SCENESETTER FOR AA/S FELTMAN'S VISIT TO THE EASTERN PROVINCE

C O N F I D E N T I A L SECTION 01 OF 02 DHAHRAN 000187

NOFORN
SIPDIS

PLEASE PASS TO NEA/EX MIRIAM SCHWEDT,
NEA/ARP JOSHUA HARRIS

E.O. 12958: DECL: 7/24/2019
TAGS: PGOV ENRG EPET SA
SUBJECT: SCENESETTER FOR AA/S FELTMAN'S VISIT TO THE EASTERN PROVINCE
OF SAUDI ARABIA

CLASSIFIED BY: Joseph Kenny, Consul General, EXEC, DOS.
REASON: 1.4 (b),(d)

INTRODUCTION:
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1. (SBU) The U.S. Consulate General Dhahran welcomes you to the
Eastern Province (EP) of Saudi Arabia. In addition to being the
Kingdom's largest province, the EP also represents the
industrial engine of Saudi Arabia and sits atop the world's
largest oil reserves. Saudi Aramco, the well-run and modern
state oil company, is based in the EP and the Consulate enjoys
an excellent working relationship with its executive
management. The EP is also the staging point for the country's
efforts to diversify their economy into the petrochemical and
mineral processing industries.


2. (C/NF) The EP is home to the highest concentration of Saudi
Shi'a in the Kingdom, the most significant minority religious
sect representing an estimated ten percent of the population.
The most prominent Shi'a religious and political leaders reside
in the EP. Earlier this year sectarian tensions resulted in
rare public protests and demonstrations by Shi'a youth in
several EP towns. The potential for Shi'a unrest is of
particular interest due to the minority sect's geographic
location atop the Kingdom's oil wealth. The SAG monitors the
Shi'a closely and rarely allows unrest to progress beyond the
initial stages.

THE OIL PROVINCE:
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3. (SBU) The most important player in the EP is without question
the government-owned oil company, Saudi Aramco. We have
requested a tour of their headquarters and meetings with top
executives, including the Senior Vice President for Industrial
Relations, Abdulaziz al-Khayyal (the CEO, Khalid al-Falih, will
be in New York during your visit). The USG enjoys a very close
working relationship with Aramco, largely due to the deep
American roots and corporate culture the company values so
highly even today. Many of the top management officials have
studied and worked in the U.S. In fact, the CEO is a
self-proclaimed "Aggie," having completed his undergraduate
studies at Texas A&M.


4. (C/NF) In May 2008, the Secretary and the Saudi Interior
Minister signed an agreement creating the Office of Program
Management - Ministry of the Interior (OPM-MOI). OPM-MOI is a
State-led interagency effort to assist the Saudi MOI with
protection of critical infrastructure, including Aramco's
petroleum production and transport facilities. The main aspect
of this initiative is a new 35,000-man Facilities Security
Force, largely trained and equipped by DOD elements, which will
protect key critical infrastructure sites throughout the
Kingdom. Aramco is anxious to maintain its prerogatives and
thus is apprehensive about having these security forces on and
around their facilities. These tensions between Aramco and the
Saudi MOI on this topic are well-known and remain a sensitive
issue for the company's executives. Needless to say, this is an
internal Saudi issue, and we should not be drawn into it.

THE SHI'A:
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5. (C/NF) If oil is the EP's top economic issue, then the Shi'a
is without doubt the top political subject of the province. The
majority of Saudi Arabia's Shi'a live in the EP oases of Qatif
and al-Ahsa, as well as substantial population centers in Dammam
and al-Khobar. Their religious and political leaders also
reside in the EP. The relationship between the Shi'a and the
Saudi authorities is distrustful at best. The Shi'a demand more
basic rights, greater representation in the government, and
access to educational institutions and other civic
organizations, and have become increasingly vocal with their
requests. Following a February 2009 sectarian altercation
between Saudi authorities and Shi'a worshipers in Medina,
tensions in the EP flared resulting in public protests,
demonstrations, and numerous arrests. Though the situation has
settled down in recent months, many of our Shi'a interlocutors
describe the present state of relations with the SAG as
troubling, and worse than it has been in years.


6. (C/NF) In addition to our dedication to promoting
international religious freedom, the USG is particularly
interested in a stable Shi'a population because of their
geographic location atop the world's largest oil reserves and
proximity to the facilities that brings it to market.
Furthermore, a disenfranchised Saudi Shi'a population may look
increasingly to Iran for political support and/or ideological
guidance.

MERCHANT FAMILIES:
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7. (C/NF) Several of the powerful business family groups that
dominate the EP trace their origins to modest but industrious
Saudi employees of Aramco, encouraged by their American managers
to become private contractors in the late 1940s and 1950s. Many
of the younger generations of these families have been educated
in the U.S. and have strong relationships with the Consulate
reaching back several decades. Due to the important economic
and political status of these merchant families, they have been
invaluable contacts for our reporting efforts and often share
informed and insightful views on a whole host of issues with
surprising candor. We have arranged to host a dinner in your
honor that will include some of the EP's most notable merchant
families should your schedule allow.

ECONOMIC DIVERSIFICATION:
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8. (SBU) The EP also hosts the country's most substantial
efforts to diversify the economy away from exclusively petroleum
exports. The so-called second and third pillars of the Saudi
diversification strategy are petrochemicals and mineral
processing, respectively. The Royal Commission port city of
Jubail and the currently underway Jubail II expansion represent
the largest petrochemicals complex in the Middle East and have
attracted tens of billions of dollars of private sector
investment over the past three decades. Also, Dow Chemical
recently signed a joint venture contract with Saudi Aramco
(valued at $ 22 billion) to construct a petrochemical complex in
the Aramco coastal town of Ras Tanura. Further to the north
along the Gulf coast, Ras al-Zour minerals city is under
construction and will host large-scale phosphate processing and
aluminum smelting complexes, water desalination, and power
generation (which will be used to meet the industrial
requirements of Ras al-Zour as well as elsewhere in the
Kingdom).

U.S. COMMERCIAL OPPORTUNITIES:
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9. (SBU) While the rest of the world is still reeling from the
economic crisis, the EP continues to see large and complex
industrial projects move forward. The EP accounts for one half
of all investment in major industrial projects in the Kingdom,
with the petrochemical city of Jubail accounting for one half of
all foreign direct investment. Historically, the U.S. has
enjoyed a privileged position as the main trading partner for EP
companies and receptivity to U.S. products and services is
extremely high. Despite the best efforts and hard work of our
commercial section, there is still ample opportunity for U.S.
businesses to prosper in the EP.

VISAS:A SOURCE OF COMPLAINTS
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10. (SBU) A popular subject that is often raised by both Saudi
business men and Aramco employees alike is access to U.S.
visas. Consulate General Dhahran reinstated full visa services
in May 2008 after a fifteen-year hiatus of very limited service,
and has issued a total of 8,300 visas over the past 12 months.
This has been highly successful and has been received very
positively by the business (and student) communities of the EP.
However, staffing shortages (we have one vice consul) and
ever-increasing visa processing times has led some leading
business figures to complain that the U.S. is difficult to do
business with. Visas will almost certainly come up in
conversation during your visit in Saudi
KENNY