Identifier
Created
Classification
Origin
09DUBAI505
2009-11-23 12:25:00
CONFIDENTIAL
Consulate Dubai
Cable title:  

DUBAI RULER SHAKES UP SENIOR FINANCIAL MANAGEMENT

Tags:  ETRD KIPR EFIN ECON PREL AE 
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VZCZCXRO5767
RR RUEHDH RUEHDIR
DE RUEHDE #0505/01 3271225
ZNY CCCCC ZZH
R 231225Z NOV 09
FM AMCONSUL DUBAI
TO RUEHC/SECSTATE WASHDC 6725
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE
RUEHDE/AMCONSUL DUBAI 0019
C O N F I D E N T I A L SECTION 01 OF 03 DUBAI 000505 

SENSITIVE
SIPDIS

DEPARTMENT FOR NEA/FO; NEA/ARP/BMCGOVERN; TREASURY FOR NATASHA
ZAMECNIK

E.O. 12958: DECL: 11/23/2019
TAGS: ETRD KIPR EFIN ECON PREL AE
SUBJECT: DUBAI RULER SHAKES UP SENIOR FINANCIAL MANAGEMENT

REF: REFTEL: DUBAI 354

DUBAI 00000505 001.2 OF 003


CLASSIFIED BY: Justin Siberell, Consul General.
REASON: 1.4 (b)
C O N F I D E N T I A L SECTION 01 OF 03 DUBAI 000505

SENSITIVE
SIPDIS

DEPARTMENT FOR NEA/FO; NEA/ARP/BMCGOVERN; TREASURY FOR NATASHA
ZAMECNIK

E.O. 12958: DECL: 11/23/2019
TAGS: ETRD KIPR EFIN ECON PREL AE
SUBJECT: DUBAI RULER SHAKES UP SENIOR FINANCIAL MANAGEMENT

REF: REFTEL: DUBAI 354

DUBAI 00000505 001.2 OF 003


CLASSIFIED BY: Justin Siberell, Consul General.
REASON: 1.4 (b)

1. (C) SUMMARY: A shake-up in Dubai's financial services and
investment nerve centers over the weekend has brought down four
of the principal architects of Dubai's rapid, debt-fuelled
economic expansion. Dubai Ruler Sheikh Mohammed bin Rashid al
Maktoum (MbR) replaced Dr. Omar bin Suleiman as head of the
Dubai International Financial Center (DIFC) with Ahmad Humaid al
Tayer, Chief Executive Officer of Emirates NBD bank, and a
member of one of Dubai's most prominent merchant families. MbR
also reshuffled the board of the Investment Corporation of Dubai
(ICD),removing three key board members and Dubai heavyweights:
Mohammed Gergawi, Chairman of Dubai Holding and Minister of
Cabinet Affairs; Mohammed Alabbar, Chairman of property giant
Emaar; and Sultan bin Sulayem, Chairman of Dubai World, each of
them U.S.-educated proponents of a globalized, integrated Dubai.
These changes come just two weeks after MbR subordinated the
new-guard dominated "Executive Office" to the Ruler's Court,
Dubai's traditional, but until recently eclipsed, nexus of
power. The moves represent a public "shaming" of some of
Dubai's highest flyers and are intended primarily to reassure
the investors upon whom Dubai must rely to secure continued
financing on its reported $80-plus billion in debt. But they
also signal the reemergence of Dubai's traditional merchant
class through men like Al Tayer who, in his role at Emirates/NBD
Bank had a poor record of responsiveness to U.S. policy
objectives, particularly on the issue of Iran-related trade and
financial sanctions. END SUMMARY.



--------------

WEEKEND SHAKE UP

--------------




2. (C) Dubai awoke Friday, the beginning of the UAE weekend, to
news that Ruler Shaykh Mohamed bin Rashid al Maktoum had
restructured the Board of the Investment Corporation of Dubai

(ICD),an investment vehicle that channels ruling family
investments and borrowed funds into the myriad companies owned
by the Dubai ruling family. The changes removed from the ICD
Board three of the (U.S. educated) government executives most
associated with Dubai's boom and bust cycle of the past decade:
Mohamed al Gargawi, Sultan Ahmed bin Sulayim, and Mohamed Ali
Alabbar. Each retains positions in the individual companies
with which they were previously associated, but removal from the
ICD Board in above-the-fold headline announcements constitutes
public shaming of three of the highest-flying Dubai executives
behind the city's dramatic rise of the past decade. The three
were replaced by members of the Dubai ruling family. This news
was followed on Saturday by news of the replacement of Dr. Omar
bin Suleiman as Governor of the Dubai International Financial
Center (DIFC),Dubai's showcase development intended to
establish Dubai as a global financial services hub.




3. (C) Elan Fabbri (protect),Strategic Advisor to the Dubai
Executive Office told polecon chief that the shake-ups were
months in the making and "nothing personal." She claims that
MbR in early Fall 2009 convened many of Dubai's high-fliers to
remind them that they serve at his pleasure and could be
dismissed at his pleasure, implying that major moves were in the
offing. Fabbri argued that the removal of Gergawi, Alabbar, and
Bin Sulayem from the ICD was "long overdue" as that entity has
an oversight role in the companies each of them oversee and that
reports any of the three had fallen out of the Ruler's favor
were false. (Note: Fabbri was equally sanguine about her own
office's recent subordination to the Dubai Ruler's Court, headed
by Mohammed Al Shaibani. While she conceded that move was part
of a consolidation of power by Dubai's more conservative old
guard, which Shaibani represents, she argued that the day-to-day
activities of the Executive Office, charged with strategic
planning and decision-making in Dubai, would remain unchanged.
End Note)




4. (C) Michael Zamorski, Managing Director of Dubai Financial
Services Authority (DFSA),the regulatory arm of DIFC (strictly
protect),told polecon chief, though, that MbR had been
personally disappointed by the mismanagement of Dubai's finances
by the men arguably closest to him. He also claimed that the
ouster of Dr. Omar bin Suleiman was more clearly linked to
performance, alleging that Suleiman had been caught with his
"hand in the cookie jar." This reportedly came to light through

DUBAI 00000505 002.2 OF 003


an audit of the DIFC which was to have been conducted in 2006,
but was later brushed under the rug, and was only recently
completed under explicit instructions by MbR himself.
Allegations of corruption within the leadership of DIFC, a crown
jewel of Dubai and a self-described island of transparency and
openness in the region, are considered a serious threat to
DIFC's longer-term viability and thus Dubai's hopes of emerging
strong from the financial crisis.



-------------- --

FIRINGS: A SIGN OF ACCOUNTABILITY TO ABU DHABI?

-------------- --




5. (C) The personnel changes at DIFC and ICD have fueled
increased speculation regarding the role Abu Dhabi continues to
play in Dubai's restructuring efforts. The four officials swept
up in this latest round of management reshuffling once
represented some of the most powerful and arguably influential
figures in Dubai's economic miracle and are now its highest
profile casualties. Although Gergawi, Bin Sulayem and Alabbar
maintain their posts as CEOs in their respective companies,
their futures at Dubai Holding, Dubai World and Emaar remain
uncertain as Dubai Holding and Emaar continue to finalize merger
proceedings (Reftel) and Dubai World continues to restructure.
Dr. Omar's position as Deputy Chairman of the Central Bank has
to also be considered in question. A senior VP at General
Electric who had recent conversations with top Abu Dhabi
officials told econoff before the shake-ups that personal
accountability, along with increased transparency and equity
stakes in Dubai Inc., would be at the top of Abu Dhabi's list of
demands in exchange for continued assistance to see Dubai
through the present financial crisis.




6. (C) Additionally, Zamorski suggested to polecon chief that
public firing of these top officials could be the public shaming
of reckless Dubai CEOs that has been long overdue in the eyes of
frustrated investors. In fact, Zamorski explained that Abu
Dhabi was especially outraged about how Dubai World managed the
first tranche of the USD 10 billion underwritten by the UAE
Central Bank. He alluded to rumors that Dubai authorities
sanctioned significant bonuses to Nakheel leadership last spring
from the USD 10 billion bailout, even as the developer continued
to sink under significant debt obligations which it is still
struggling to meet. A senior consultant to the Dubai government
told Consul General that as dramatic as the changes were, they
were only the beginning of a broader restructuring expected to
play out over the coming three or four months. Expected to fall
further, in particular, is Nakheel Chief Sultan bin Sulayim
whose Dubai World holding company is alone estimated responsible
for some $59 billion in debt. Among Dubai World's investments
is the massive Las Vegas City Center project, reportedly the
largest privately-funded real estate project in history that
came close to bankruptcy in 2008. City Center's scheduled
December opening may be the one thing saving bin Sulayim from a
more dramatic public humiliation.



-------------- -

AHMAD AL TAYER AND THE RETURN OF THE OLD GUARD

-------------- -




7. (C) With Dr. Omar's removal, Ahmed Humaid al-Tayer, Chairman
of Emirates NBD bank, will take over as the new head of DIFC.
Al-Tayer is a former Minister of State for Finance and Industry
and Minister of Communication. He is a member of one of Dubai's
most powerful and influential merchant families. Relatives hold
positions as head of the Road and Transport Authority and the
Dubai Water and Electricity Authority. His brother, Obaid al
Tayer, is the current Minister of State for Financial Affairs.
In remarks to the press, Al Tayer said he would pursue the same
strategy as his predecessor at the DIFC. Kito De Boer, Manager
of the Dubai office of McKinsey &Co., told Consul General that
Al-Tayer is regarded as a "solid", if conservative banker of
strong reputation, something many outside the DIFC (read: Abu
Dhabi) will welcome. Ahmed Saeed, head of Cerberus Capital's
Dubai office (and former Treasury DAS) told polecon chief that

DUBAI 00000505 003.2 OF 003


he suspects the shift to the old guard and the return to
prominence of the old merchant families, of which al Tayer is a
member, may be accompanied by a new focus at DIFC away from the
West and toward "Eastern" or Islamic banking institutions. One
question that remains is whether Al Tayer's appointment is
intended as a stop-gap measure or a longer-term posting to the
DIFC flagship. Al Tayer's duties at Emirates/NBD, the region's
largest bank, are considerable, particularly as the merger
between the former Emirates Bank and National Bank of Dubai is
only just being completed.



--------------

COMMENT

--------------




8. (C) Although long expected, the Dubai Ruler's weekend shakeup
has nonetheless excited local analysts into divining a true
meaning for Dubai's future. The four men displaced are all of a
young generation that rose along with Mohamed bin Rashid's own
ascendance in the 1990's. They were chosen deliberately by him
for their non-association with the old Dubai merchant class, and
admired for their U.S. education and willingness to match MbR's
ambitious thinking, something the merchant families could not be
counted upon to do. But now that the bubble has burst, and
Dubai has had to turn to Abu Dhabi and the merchant families
earlier spurned, the new guard has been sacrificed. More
changes are likely as Dubai continues to claw its way back to
financial stability. Of particular interest will be how Ahmad
Al Tayer manages DIFC. As CEO of Emirates/NBD, he has been less
than fully-responsive to USG demarches to restrict the Bank's
exposure to Iranian banks at the heart of Iran's nuclear
procurement activity. END COMMENT
SIBERELL