A/S WELCH AND KHALDOON AL-MUBARAK DISCUSS INVESTMENTS, IRAN

C O N F I D E N T I A L SECTION 01 OF 02 ABU DHABI 000535

SIPDIS

DEPT FOR NEA/ARP, EEB/IFD/OMA, EB/ESC/IEC/EPC
TREASURY FOR ROSE
SIPDIS

E.O. 12958: DECL 4/22/2018
TAGS: EINV ECON PREL EPET ENRG IR AE
SUBJECT: A/S WELCH AND KHALDOON AL-MUBARAK DISCUSS INVESTMENTS, IRAN
AND LIBYA

CLASSIFIED BY MARTIN QUINN, CHARGE D'AFFARIES A.I. FOR REASONS 1.4 (B
& D).


1. (C) Summary: On April 20, Mubadala CEO Khaldoon Al-Mubarak told
A/S Welch that he was seeing a slightly improved political risk for
investment in the U.S. than he had in the summer and that ADIA's work
with the U.S. Treasury and Singapore to develop best practices for
Sovereign Wealth Funds was a good step. Despite that, he stressed
that he was still concerned about U.S. protectionism. He noted that
Libya presented a good investment opportunity given its resources and
complete underdevelopment. With regard to Iran, Al-Mubarak stressed
that Iran was a bad place to invest and stated that he did not
believe stories saying that the Iran-Dana Gas natural gas deal was
moving toward a successful conclusion. He found the investment
opportunities in Libya attractive, however. Charge and Econchief
also attended the meeting. End Summary.


2. (C) Welch asked Al-Mubarak for his assessment of the U.S.
investment climate and for his thoughts with regard to the issue of
Sovereign Wealth Funds (SWF). Al-Mubarak stated that Abu Dhabi's
cooperation with Treasury and with Singapore developing policy
principles for SWFs and investment recipient nations had been the
right thing to do. Although the situation had improved since summer
2007, he opined that the problems facing foreign investors in the
U.S. were "far from over." Mubadala was taking a cautious approach
to U.S. investments both because of the difficult economic climate
and for political risk reasons, and had no major U.S. transactions in

2008. He did note that Mubadala had not found any commercially
viable U.S. investments in 2008 that it had shied away from for
political risk reasons.


3. (C) Al-Mubarak explained that Mubadala's definition of risk was a
subjective one related to the potential damage to the company's
reputation or image or that an investment would be
"over-politicized." In response to a question by A/S Welch about the
types of problems UAE investors face, he raised Mubadala's non-voting
stake in Carlyle. According to Al-Mubarak, opponents to a proposed
Carlyle investment in a U.S. insurance company were focusing on Arab
ownership as a potential weak point to exploit "national security"
concerns. Al-Mubarak stressed that, even with the ongoing debates in
Europe over SWF investment, he did not see the same level of
protectionism.
Al-Mubarak noted his understanding that the upcoming Presidential
elections made it an "unstable environment" for foreign investment.
His concern, however, was whether the atmosphere of protectionism
would continue into the next administration.


4. (C) With regard to the strength of the U.S. economy in general,
Al-Mubarak said he had no doubt that both the economy and the dollar
would rebound at some point. His inclination was to "duck" for a
year and not overreact. He extended his analysis to the
dirham-dollar peg, noting that a broader macro economic view allowed
the UAEG to resist short term pressure to de-peg.


5. (C) Econchief took advantage of the meeting to ask about press
reporting that the Iranians and Dana Gas were finally gong to
conclude their natural gas deal and to remind Al-Mubarak about
long-standing USG concerns about the deal. Al-Mubarak stated that he
did not see any near term prospects for the deal to become
operational, not least because it did not appear as if Iran had
invested in the necessary infrastructure on its side of the border.
From a purely economic perspective, he argued, buying gas from Iran
made sense. However, the track record for this deal was not good.
Dana gas had sunk millions of dollars into infrastructure on the UAE
side of the border, based on a certain price for the natural gas.
The Iranians, however, had repudiated their original agreement and
were demanding more money for the gas. Al-Mubarak noted that the
Iranians had never stuck to any of their natural gas contracts and
were facing huge internal power demands and an active debate about
allowing any external gas sales. In response to A/S Welch's question
about UAE economic relations with Iran, Al-Mubarak stated that trade
relations were good; however, he thought that there was little UAE
capital invested in Iran. The Iranian investment climate was poor,
including limits on the repatriation of capital, and the Iranian
ability to unilaterally change policies was also a negative, he said.


6. (C) A/S Welch and Al-Mubarak briefly discussed Libya. Welch noted
that the Libyans were facing problems in the U.S. and were divesting
from their U.S. investments. He asked whether the Libyan problems
were having an impact on UAE willingness to invest in the U.S.
Al-Mubarak stated that Libya's situation did not impact Abu Dhabi,
but he could see that it might affect other Arab investors. He said
that Mubadala viewed Libya as an attractive investment destination,
given its natural resources and complete lack of infrastructure. He
gave his opinion that Colonel Qaddafi still was the ultimate decision
maker in the country and that he would periodically empower then
dis-empower other actors in the country. He noted that during an
official visit by Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed
Al-Nahyan (MbZ) to Libya, MbZ had met with Qaddafi. The UAEG

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delegation had been about eight people, he noted, but Qaddafi met
them alone, "without even a note-taker." Qaddafi's son Saif had
escorted the delegation to the meeting, but did not attend.


7. (U) A/S Welch did not have an opportunity to clear this message.


Quinn