Identifier
Created
Classification
Origin
08MUSCAT3
2008-01-02 12:57:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Muscat
Cable title:  

SCENESETTER FOR CODEL PRICE'S VISIT TO OMAN

Tags:  OREP PGOV PREL PTER MU 
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VZCZCXRO3205
PP RUEHDE RUEHDIR
DE RUEHMS #0003/01 0021257
ZNR UUUUU ZZH
P 021257Z JAN 08
FM AMEMBASSY MUSCAT
TO RUEHC/SECSTATE WASHDC PRIORITY 9107
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE
UNCLAS SECTION 01 OF 03 MUSCAT 000003 

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR NEA/ARP
H PASS
FROM AMBASSADOR GRAPPO TO REPRESENTATIVE DAVID PRICE

E.O. 12958: N/A
TAGS: OREP PGOV PREL PTER MU
SUBJECT: SCENESETTER FOR CODEL PRICE'S VISIT TO OMAN

REF: STATE 169292

UNCLAS SECTION 01 OF 03 MUSCAT 000003

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR NEA/ARP
H PASS
FROM AMBASSADOR GRAPPO TO REPRESENTATIVE DAVID PRICE

E.O. 12958: N/A
TAGS: OREP PGOV PREL PTER MU
SUBJECT: SCENESETTER FOR CODEL PRICE'S VISIT TO OMAN

REF: STATE 169292


1. (SBU) Embassy Muscat and I warmly welcome you and your
delegation to Oman. We look forward to your arrival on
January 7 to tour the Port of Salalah and discuss
international trade security in the context of our overall
bilateral relationship with Oman. In order to fulfill the
objectives of your visit, we are seeking an audience with
Sultan Qaboos bin Said, Oman's head of state, as well as
meetings with Yousef bin Alawi, Minister Responsible for
Foreign Affairs, and Malik al-Ma'amari, Inspector General of
the Royal Oman Police. End Summary.

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Strong Bilateral Relationship
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2. (SBU) We enjoy a strong bilateral relationship with Oman,
one that officially dates back to 1833 with the signing of
the Treaty of Amity and Commerce. Under the leadership of
Sultan Qaboos bin Said, Oman has proven to be a stable and
reliable ally in a volatile part of the world. Since taking
over the government in 1970, the Sultan has been able to gain
and keep the allegiance of tribal groups and religious sects;
maintain amicable relations with neighbors; control religious
fundamentalism; and guide the country through conservative
but consistent economic growth and political reform. With
Oman's decidedly pro-West government and its strategic
location presiding over the shipping lanes of the Strait of
Hormuz, Oman likely will remain a key regional ally.

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Military Cooperation
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3. (SBU) Military cooperation forms a cornerstone of our
relationship with Oman, as evidenced by our long-standing
base access agreement with Oman signed in 1980. Oman has
supported all of our military requests, including substantial
basing and access needs during the height of Operation
Enduring Freedom, Operation Iraqi Freedom, and Desert Storm.
Its location at the Strait of Hormuz makes it a natural hub
outside of the Gulf to support current or future operations
in Afghanistan, Iran, Iraq, the Horn of Africa and across the
Indian Ocean rim.


4. (SBU) Our engagement with the Omani military continues to
grow and deepen, especially with the presence of our War
Reserve Materiel (WRM) sites, the recent purchase of 12
F-16s, and greater interest in cooperating on border security
matters. Oman's use of Foreign Military Financing (FMF) and
Foreign Military Sales (FMS) has proven effective, and the
military smoothly integrates new equipment into its
operations. Oman's FMF budget has been in decline, however,
with FY08 figures equaling $10.1 million, down from $19.8
million in FY05. Oman has made good use of its approximately
$1.08 million IMET allocation for U.S. military training, and
its graduates have risen to high positions within Oman's
armed forces.

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Trade and Border Security
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5. (SBU) We are working closely with Oman to strengthen
security at its ports and along its borders to prevent the
proliferation of nuclear and other weapons of mass
destruction (WMD) or their components. The Port of Salalah -
one of the busiest transshipment ports in the world - has
been a primary focus of these efforts. The port is
participating in the Department of Energy's Megaports program
and is a pilot port in the Secure Freight Initiative (SFI).
The Port of Salalah hosts three Customs and Border Protection
(CBP) targetters, who have been working closely with Royal
Oman Police (ROP) Customs since 2005 under the auspices of
the Container Security Initiative (CSI). Through ongoing
technical and financial assistance from the U.S. Departments
of Energy and Homeland Security, ROP Customs soon will be
able to scan targeted containers through an Integrated
Container Inspection System (ICIS) lane utilizing both x-ray
and radiation detection equipment.


6. (SBU) While Oman is a willing participant in
U.S.-sponsored programs to secure international trade,
contacts at Port of Salalah are concerned that the new 100%
scanning requirement for U.S.-bound cargo under the 9/11 Act
will adversely affect trade at the port by lowering
productivity, and - if not mandated worldwide - ultimately

MUSCAT 00000003 002 OF 003


damage Salalah's ability to compete with other ports in the
region. Port officials hope that the U.S. will use lessons
learned from the SFI pilot to tailor U.S. security
requirements to the needs of major transshipment hubs.


7. (SBU) Oman also has received equipment and technical
assistance to strengthen its export control regimes under the
U.S. Department of State's Export Control and Related Border
Security (EXBS) program. In 2007, EXBS provided the ROP with
ground sensors to track movement of people and vehicles
across its border with Yemen. EXBS trainers also conducted
workshops to encourage policy makers to pass export control
legislation and adopt an export control list for sensitive
and dual-use items. Through EXBS, we also encourage Oman to
fully meet its commitments under United Nations Security
Council Resolution 1540 to prevent the proliferation of
chemical, nuclear and biological weapons.

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Regional Issues
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8. (SBU) A traditionally staunch supporter of the Middle East
peace process, Oman takes an objective, pragmatic and
non-confrontational approach to pressing regional security
issues. On Iran, Oman maintains a cordial, although mostly
non-substantive, relationship with Tehran. The Sultanate
prefers dialogue and cooperation on maritime security and
other shared interests - including the possible importation
of Iranian gas - rather than isolating the regime in Tehran.
The Omanis are concerned about the impact of Iran's nuclear
enrichment program on the region's stability, but believe
that harsher economic sanctions against Iran would not have a
strong deterrent effect, as it might constrain diplomatic
maneuverability in the long-term.


9. (SBU) Oman remains generally supportive of our efforts to
promote security and political stability in Iraq, but is very
concerned about the ability of Iraq's leadership to overcome
allegiance to particular factions/groups in meeting this
long-term goal. Like its neighbors, Oman is worried that
extremism and sectarianism in Iraq could spill over into the
region. Oman is not a source or transit country for either
illicit funds or foreign fighters destined for Iraq.


10. (SBU) The Israeli-Palestinian conflict continues to be a
source of high-level interest, and the Omani government
supported the President's November 26-27 Middle East peace
conference in Annapolis. On Lebanon, Oman supports the
government of PM Siniora, who met with the Sultan in January
2007, but hopes that the different Lebanese factions can
reach a consensus to resolve the current political crisis
there.


11. (SBU) Oman has been free from terrorist activity and
works closely with the USG on terrorism-related issues. It
is not a regional or offshore financial center; accordingly,
it does not have a significant money laundering problem. Its
modest banking sector is closely supervised by the Central
Bank of Oman, and the government has issued a series of
decrees to combat money laundering.

- - - - - - - - -
Economic Overview
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12. (SBU) Oman's economy is based primarily on revenues
derived from petroleum and natural gas, which are expected to
account for 79% of the government's income in calendar year

2007. Oman's proven recoverable oil reserves are estimated at
4.8 billion barrels, though Ministry of Oil and Gas officials
are optimistic that over 35 billion barrels remain to be
recovered. The main oil producer is the government
majority-owned Petroleum Development Oman (PDO, in
partnership with Royal Dutch Shell),which controls 90
percent of reserves and the lion's share of total production.
U.S.-owned Occidental Petroleum is the second largest
producer in Oman, and has committed to investing more than $3
billion over the next several years in enhanced oil recovery
efforts in mature fields.


13. (SBU) High oil prices over the past several years have
led to solid Omani budget surpluses and GDP growth, despite
declining oil production. Oman's economy, with GDP estimated
at $35.5 billion, grew over 15% in 2006, and is on track to
gain more than 11% in 2007. The government planned on
spending approximately $4 billion more than in 2006 on
investment-related expenditures, with $1.5 billion allocated

MUSCAT 00000003 003 OF 003


to enhancing oil production capabilities and $1 billion on
gas production capabilities. The hefty investment budget
reflects continued government emphasis on reversing declining
oil production rates, locating additional pockets of gas
reserves, and promoting diversification of the economy.
Under the government's seventh Five-Year Plan, to cover
2006-2010, the average investment rate over the five-year
period is estimated to be 24% of GDP. Oman also is using its
budget surpluses and oil revenues to strengthen the economy
in the long-run by shoring up its 21-year old pension fund,
reducing the debt, and strengthening a number of reserve
funds.

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Free Trade Agreement
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14. (SBU) On October 2006, Oman became the fourth Arab
country to sign a Free Trade Agreement with the U.S.
Implementation of the Agreement, however, still is pending
the resolution of issues related to intellectual property,
customs, telecommunications, and transparency, among others.
The Sultan has a personal interest in the FTA and has
instructed his ministers to work actively for its success.
The FTA supports Oman's efforts to diversify its economy, and
Oman hopes that the Agreement will bring increased U.S.
private investment to industry, telecommunications, tourism
and high education. Oman is planning a trade and investment
promotional tour of the U.S. in 2008, with proposed stops in
New York, Chicago, Houston, Los Angeles, and Washington.
Oman also is using the promise of duty-free access to the
U.S. market as a major selling point to attract investment
from other countries in the region.


15. (SBU) In order to comply with the FTA's labor provisions,
the government introduced sweeping reforms to its 2003 labor
law. Under these reforms, workers now are allowed to
organize unions, conduct strikes, and engage in collective
bargaining - freedoms that were unheard of less than two
years ago. Due to the quick pace of reform, however,
government, business and labor representatives are uncertain
about their future relationships with each other. Effective
implementation of labor reforms and the development of labor
unions are becoming major components of our bilateral
assistance under the Middle East Partnership Initiative
(MEPI).

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Hot Button Issue
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16. (SBU) While our relationship is generally free of
bilateral irritants, the Omani government reacted strongly to
its Tier 3 designation on the State Department's annual
Trafficking in Persons (TIP) report. Nevertheless, the
designation has gotten their attention. Since the
designation, the 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. In December 2007, the
Ministry of Foreign Affairs hosted an inter-ministerial
workshop to review and critique the draft law, and contacts
hope that the Council of Ministries will approve the law in
early 2008. If passed, the law and formation of a national
committee represent significant steps by the government in
addressing our concerns.
GRAPPO