UAE ENERGY POLITICS -- OIL FOR SECURITY?

C O N F I D E N T I A L ABU DHABI 000856 NOFORN SIPDIS E.O. 12958: 08/29/2019 TAGS: ENRG EPET ETRD PGOV IR RS AE SUBJECT: UAE ENERGY POLITICS -- OIL FOR SECURITY? CLASSIFIED BY AMBASSADOR RICHARD G. OLSON FOR REASONS 1.4 B AND D. ¶1. (C/NF) SUMMARY: According to a senior energy official, recent oil storage deals between the Abu Dhabi National Oil Company and China and Japan were completed for "political" reasons at the instruction of Abu Dhabi Crown Prince Mohammed bin Zayed (MbZ). While the deals may have simply been visit deliverables, given MbZ's preoccupation with the Iranian threat, a similar deal between Abu Dhabi's TAQA and Russia's Gazprom suggests MbZ may be offering energy deals to garner P5 support on Iran. END SUMMARY. ¶2. (C) On August 14, the Abu Dhabi National Oil Company (ADNOC) signed an MOU with the China National Petroleum Corporation to cooperate in crude oil storage. The MOU was signed in conjunction with the visit of Abu Dhabi Crown Prince Mohammed bin Zayed Al Nahyan (MbZ) to China. ADNOC Deputy CEO Abdulla Nasser Al Suwaidi (strictly protect) told EconOff on August 25 that the MOU was a purely political gesture taken at the instruction of MbZ. As the MOU is nonbinding and lacks specifics, Al Suwaidi said ADNOC had little to gain from the deal. However, he noted that ADNOC may be able to use the MOU to its advantage in business with other Chinese companies. ¶3. (C) Al Suwaidi laughingly compared the China MOU to a similar strategic reserve storage agreement he signed, on behalf of Abu Dhabi's Supreme Petroleum Council, with Japan in June. He said that deal was for one million barrels of oil storage; only a fraction of Japan's daily consumption. To demonstrate the noncommercial nature of the deal, Al Suwaidi added that no one considered the tax implications of the deal. Before signing, he had to clarify that ADNOC crude storage would not be subject to domestic Japanese energy taxes, which exceed 40 percent. ¶4. (C) Separately, the Abu Dhabi National Energy Company (TAQA) finalized a gas storage deal in the Netherlands with Gazprom on August 22, following a December 2008 MOU. TAQA, a government-owned corporation, has many purely commercial deals, but could also have been directed to seek out Gazprom. ¶5. (C/NF) COMMENT: MbZ is known to instruct state-owned firms to look to particular markets for political reasons. In 2008, he asked key Abu Dhabi companies to explore business in Iraq, for example. Given his deep-seated concerns about Iranian hegemony, it may be MbZ may be using oil to bind UAE interests to those of key Security Council members. COMMENT. OLSON