WELCOMING CODEL McCONNELL TO THE UAE

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SUBJECT: WELCOMING CODEL McCONNELL TO THE UAE

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1. (U) This is a joint message from Embassy Abu Dhabi and Consulate
General Dubai.


2. (U) Summary: The U.S. Mission to the United Arab Emirates (UAE)
is pleased to welcome CODEL McConnell for a first-hand review of key
U.S. priorities here. Our robust relations with the UAE focus on
mutual strategic interests throughout the region, as well as our
common interest in economic growth and prosperity here and at home.
Abu Dhabi, as federal capital and with 93 percent of UAE petroleum
reserves, is the focus of our regional security, defense and energy
cooperation. Dubai, business capital of the Gulf, has been a key
commercial center, and is a vital regional trade and transport hub.
You will meet UAE Vice President, Prime Minister and Dubai Ruler
Mohammed bin Rashid al Maktoum, a business-oriented leader and the
man behind Dubai's recent rise to international prominence. The UAE
is an active partner in a broad range of mutual goals, particularly
regarding regional stability and security, and is the largest US
export market in the Middle East ($17b in bilateral trade in 2008).
Like the rest of the world, the UAE has been hard hit by the
economic crisis; but cash-rich Abu Dhabi has been hurt less than
Dubai which is more vulnerable to negative international financial
pressure given its globalized economy and high level of financial
leverage. End summary

Regional Stability


3. (SBU) The UAE punches above its weight class as a small and in
many ways developing nation with global ambitions -- while living in
a rough neighborhood. The citizen population of about 900 thousand
(less than 20% of the 5 million residents) faces the myriad
challenges of running a complex nation in the 21st century and seeks
moderate allies with whom to carve out a stable place in the
community of nations. In that context, U.S. relations are
traditionally strong and continue to grow. Key U.S. strategic
interests throughout the region (involving Iran, Iraq, Pakistan,
Afghanistan, terrorism, economics, and more) form the core of our
daily dialogue with the UAE.


4. (SBU) Our broad and enduring bilateral relations have produced
close military engagement and cooperation for two decades; we base
key assets in the country, and continually plan and exercise
together. Coalition operations in Iraq Afghanistan, and the Horn of
Africa rely on that cooperation; the UAE also has its own troops in
Afghanistan under the NATO/ISAF banner. A favorite liberty location
for the Fifth Fleet, the UAE hosts more US Navy ships, principally
at Dubai's Jebel Ali port, than any port outside the United States.
Our regional military logistics profile benefits from our UAE hosts
who share various facilities throughout the country. Defense
coordination is in our common national security interests, and
therefore cooperation continues to grow. Following recent UAE
purchases, including transport aircraft, air defense and other high
value systems, the UAE will be the United States' largest Foreign
Military Sales customer this year.


5. (SBU) The UAE is intent on cooperating with us to create a
stable economic, political, and security environment in a troubled
region. Concerned about regional proliferation, the UAE has been
responsive on export control issues and we engage on that front
regularly (including a recent review of efforts by a dedicated
bilateral Counter-proliferation Task Force). As Abu Dhabi pursues a
peaceful nuclear power program -- a sign of its ambitions and a real
need for electricity to meet development goals -- it has taken clear
steps to cooperate with the US (including signing a Section 123
Agreement) -- and to prevent proliferation, offering a clear
regional counterpoint to Iran's nuclear model.


6. (SBU) UAE support for Iraq continues to grow, in the forms of
debt relief, reciprocal visits, dispatching an Ambassador, and
ongoing efforts to use their political influence to bring about
stability. Similar focus on shared interests with regard to
Lebanon, Israel-Palestinian peace, Afghanistan, Pakistan and
elsewhere keep our two nations closely engaged in daily strategic
diplomacy. Recent visits by Special Envoys Senator Mitchell and
Richard Holbrooke underscored the importance we place on
coordination with the UAE on issues as important as Middle East
peace and stability in Pakistan/Afghanistan.

Economy, and the World Crisis


7. (SBU) In the past five years, the UAE has emerged as an economic
powerhouse in the region (our largest export market in the Middle
East, with $15.74b in total exports in 2008) and has attained a
commensurate level of political influence. Over 700 U.S. companies
operate here in a broad array of fields, with some 550 being based
in Dubai and its free zones. Regional leaders look to Abu Dhabi and
Dubai for assistance and political support, while Washington and
other Western capitals increasingly seek the UAE's views. The
strength of relations with the U.S. is evident in the string of high
level USG visitors -- including the President in January 2008, as
well as multiple cabinet-level visits and senior Congressional

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delegations.


8. (SBU) The individual emirates retain significant economic
autonomy, which Dubai asserted over the last several years to its
benefit. Sheikh Mohammed bin Rashid al Maktoum, UAE Vice President,
Prime Minister and Ruler of Dubai, has deliberately pushed Dubai to
develop as a "regional model" of business-friendliness and social
moderation. Dubai leveraged its limited oil wealth (only 3-4
percent of its GDP) to build the infrastructure to grow and
diversify the economy -- Dubai is the regional air transportation
hub, and its Jebel Ali port is the 7th largest in the world by
container traffic. Dubai has focused on real estate development,
infrastructure, trade and transportation, knowledge-based
industries, tourism, and finance to sustain its high growth rates of
recent years. Dubai has also been the clear leader among the UAE's
seven emirates in encouraging direct foreign investment through
innovative free zones and a range of business-friendly practices and
regulations. Dubai has welcomed and courted US businesses, and
hosts many regional headquarters for non-oil, non-defense sector
companies (including GE, GM, Microsoft, Ford, Caterpillar, Boeing,
and Citicorps).


9. (SBU) Despite its resource wealth and exponential growth, the
UAE has been affected by the international economic crisis. Stocks
have been battered, liquidity is tight and consumer confidence has
declined; Dubai, with its non-oil, more globalized economy, has been
particularly hard hit. The UAEG has taken a number of steps to
restore confidence: insuring bank deposits, creating a bank
liquidity fund, and reassuring the public that the government was
ready and willing to support the economy. Despite these steps,
investors remain concerned about local market conditions,
particularly Dubai's financial situation and the sharp correction in
Dubai's large, overheated real estate sector, which had provided the
financial engine for much of that emirate's recent development. A
recent $20b bond issue by Dubai, with the UAE Central Bank
immediately purchasing $10b, has helped stabilize the emirate's
finances and to restore some confidence that the UAEG will address
the downtown on a national basis.


10. (SBU) For its part, Abu Dhabi's investment portfolio, including
the world's largest sovereign wealth fund, the Abu Dhabi Investment
Authority (ADIA),has taken a multi-billion dollar hit in recent
months, although a rapid pace of development continues with key
projects going forward. The highest profile investments continue to
be driven by wholly or partly state-owned entities, with the weaker
private sector largely benefiting from the government's largesse.
Most here remain optimistic about the UAE's economic future, partly
in view of their optimism that U.S. economic fundamentals will
remain strong and a close U.S.-UAE relationship will stand them in
good stead.

Social Transition


11. (SBU) We also engage the UAE on human rights, women's
empowerment, trafficking-in-persons, education, and participatory
governance. Progress in these fields is notable, with more work to
be done in each arena; based on its Tier 2 rating in the Department
of State's annual Trafficking in Persons Report, the UAEG is
farthest along in the region in addressing this persistent problem.
The UAE is justifiably proud of opportunities for women (there are
four in the UAE Cabinet, including influential Minister of Foreign
Trade Sheikha Lubna al Qassimi). More than 90 percent of female UAE
high school graduates attend university; UAE women are increasingly
educated, assertive, and free to be choose jobs as diverse as
piloting planes or working in the judiciary. That said, family
constraints and tradition still limit the choices of some. A very
conservative government approach to civil society also puts
constraints on NGO activity. The UAE is focused on revamping
education, and is working closely with both the USG and US
consultants toward that end; all UAE universities teach in English.
The UAEG hopes to nurture and train a more skilled national
population to support its emergence as a moderate, tolerant, and
ambitious state with a clear Islamic identity; these social forces
will continue to interact in a dynamic evolution as the nation
defines its future course.
OLSON