INCREASED COSTS AND DELAYS FACTORED IN TO U.S.

C O N F I D E N T I A L ABU DHABI 001827

SIPDIS

SIPDIS

TREASURY FOR U/S MCCORMICK, A/S LOWREY, DAS SAEED, DAS
SOBEL, DAS DALY, KMATHIASEN, JROSE, RKAPROTH, MTURNER
STATE FOR NEA/ARP, EB/IFD/OMA
NSC FOR NRAMCHAND

E.O. 12958: DECL: 10/26/2017
TAGS: ECON EFIN EINV AE
SUBJECT: INCREASED COSTS AND DELAYS FACTORED IN TO U.S.
INVESTMENTS, ACCORDING TO ABU DHABI INVESTMENT FIRM

REF: REF ABU DHABI 1696

Classified By: Ambassador Michele J. Sison, for reasons 1.4 b and d.

This cable contains business proprietary information.


1. (C) Summary. On 25 October 2007, Treasury Attach Matthew
Epstein and Econ Chief Oliver John met with Mubadala Chief
Operating Officer (COO) Walid al Mokarrab and Executive
Affairs Authority Director of Strategic Communications Simon
Pearce. Treasury Attach and Econ Chief stressed USG
commitment to open investment, per recent and upcoming
Treasury Department visits to UAE. Mubadala COO stated that
the U.S. would continue to receive the majority of Abu
Dhabi's overseas investment due to the size and depth of the
U.S. economy. However, he expressed frustration at the rising
political climate of protectionism in the U.S., stating that
additional time and costs are factored in to every U.S. deal.
End Summary.


2. (C) On 25 October 2007, Treasury Attach Matthew Epstein
and Econ Chief Oliver John met with Mubadala Chief Operating
Officer Walid al Mokarrab and Executive Affairs Authority
Director of Strategic Communications Simon Pearce. Treasury
Attach and Econ Chief stressed USG commitment to open
investment, as discussed during Treasury DAS Ahmed Saeed's
September 2007 visit to UAE, and will be discussed during U/S
McCormick's upcoming October 2007 visit. Mubadala COO stated
that the U.S. would continue to receive the majority of Abu
Dhabi's overseas investment due to the size and depth of the
U.S. economy. However, he expressed frustration at the rising
political climate of protectionism in the U.S.


3. (C) Al-Mokarrab explained that Mubadala now factors in an
additional political risk premium (up to 15%) in costs to
their pre-capitalized deal budget for every U.S. transaction.
Providing detail, Pearce described a process of designing and
implementing detailed strategic political outreach and public
relations plans for every U.S. deal to manage the risk of
possible blowback. Pearce believed that this planning effort
and "micro-attention" to detail contributed to the success to
date of the Carlyle transaction, and that these lessons will
be carried forward to future transactions. Pearce, labeling
this process a strategic "machine," informed that he had no
similar machine for European deals, as the political and
investment climate in Europe did not require such an effort
by Mubadala. Pearce regarded the CFIUS process as "smooth"
and not problematic in the context of closing deals.


4. (C) On the topic of sovereign wealth funds and the recent
statements from Secretary Paulson and the G-7, Pearce
expressed reservation about being "put into a barrel for
everyone to shoot at." Treasury Attach and Econ Chief
reiterated that best practices could be a means to
distinguish responsible investment actors, benefiting well
run and established funds such as Mubadala. While Pearce
admitted that he was "paid to worry" about such issues,
Mubadala COO did not seem to express an opinion on the value
of a voluntary, IMF-lead best practices exercise, while he
did inquire as to ADIA's response to the proposal.


5. (C) Underlining the commitment to continued investment in
the U.S. market, Mubadala COO advised that the Abu
Dhabi-based investment firm would be announcing several U.S.
transactions in the coming weeks before Christmas. Mubadala
COO and Pearce thanked Treasury Attach and Econ Chief for
the discussion and looked forward to further engagement with
Treasury Under Secretary David McCormick.
SISON