SCENESETTER FOR THE DEPUTY SECRETARY'S VISIT TO

S E C R E T SECTION 01 OF 04 MUSCAT 000729

SIPDIS

E.O. 12958: DECL: 10/16/2018
TAGS: PREL PTER ECON ENRG ETRD KNNP KPAL KTIP SMIG
IR, IZ, MU
SUBJECT: SCENESETTER FOR THE DEPUTY SECRETARY'S VISIT TO
OMAN

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

Summary
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1. (C) Mr. Deputy Secretary: Embassy Muscat and I warmly
welcome you to Oman. As one of our oldest friends in the
region (the Omanis refer to their relationship with us as
"strategic" ),the Sultanate remains a trusted U.S. partner.
This year marks the 175th anniversary of the U.S.-Oman
"Treaty of Amity and Commerce," second oldest in the Middle
East and North Africa. Yet, while we enjoy close relations
with Oman, we do not see eye-to-eye on all matters, most
notably Iran and the sufficiency of local efforts to combat
trafficking-in-persons. We also continue to experience
roadblocks in implementing the U.S.-Oman Free Trade
Agreement. Your visit here will help us to maintain our
already strong relationship while increasing opportunities
for further cooperation on bilateral and regional issues. In
addition, you will be able to express personal thanks to the
Sultan for the strong support he has provided to the U.S.
throughout the President's term in office.


2. (C) Mr. Deputy Secretary, you will find the Sultan a most
engaging interlocutor. Fluent in English, a graduate of
Sandhurst and a veteran officer of a British NATO unit in
Germany, he is decidedly pro-Western. He may aptly be
described as a polymath with wide-ranging interest in and
extensive knowledge of political and security matters,
history, Islam, sustainable agriculture, education,
astronomy, the environment and Western classical music (he
plays the pipe organ). At one time, he was a ham radio
operator but now reportedly surfs the net for much of his
information. He is also an avid reader with well-stocked
libraries in all of his palaces. He often begins discussions
on a matter unrelated to issues at hand. In keeping with the
traditions of Ibadhi Islam and of the Al Sa'id sultans, he
has no designated successor. In my one-on-one sessions with
him as well as audiences with other senior USG officials, he
has been generous with his time, sometimes going as long as
an hour and a half. End Summary.

Free Trade Agreement
--------------


3. (C) Over two years have passed since the President and
the Sultan signed the U.S.-Oman Free Trade Agreement (FTA),
but the trade deal has yet to enter into force. Causes for
the delay primarily lie with Oman, which, in addition to a
shortfall in government resources and coordination, seriously
underestimated the amount of legislative, regulatory,
technical and administrative work required to fully comply
with the Agreement's many provisions. Some senior Omanis,
however, complain that nit-picking and continual requests for
information by USTR, coupled with perceived shifting demands
for changes to Oman's laws and regulations, have hampered
Omani progress on the FTA while souring the overall mood in
the Cabinet of Ministers towards the trade pact.


4. (C) The list of outstanding items needed for FTA
implementation has finally been pared down to a single page.
Yet disagreements over telecommunication licensing
regulations and, to a lesser extent, intellectual property
rights legislation, threatens to prevent the FTA from
entering into force by the end of the year. To help break
this logjam and complete the deal, Ambassador Susan Schwab,
U.S. Trade Representative, is coming to Muscat October 24-26.
In order to ensure that the Sultan gives the FTA
implementation process a needed final push, and to pave the
way for a successful USTR visit, it is essential that you
mention that Ambassador Schwab will be arriving in Muscat
later this month to help close the FTA and that you hope he
will meet with her.

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


5. (C) The Omani government was incensed over its Tier 3
ranking in the 2008 Trafficking in Persons (TIP) report. As
a result, and with the approval of the Sultan, it threatened
to reevaluate the entire bilateral relationship between the
U.S. and Oman if its ranking were not upgraded. Senior
Omanis, the Sultan included, felt betrayed and "stabbed in
the back" by the TIP report, in part because they believed
political considerations in Washington either motivated the
ranking or should have kept Oman off the list of worst
offenders. Certain officials also refuse to accept that
there may be a TIP problem in Oman to begin with.


6. (C) Fortunately, once Oman is taken off Tier 3, the

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Sultan and his ministers appear ready to put this uniquely
unpleasant chapter in our otherwise strong bilateral
relationship behind them. The long delay in announcing the
final TIP rankings, however, has unnerved senior Omanis about
our intentions on this issue. If the final determinations
are not released by the time of your arrival in Muscat, you
may be asked to explain the reasons behind this delay.


7. (C) While the Omani government has shared its firm
intention to take further steps to combat TIP, most notably
the adoption of a comprehensive anti-TIP law, it adamantly
refuses to agree to any public acknowledgment of a
"commitment" to take certain steps in order to remove itself
from Tier 3. Omami officials have also said they will not
respond to U.S. pressure. Your visit here will allow us to
reassure the Omanis of the importance of our bilateral
relationship and our commitment to work with them in
addressing TIP, while pushing to secure a timeline for
passage of anti-TIP legislation and action on other measures.


Oman-Iran Overview
--------------


8. (C) Devoid of any outstanding territorial claims or other
divisive issues, Oman probably enjoys the best relations with
Iran of any GCC state. The government in Muscat has long
placed a premium on preserving amicable ties with its
northern neighbor and is especially careful not to antagonize
the regime in Tehran. Omani Minister Responsible for Foreign
Affairs Yusef bin Alawi visits Iran on a semi-regular basis;
a senior Omani delegation led by the Deputy Prime Minister
traveled to Tehran in April 2008 to reciprocate the visit of
Iranian President Ahmadinejad to Muscat in May 2007. The
Omani police and military maintain open channels of
communication with their Iranian counterparts on matters such
as the smuggling of illegal migrant workers to Oman through
Iranian waters, and Iranians and Omanis invite one another to
observe each other's military exercises.


9. (C) Despite the value Oman places on keeping good
relations with Tehran, it has at the same time been careful
to keep a comfortable distance from its Persian neighbor.
Apart from a few subjects, the Oman-Iran relationship has
largely been non-substantive with little in the way of
meaningful cooperation. Bilateral economic ties and trade
remain limited and Oman's security establishment continues to
vet Iranian visa applicants with a watchful eye. Oman's
strategic relationship still clearly lies with the United
States (and the U.K.),and it regularly shares its insights
and observations concerning Iran with us. Omani officials
also advocate in Tehran for a more conciliatory approach
towards the West. Oman's small Shi'a population (less than
5%) has little affiliation with Iran.


10. (C) There are indications, however, that both Oman and
Iran are proactively trying to strengthen their bilateral
relationship. Iran as of late is pushing to bolster ties
with Oman through increased tourism, trade and investment and
has even attempted to raise the level of mil-mil cooperation.
For its part, the Omani government has given the green light
for a growing number of official Iranian visits and has
reciprocated with high-level visits to Iran of its own.
Fearful of a regional conflict with Iran into which it might
be drawn and also perceiving a regime in Tehran emboldened by
recent events, Oman may be acting to establish a separate
identity from that of the rest of the GCC and to demonstrate
that, therefore, Iran has nothing to fear from Oman.

Oman's Quest for Iranian Gas
--------------


11. (C) A more certain factor in Oman's current approach
towards Iran is natural gas. With a major share of its
domestic gas production committed to long-term liquefied
natural gas (LNG) export contracts, Oman urgently needs large
quantities of gas to fuel its ambitious industrial
development plans. The government accordingly considers the
acquisition of new gas supplies to be a vital national
security issue and, after extensive review of alternatives,
sees Iran as the only realistic supplier.


12. (C) Oman signed a Memorandum of Understanding (MOU) in
April 2008 on the joint development of Iran's off-shore Kish
gas field and continues difficult and protracted negotiations
with Tehran on the terms of a final deal. Oman reportedly is
prepared to invest at least seven billion dollars to develop
the field and build an undersea pipeline, but is frustrated
with unreasonable Iranian demands on gas pricing and other
issues. In sharing our concerns over the proposed deal, I

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have reminded the Omanis of the unreliability of Iran as an
energy supplier, as it could shut off a gas pipeline at any
time and for any (or no) reason.

Differing Views on Iran
--------------


13. (C) Oman's leadership recognizes and shares U.S. concerns
about Iran's nuclear activities and the significantly
increased instability a nuclear-capable Iran would mean for
the region. Omanis are also anxious about Tehran's meddling
and trouble-making in other states and its opposition to
efforts to end the Israeli-Palestinian conflict. Moreover,
the January 2008 incident between Iranian Revolutionary Guard
Corps (IRGC) and U.S. naval vessels in the Strait of Hormuz
highlighted to Omani officials the vulnerability of this
strategic chokepoint to unpredictable Iranian behavior.


14. (C) Despite these shared concerns, Oman's views on how to
respond to Iranian actions continue to diverge from our own.
Senior Omani government officials repeat their advice that
sanctions against Iran are counter-productive and only
strengthen hard-line attitudes in Tehran. They instead urge
us to initiate direct talks with Tehran without preconditions
as the best way to mitigate Iranian threats. Leaders in
Oman's military and security services, however, including the
Sultan's top security official and advisor, take a more
pragmatic and hard-line view about the dangers posed by Iran
than their civilian counterparts, who are more apt to
downplay Iran's destabilizing activities and to dismiss
threatening statements from Iranian officials as just
political rhetoric intended for domestic consumption.

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


15. (C) The Omani leadership remains concerned with Iraq's
future and the possibility that extremist and sectarian
violence in Iraq could spill over into other states in the
region. Therefore, the Sultan will be interested to hear
about your recent trip to Iraq. Though encouraged by the
improvement in security in Iraq brought on in part by the
U.S. troop surge, Omani government officials continue to
harbor doubts about the reliability of Iraq's leadership and
whether it can effectively control the country. Senior
Omanis also have concerns about Iraqi Prime Minister Maliki's
interest in and capability of pursuing reconciliation with
Sunni leaders, which they see as critical to ending the
violence in Iraq. The Sultan and his senior military
officers back a continued U.S. military presence in Iraq
until security is established and Iraqi forces and police are
able to preserve stability.


16. (S) Sultan Qaboos told me this spring that he recognizes
that Oman and other Arab states should "do more" to support
the Iraqi government, although he declined to re-open Oman's
embassy in Baghdad due to security concerns. (Note: Senior
MFA officials continue to rebuff our requests to establish a
diplomatic presence in Baghdad or name an ambassador to Iraq,
although they insist this is due solely to security, versus
political, reasons. Iraq maintains an embassy and resident
ambassador in Muscat. End Note.) In accordance with the
Sultan's stance, a senior Omani economic delegation staged a
three-day visit to Baghdad from June 29-July 1. You may wish
to raise again the need for an Omani diplomatic mission in
Iraq.

Middle East Peace
--------------


17. (C) The Omani government remains a quiet supporter of
efforts to peacefully resolve the Israeli-Palestinian
conflict based on the President's two-state vision. Oman
endorsed and participated at the ministerial level in the
November 2007 Annapolis Conference to promote Middle East
peace; both Minister Responsible for Foreign Affairs Yusef
bin Alawi and MFA Secretary General Sayyid Badr al-Busaidi
remain in periodic contact with Israeli officials. Bin Alawi
most recently met publicly with Israeli Foreign Minister
Livni in April 2008 in Doha. However, Omani officials, and
bin Alawi in particular, are currently very pessimistic about
the possibility of the two sides striking a deal by the end
of the year. They fault the U.S. for not applying sufficient
pressure on Israel, but most especially Israel for failing to
take meaningful action on settlements and offer genuine
concessions to the Palestinians. However, they also
recognize that Palestinian political disunity is also to
blame for the lack of progress. More recently, the Foreign
Minister has complained to me about the lack of information
about the status of the current Israeli-Palestinian

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negotiations. A brief update on the status of negotiations
may help counter this negative mood.

Bilateral Security Relationship
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18. (S) U.S. security and military cooperation with Oman is
strong. The U.S.-Oman Base Access Agreement (BAA),first
signed in 1980, remains the cornerstone of our bilateral
security relationship, and Oman has supported virtually all
access, basing and over-flight requests we have made. The
BAA is up for renewal in 2010. The U.S. will ask to expand
its scope to include the growing Port of Sohar in northern
Oman, as well as the new al-Musanah airbase (close to Sohar)
to help compensate for the phased closure of military
facilities at Muscat International Airport (MIA). In
addition, we will probably have to address Oman's
unwillingness to accept our aircraft carriers and nuclear
submarines.


19. (S) Oman's long coastline and relatively open borders in
some inland areas remain vulnerable to smugglers, drug
traffickers, and terrorists. At present, we are aware of
less than a dozen Omani foreign fighters who have gone or
attempted to go to Iraq. Border control accordingly
continues to be one of Oman's top priorities and a major area
of bilateral cooperation with the U.S. The Royal Oman Police
Coast Guard regularly detains smugglers and illegal migrant
workers (most of whom are from South Asia),usually along
Oman's northern coast between Muscat and the city of Sohar.
Most migrants travel overland from Pakistan to Iran, where
they board boats to cross the Gulf of Oman; more Somalis are
reportedly attempting to enter Oman via Yemen.

Thanks for a Valued Partner and Friend
--------------


20. (C) During your visit to Oman, Mr. Deputy Secretary, we
should acknowledge and thank the Sultan for the strong
support the Sultanate has provided the U.S. throughout the
President's term in office. The use of Omani military
facilities by U.S. forces was invaluable in both OEF and OIF,
for example, while Oman remains a close partner in the global
war on terror. As the Sultan approves all major decisions in
the country, he is personally responsible for this support
and, despite some differences of opinion, remains a loyal
U.S. friend.
GRAPPO