SCENESETTER FOR NEA A/S WELCH VISIT TO MUSCAT (AUG

S E C R E T SECTION 01 OF 04 MUSCAT 000786

SIPDIS

NOFORN
SIPDIS

DEPT FOR NEA/FO, NEA/ARP

E.O. 12958: DECL: 08/14/2017
TAGS: PARM PREL KNNP ECON PDEM MU
SUBJECT: SCENESETTER FOR NEA A/S WELCH VISIT TO MUSCAT (AUG
23-25)

REF: A. MUSCAT 780

B. MUSCAT 709

C. MUSCAT 705

D. MUSCAT 700

E. 06 MUSCAT 1670

Classified By: Ambassador Gary A. Grappo, reasons 1.4 b and d

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


1. (C) Embassy Muscat and I warmly welcome your return to
Oman. Omani officials look forward to meeting with you to
receive updates on issues concerning the Israeli-Palestinian
conflict, Iraq, and Iran. While Oman remains a strong friend
and ally and cooperates with us on a wide range of subjects,
our designation of Oman in June as a Tier 3 country for
trafficking-in-persons (TIP) generated a surprising reaction
from both the government and the media. Regional concerns,
however, remain uppermost in the minds of the Omani
leadership. On the domestic front, your visit will present a
good opportunity to urge the Omanis to continue their nascent
efforts to combat TIP. The U.S.-Oman Free Trade Agreement,
once implemented, should boost Oman's ambitious economic
diversification efforts. Oman's economy continues to grow on
the account of high oil prices, albeit at a slower pace than

2006. The government's massive recovery effort from Cyclone
Gonu will likely cost an estimated USD 3-4 billion; on the
positive side, much of this is going back into the domestic
economy, further boosting growth for this year and into 2008.
The government is actively promoting the October Majlis
al-Shura elections, though turnout is expected to be low.
End Summary.


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


2. (C) Regional stability continues to be of primary
importance to the Omani government. Of utmost concern to
them is re-establishing dialogue toward finding a resolution
to the Israeli-Palestinian conflict. Oman's leadership is
generally supportive of the President's proposed Middle East
peace conference, but wants to see inclusive participation.
Characterizing it as an "opportunity that can't be missed,"
the Omani government stands firmly behind the concept of
having broad participation, including Syria, Lebanon, and
other Arab and Muslim countries; to have otherwise would not
fulfill the goal of having a "true" international peace
conference.


3. (C) The Omanis caution that for the conference to be a
success, Israel must be prepared to take risks to support
Palestinian Prime Minister Abu Mazen and show the
Palestinians that they are serious about addressing
Palestinian concerns. In order to achieve tangible progress,
the government advises that participants focus on a
"medium-term package," rather than final status issues. The
Omani government believes that any overarching peace plan
developed would have to address three critical issues: the
right of return, permanent borders and the status of
Jerusalem. Oman most likely would support a plan that
includes the resolution of these three issues, so long as
they are settled through direct negotiation between Israel
and the Palestinians. Oman is "skeptical" of Israeli
intentions, given "contradictory" statements offered by the
Israelis. For example, Minister Responsible for Foreign
Affairs Yusuf bin Alawi recently pointed out that Israeli
Prime Minister Ehud Olmert had expressed notional
"acceptance" of the Arab League Peace Initiative, but then
had publicly rejected the return of Palestinian refugees to
present-day Israel.


Iraq
--------------


4. (C) Omani officials, who cast a wary eye toward events
occurring in Iraq, will want to hear your views on the
situation there, especially on where we may be headed over
the next 3-6 months. 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. Iraqi Prime Minister Nuri al-Maliki led a
10-member delegation to Muscat in April 2007; the Omani
government has completely forgiven Iraqi debt.


5. (C) The Omani government remains very concerned that
Maliki does not have the stature to lead the country

MUSCAT 00000786 002.2 OF 004


effectively over the long-term. Bin Alawi has been critical
of Maliki's ability to reach outside of his power base and
questions whether the Prime Minister has effective control of
Iraqi security forces. In dismissing rumors of former Prime
Minister Iyad Allawi replacing Maliki, bin Alawi acknowledged
that the situation in Iraq "will not change overnight
regardless of who is Prime Minister."


Iran
--------------


6. (S/NF) Oman does not view Iran as an enemy or direct
threat to its national security, as explained more fully in
reftel A. Accordingly, it prefers dialogue and cooperation
on mutual maritime security and other shared interests,
rather than isolating Iran or interfering in its internal
politics. Barring a significant increase in Iran's
provocative rhetoric, acts of belligerency in the region, or
a defiant withdrawal from the non-proliferation treaty, Oman
will likely continue its policy of engagement with Iran and
oppose sanctions against the regime in Tehran. Nevertheless,
the relationship is skin-deep, as Omanis and Iranians, in
general, do not share cultural or religious affinities and
have little in common.


7. (S/NF) Questions persist within the Omani leadership as to
what extent Iran poses a threat. Oman's military and
security services generally have a more pragmatic view of
Iran's threat potential than does the Ministry of Foreign
Affairs (MFA). Mirroring U.S. concerns, leaders in these
institutions worry about growing instability in the region
resulting from Iranian policies, perceived as expansionist.
The MFA, on the other hand, appears more ready to downplay
Iran's destabilizing activities and to dismiss threatening
statements as just political rhetoric intended for domestic
consumption. Eager to ease Iranian suspicions of Muscat's
close security ties with the U.S., MFA officials, including
bin Alawi, emphasize Oman's long-standing good relations with
Iran in public statements and joint press conferences. MFA
officials have also called for the U.S. to integrate Iran
into a regional security framework.


8. (C) Concerning Iran's nuclear program, Oman's leadership
believes that Iran has improved its working relationship with
EU High Representative Javier Solana and with the
International Atomic Energy Agency (IAEA). Bin Alawi advised
that Iran appears to be "more forthcoming" on issues related
to its nuclear activities and "very concerned" about another
UN Security Council sanctions resolution. The Omani
government is skeptical of additional punitive sanctions
meted out by the UN Security Council, which "will only make
hard-liners in Tehran stronger."


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


9. (C) The Omani government reacted strongly to its Tier 3
designation, with some officials questioning our motives for
such harsh criticism of a long-time friend. Nevertheless,
the designation has gotten their attention. Since the
designation, the Omani government has drafted, with the
assistance of a prominent U.S.-based expert, an anti-TIP law
that both criminalizes TIP and establishes a national
committee to coordinate anti-TIP initiatives. The government
plans to hold its first internal anti-TIP workshop in
September. The draft law and formation of a national
committee represent significant steps by the government in
meeting the targets set out in the 60-day action plan. The
government will soon send officials from the Royal Oman
Police and the Ministry of Manpower on a Voluntary Visitors
Program to learn from and observe U.S. colleagues in their
handling of TIP crimes. Nevertheless, considerable work
remains, and you can help reinforce post's engagement on this
subject by stressing that the government's continued
proactive efforts will be needed in order to meet the
requirements listed in the 60-day action plan.


FTA Pending
--------------


10. (C) The implementation of the U.S.-Oman Free Trade
Agreement remains pending. We have made considerable
progress in working through the issues related to
intellectual property, customs, telecommunications,
transparency, and labor, among others. Nevertheless, before
setting an implementation date, we await the government's

MUSCAT 00000786 003 OF 004


promulgation of draft tender, copyright, and industrial
property laws, in addition to its adoption of
telecommunications licensing and customs administration
procedures. The Sultan has a personal interest in the FTA
and has instructed his ministers to work actively for its
success.


11. (U) Oman's pursuit of an FTA is part of its overall plan
to reduce dependence on dwindling petroleum reserves. Oman
continues to follow its 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. Oman actively
seeks private foreign investors, especially in the
industrial, information technology, tourism and higher
education fields.


Gonu Windfall
--------------


12. (C) Under the quiet leadership of the Sultan, the Omani
government is moving quickly to recover from the devastating
impact of Tropical Cyclone Gonu. The official storm tally of
fatalities was 49; but many, including officials, privately
estimate the number of dead and missing at 500-1,000.
Estimates peg the damage caused by the cyclone at USD 3-4
billion. Under the direction of the state-run Oman
Charitable Organization, the government has offered to
replace houses, cars, and household effects of those Omani
nationals whose uninsured property was destroyed by Gonu.
The organization, which has received 59,000 petitions from
affected families so far, estimates cumulative losses to be
USD 300 million. On the positive side, the domestic economy
should receive an added boost from the spending associated
with Gonu. On the downside, the government has claimed most
of the credit in media outlets for its activities,
overshadowing extensive volunteer relief efforts. (Note: A
media contact confided in receiving a directive not to
publish volunteer actions, nor the amount of aid received by
the Sultanate from neighboring GCC countries. End note.)
While undoubtedly beneficial to affected recipients, the
generosity of the government further embeds the image of the
Sultanate as a paternalistic welfare state in the Omani
psyche.


Upcoming Elections
--------------


13. (C) The Omani government has been promoting the upcoming
October 27 elections for the Majlis al-Shura, its lower
consultative chamber. Established in 1991, the Majlis
al-Shura has slowly been given expanded powers, including the
right to review and propose changes to (but not veto)
legislation, question ministers, and examine government
financial plans. The government has sent "awareness teams"
to address Omani employees at government offices and major
private companies to encourage them to register to vote and
run for office. A total of 717 candidates, including 20
women, have been registered. Regulations on official
campaign activities limit outreach to voters, but candidates
often campaign informally at social events and many rely
heavily on tribal connections to win their electoral races.
While press editorials generally have backed the government's
voter registration drive, some articles have surprisingly
questioned the utility of casting a ballot for a body often
seen as failing to seriously benefit citizens. On-line
commentaries and polls indicate that voter apathy continues
to plague the government's efforts to increase participation
in the elections.


Collaboration with Iraqi SU*1-!dHF;;f

14. (S) The Omani government has agreed "in principle" to our
request to accept Iraqi WMD/missile scientists for one-year
fellowships at USG expense, and is strongly considering
participation in the program. Oman would require
"comprehensive background information" on relocation
candidates and emphasized that these individuals should have
"strong professional qualifications" so that they could be
properly placed at a university or other appropriate
institution. Of particular interest to the MFA is placing
qualified individuals at the Middle East Desalination
Research Center (MEDRC),established in 1996 through the
Middle East Peace Process (MEPP) multilateral working group

MUSCAT 00000786 004 OF 004


on water resources. As the only active MEPP Track II
institution in the Gulf, the Omani government attaches great
significance to MEDRC. Bin Alawi may ask you for help in
encouraging other countries, as well as private
donors/foundations, to support MEDRC.
GRAPPO