COMMERCE MINISTER CONCERNED ABOUT FTA, DESCRIBES

C O N F I D E N T I A L SECTION 01 OF 02 MUSCAT 000852

SIPDIS

SIPDIS

STATE FOR NEA/ARP, EB/CBA (WBEHRENS),DRL (JDEMARIA)
STATE PASS USTR FOR J. BUNTIN, A. ROSENBERG
STATE ALSO FOR INR/B
LABOR FOR ILAB (J. SHEA)
USDOC FOR ITA (C. OBERG)

E.O. 12958: DECL: 05/31/2016
TAGS: ETRD PREL ELAB KBCT EPET PINR IR MU
SUBJECT: COMMERCE MINISTER CONCERNED ABOUT FTA, DESCRIBES
IRAN TRADE

REF: MUSCAT 793

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

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


1. (C) Minister of Commerce and Industry Maqbool Sultan, long
impatient over the slow pace of Free Trade Agreement
ratification in Congress, claims he has abandoned hope of any
progress and is contemplating suspending the work of Oman's
expensive advisers in Washington until prospects improve.
The Minister says embarrassment over the FTA is keeping
high-level Omanis from the upcoming U.S.-Arab Economic Forum
in Houston, and puts in limbo Omani participation in a
USG-funded MEFTA trade conference in London in September. He
reports that Oman nevertheless stands by its labor reform
commitments. The Minister also discussed prospects for
increased Omani trade and investment with Iran, and the
Sultanate's need for additional sources of natural gas. End
summary.

--------------
Caught in Partisan Crossfire
--------------


2. (C) In a May 27 meeting with the Ambassador, Minister of
Commerce and Industry Maqbool Sultan despaired over continued
partisan sparring in Congress over the U.S.-Oman Free Trade
Agreement (FTA),saying he has "lost hope" for ratification.
When the Ambassador noted that the U.S. Treasury Department
had finally agreed to remove Oman from the list of states
supporting the Arab League boycott of Israel, the Minister
tersely replied that that step was several years overdue, and
in any event, the boycott never became an issue on the Hill.


3. (C) The Minister said he fully realized that labor rights
in Oman was simply the pretext for partisan skirmishing in
the House Ways and Means Committee in this mid-term election
year. While he claimed not to be taking personal offense
over congressional concerns about "slave labor" in Oman, he
was alarmed at the daily cost to the Sultanate in legal and
consultancy fees for every hour of congressional delay. The
Minister said he was seriously considering stopping payment
for further such services, believing that Oman's efforts to
respond to Congressional ultimatums merely encouraged
additional demands. If the battles in Congress are strictly
partisan, he said, Oman should step back and wait for the
fighting to subside.

--------------
No Time to Trumpet FTA at International Fora
--------------


4. (SBU) The Ambassador encouraged high-level Omani
attendance at the June 26-28 U.S.-Arab Economic Forum in
Houston, saying it would be an ideal opportunity for Oman to
market itself and the FTA to top business leaders. The
Minister reiterated his earlier indications that he could not
attend, citing the timeframe as a rare opportunity for him to
visit his daughter during her school break in Australia.


5. (C) The Minister added that he would not have attended
regardless, given the embarrassing state of the FTA
non-ratification. He said he refuses even to grant press
interviews on the subject, since any sign of Omani
anticipation of the FTA seems to produce further delays in
Congress. The Minister affirmed his personal belief in the
significant benefits to Oman of the U.S. FTA, and said he
fought hard within the Omani government on its behalf. "We
saw this as a way to transform our economy. But now I'm
helpless. I can't do anything."


6. (SBU) As for attending a State Department-sponsored MEFTA
Trade and Investment Conference in London on September 19,
the Minister said his calendar was free and that he is
personally interested in attending, but would not formally
commit before FTA ratification. He noted that the Omani
ambassador in Washington had reported to him that House
Democrats suggest delaying ratification until after the
October 31 deadline Oman had offered by which to adopt a host
of labor reforms. The Minister concluded that such a delay
might postpone the FTA vote until 2007.
--------------
Standing By Labor Reform Commitments
--------------


7. (SBU) The Minister affirmed that Oman was well on-track to
meeting its labor reform commitments (made not only to
Congress but also to the International Labor Organization)
and stands firmly by its deadline. (Note: The Minister of
Manpower showed tangible evidence of labor reform progress in
a May 31 meeting with Ambassador, septel. End note.) He
said Oman's reform efforts will be far simpler than has been
the case in Bahrain, assuring the Ambassador that all
relevant Omani ministers were fully on board with the reform,
and that the Sultan will be far more accommodating than the
Bahraini parliament has been.

--------------
Prospects for Trade with Iran
--------------


8. (SBU) In response to the Ambassador's query, the Commerce
Minister described Oman-Iran trade relations as good but
modest in volume. As chairman of the Oman-Iran Joint
Committee on Trade, he said he had traveled to Iran in
February for talks. Oman's Musandam Peninsula is the primary
beneficiary of bilateral trade, being a re-export center to
Iran for goods mostly purchased in the UAE. Even that trade,
however, is well below the levels of a few years ago after
the UAE Emirate of Ras al-Khaimah made upgrades to its port
facilities. He noted that Musandam residents are complaining
to Muscat for similar port upgrades to better compete.


9. (SBU) The Minister said Iran's trade focus is largely on
the UAE, Qatar, and Bahrain. Oman is in talks with Iran on
an ethylene dichloride project (with Iran to supply the
ethylene),but the deal is still under study. Oman is also
deeply interested in buying Iranian gas, to be delivered by
pipeline into Oman's growing industrial port of Sohar. The
Minister revealed that Oman's current gas imports, combined
with domestic production, are still inadequate for its needs,
but that Oman has yet to convince either Qatar or the UAE's
Dolphin project to increase its supplies. The ideal solution
would be for Oman to increase its own production, but the
Minister evinced little confidence in that prospect. He said
Oman was also interested in finding investment projects in
Iran, but offered no examples.

--------------
Comment
--------------


10. (C) While clearly frustrated by the slow FTA progress in
Congress, the often petulant Minister is not about to give up
on something so important to the country. He doubtlessly
expended personal capital to move the FTA through the Omani
bureaucracy and approved compromises not previously
anticipated, and is eager to receive his laurels. So far,
however, we have not heard such complaints from others,
either unaware of Congress' activities or simply more patient.
GRAPPO