publicly condemned several
high-profile terrorist attacks in the region, while stressing
religious tolerance at home. The Omani security and
intelligence services are professional, well-funded and
motivated. While there have been no reported incidents of
international or domestic terrorism in Oman, there were
arrests of an Ibadi extremist group in 2005, members of which
included military, clerical, and private citizens. One of
those arrested was previously convicted in the attempted
murder of two British nationals in two separate incidents,
one in 2003 and one in 2004. Also in 2005, two Omani
citizens accused of participation in extremist activities
were repatriated from abroad, one of whom was arrested while
attempting to conduct a suicide operation against coalition
forces.


7. (S/NF) While Oman is continually challenged by the threat
from extremists hiding among the significant and increasing
number of economic migrants and narcotic smugglers that pass
through Gulf countries, including Oman, there is little
evidence that al-Qa'ida or other terrorist organizations
transit Oman in significant numbers. Nevertheless, Oman with
its relatively open and welcoming society and increasing
numbers of Western tourists, remains vulnerable to terrorist
attacks. Confident in its security forces and procedures,
however, Omani officials naively continue to argue, "It can't
happen here."


8. (C) Oman is an active participant in two port/cargo
security programs sponsored by the USG: the Container
Security Initiative (administered by the Department of
Homeland Security),which pre-screens containerized cargo
being shipped to the U.S.; and the Department of Energy's
MegaPorts Initiative, which is working to install equipment
at Omani ports to identify nuclear material. The Omani
government has assured us of its adherence to the principles
of the Proliferation Security Initiative (PSI),and sent
observers to the PSI exercise "Anatolia Sun" in May. It
declined, however, to participate in "Leading Edge" in
October, citing late notice and preparations for its upcoming
GCC military exercises, and is reluctant to publicize its
support for PSI.

Economic Highlights
--------------


9. (U) Oman's economy is based primarily on petroleum and
natural gas, which are expected to account for 81% of the
government's revenue in calendar year 2006. High oil prices
in 2005 led to a record Omani budget surplus of USD 3.8
billion and GDP growth of 21.7 percent, despite a steady
decline in oil production since 2001. Similar performance is
expected this year. Oman actively seeks private foreign
investors, especially in the industrial, information
technology, tourism and higher education fields.


10. (C) The U.S.-Oman Free Trade Agreement was ratified by
the U.S. Congress earlier this year and signed by the
President on September 26 and by the Sultan days afterwards.
The target date for implementation is January 1, 2007,
although this will likely slip. The Sultan has a personal
interest in the FTA and has instructed his ministers to
actively work for its success. To reduce dependence on
dwindling petroleum reserves, Oman has embarked on an
ambitious industrialization and economic diversification
program. Several billion dollars of U.S. investment have
poured into Oman in the past few years, including from Dow
Chemical (petrochemical complex),Bechtel (aluminum smelter)
and Occidental Petroleum.

Democratic Reform/MEPI
--------------


11. (C) Oman recently commemorated the 25th anniversary of
the establishment of its Consultative Council. It has since
evolved into a bicameral body comprised of the Majlis
al-Doula (appointed by the Sultan) and the directly elected
Majlis al-Shura. The Majlis al-Shura has slowly been given
expanded powers since its creation in 1991, including the
right to review and propose changes to (but not veto)
legislation, question ministers, and examine government
financial plans. The Sultan himself is very interested in
promoting citizen participation in government and creating
transparent institutions that operate under the rule of law
(ref A). Government officials contend that Oman's course of
gradual democratic opening has helped preserve the country's
stability and internal security - in marked contrast to
events in some neighboring states - and accordingly appear to
have no plans to accelerate the pace of political reform

MUSCAT 00001670 003 OF 003


(refs B,C).


12. (C) Oman cooperates with post on several MEPI-funded
programs. The Omani government is particularly supportive of
MEPI projects in the economic sphere, such as workshops and
training seminars to help Oman prepare for implementation of
the U.S.-Oman FTA. Recently, however, the Omani government
has put the brakes on several proposed activities. For
example, the Council of Ministers rejected a women's
empowerment program that had been designed with the
enthusiastic backing of the Minister for Social Development.
A workshop for civil society organizations, and an
out-of-country seminar for Omani judicial officials, had to
be postponed at the last minute when the Foreign Ministry
failed to respond in a timely fashion to written requests for
approval. Foreign Ministry officials have indicated that
submitting an &annual work plan8 of proposed MEPI
activities for review by the Council of Ministers could
prevent such problems in the future. Raising this subject
with Minister bin Alawi could help emphasize the importance
of MEPI to the USG and facilitate improved cooperation.

Trafficking in Persons
--------------


13. (C) Oman is currently on the Tier 2 Watch List with
regards to trafficking in persons (TIP),the most significant
current irritant in our bilateral relationship. The
Ambassador and emboffs have discussed this issue on numerous
occasions with senior Omani officials, and even prepared and
distributed to relevant contacts a suggested action plan, to
help Oman improve its anti-TIP regime. However, while the
government firmly condemns trafficking, it has taken only
limited steps to strengthen its efforts to combat TIP and has
so far not followed our action plan recommendations (ref D).
This foot dragging is likely due in large part to the
government's failure to recognize the possible extent of
trafficking involving Oman, as interlocutors often claim that
migrant workers face fewer problems and enjoy better
conditions in Oman than elsewhere in the Gulf. You can help
reinforce post's engagement on this subject by stressing the
USG commitment to fight TIP in the region and noting that
inaction could unfortunately lead to Oman being placed in
Tier 3.

MEDRC
--------------


14. (C) Muscat is the home of the Middle East Desalination
Research Center (MEDRC),established in 1996 through the
Middle East Peace Process multilateral working group on water
resources. As the only active MEPP Track II institution in
the Gulf, the Omani government attaches great significance to
MEDRC and is very appreciative of the Secretary's recent
letter of support to help commemorate its 20th anniversary.
Oman remains concerned, however, over funding for MEDRC.
Minister bin Alawi recently informed the Ambassador that
current member nations will have to dig deeper in their
pockets to keep the institution afloat if new members are not
found to provide an infusion of cash. The Omani government
sent a delegation to Berlin in August to lobby for German
participation; the UAE has reportedly expressed &some
interest8 in joining MEDRC as well. Minister bin Alawi may
ask you for help in encouraging other countries, as well as
private donors/foundations, to support MEDRC.
GRAPPO