TREASURY SECRETARY GEITHNER MEETS WITH KING

S E C R E T SECTION 01 OF 02 RIYADH 000986

SIPDIS

TREASURY FOR DAVID COHEN AND ANDREW BAUKOL
TREASURY ALSO FOR SARA AVIEL

E.O. 12958: DECL: 07/30/2019
TAGS: ECON EFIN EINV PREL KTFN KWBG SA
SUBJECT: TREASURY SECRETARY GEITHNER MEETS WITH KING
ABDULLAH OF SAUDI ARABIA

Classified By: CDA Richard Erdman for reasons 1.4 (B) and (D)


1. (S) Summary: On July 14, Treasury Secretary Timothy
Geithner visited Saudi Arabia and met with King Abdullah bin
Abdulaziz Al Saud in Yanbu, discussing a broad range of
topics including commitment to the dollar, the global
economic crisis, illicit finance, Israel-Palestine issues,
and the G-20. King Abdullah was joined by Dr. Ibrahim Al
Assaf (Minister of Finance),His Royal Highness Prince Nayef
bin Abdulaziz Al Saud (Minister of Interior),His Highness
Prince Faisal bin Abdullah bin Muhammad (Minister of
Education),Dr. Hamad Al Bazai (Deputy Minister of Finance),
and Dr. Abdulrahman Al Hamidy (Deputy Governor, Saudi Arabian
Monetary Agency). Secretary Geithner was accompanied by
Charge d'Affaires Ambassador Richard Erdman, Assistant
Secretary for Terrorist Financing and Financial Crimes David
Cohen, Acting Assistant Secretary for International Affairs
Andrew Baukol, and Special Assistant to the Secretary Sara
Aviel. End summary.

OIL PRICES, INFLATION, AND THE DOLLAR
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2. (S) King Abdullah opened the meeting by conveying his
desire to play a helpful role in world affairs. "If there is
a problem, we want to assist in solving it." The Secretary
said the President recognized and appreciated the King's
readiness to play a helpful role. He said, however, that the
U.S. was a large country with global reach, whereas Saudi
Arabia was a "small country that tried to do its best for its
people." The Secretary said the U.S. appreciated the
important stabilizing role the Kingdom was playing in the
financial system and in oil markets. "We will do our best,
as much as we can," the King replied.


3. (S) Geithner said the U.S. was working hard to reform our
financial system. We have important responsibilities to the
international system, and we take them seriously. He
described plans to control the U.S. budget deficit and
reiterated our commitment to a strong dollar. King Abdullah
stated this was "good news," because "we are so connected to
the dollar, we can't leave it." Geithner said he was
convinced the dollar would remain the principal reserve
currency for some time to come, and this was good for both
Saudi Arabia and the U.S. The King confided that "many
people tried to convince us to switch, but we insisted on
staying with the dollar." Geithner expressed appreciation
for the stabilizing role the Kingdom was playing vis-a-vis
the dollar.

THE GLOBAL ECONOMIC CRISIS
--------------

4. (S) Geithner told King Abdullah that he spent his days
trying to solve the financial crisis. The U.S. was making
some progress on the ground -- the decline was slowing and
Asia was doing better.


5. (S) King Abdullah said people were afraid to spend money
and blamed the media for spreading fear among the public.
The King reiterated the importance of restoring confidence
around the world, noting we needed only six months to do
this. Geithner said we went though a period of excessive
risk-taking. Now we had too little. The U.S. must now
establish a solid basis for risk-taking. Restoring
confidence around the world would be critical to stemming
fears, and "we must make the world confident so that it is
willing to take risks again."


6. (S) While noting we were making progress on economic
recovery, the Secretary said the financial system was prone
to crisis and that the U.S. had an obligation to the world to
restore stability to the system. Geithner indicated it was
important to take advantage of the opportunity created by the
crisis to put reforms in place. The King readily agreed,
noting it was the right time to do this and the U.S. should
move in this direction now. He noted that banks around the
world should be more careful and disciplined in choosing to
whom they lend.


7. (S) Geithner agreed we needed to move quickly on financial
reform, despite some views in the U.S. that we should wait.
He emphasized that the President was working hard to solve
the problems that contributed to the crisis The King said
the public would not accept reform before the crisis, but now
they will. "The U.S. must start without delay, because it is
a leader. The U.S. has to pave the way." Europe, Russia,

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and China are looking to the U.S. in this regard. The King
expected the President to succeed, provided Congress was with
him.


8. (S) King Abdullah expressed hope that financial
institutions had "learned their lesson." The King noted that
"we have strong confidence in the U.S." The Secretary and
the King agreed on the need for continued cooperation between
the U.S. and Saudi Arabia. The Secretary noted our close
cooperation with the Finance Ministry and Central Bank.

EXTREMIST FINANCE AND IRAN
--------------

9. (S) The Secretary thanked King Abdullah for the Saudi
government's efforts to reduce financing to extremists
outside the Kingdom. The King said the Kingdom had worked
hard to capture extremists, and had gone after the leadership
of these groups, but recognized that they still needed to
"squeeze" these groups further. The King, nodding to
Interior Minister Prince Nayef, gave credit to Prince Nayef,
for what had been accomplished in this area and Prince Nayef
dutifully responded it had been possible because of the
King's support. (COMMENT: Much of the progress that we have
seen in Saudi efforts to combat terrorism, including
terrorist financing, has been due to the efforts of Prince
Nayef's son, Mohammed bin Nayef, the Deputy Interior
Minister.) Geithner encouraged the King to intensify and
extend their efforts so that extremists "could not find a way
around" Saudi enforcement actions.


10. (S) On Iran, King Abdullah "wished for Iran what Iran is
facing now, opining that "this is what will break the Iranian
system." Geithner explained that the USG was working closely
with the Europeans and others, especially the Gulf states, to
increase economic pressure on Iran, and also noted that it is
important to bring along Russia and China as well. The King
said that he supported USG efforts to impose economic
pressure on Iran, and said that he had heard that the
Russians and Chinese will cooperate.

AFGHANISTAN AND PAKISTAN; ISRAEL AND PALESTINE
-------------- -

11. (S) Geithner expressed his appreciation for the financial
support the Kingdom has provided to Afghanistan and Pakistan.
King Abdullah said that the situation in those countries
"hurt us a lot." On Middle East peace, the Secretary said
the President was working hard to find a solution to the
Israeli-Palestinian conflict, and hoped the Kingdom could
help on the financial front with the Palestinians. Avoiding
a direct response, the King said Israelis and Palestinians
had to find a solution. This was in their, our, and the
world's interest. King Abdullah noted that the U.S. was not
without influence. Israel needed to be pressed. "We know
both the Israelis and Palestinians want peace, but the
problem is how to satisfy the Palestinian people." Israel
had not given any help to the Palestinian Authority, and
continued Israeli settlement activity was not encouraging
Palestinians to support peace. Abu Mazen was not a weak
person, the King commented, but he had not been given
anything he could offer the Palestinian people. Geithner
agreed it was important to strengthen Abu Mazen's position
and his peaceful approach by enabling him to show concrete
progress.

KING ABDULLAH UNABLE TO ATTEND G-20 IN PITTSBURGH
-------------- --------------

12. (S) Geithner said the President really hoped to see the
King at the G-20 meeting, because we wanted the G-20 to be a
strong organization and felt it would be stronger with Saudi
Arabia. The King deeply regretted he would not be able to
attend the G-20 meeting in Pittsburgh this September. He was
so committed to the inauguration of the King Abdullah
University for Science and Technology (KAUST),which was
scheduled for the same time frame, and had invited so many
international dignitaries to the event, that it simply wasn't
possible for him to attend. In this regard, he would love to
see the President come for the KAUST inauguration, but
understood that that would not be possible. The King
concluded the meeting by asking the Secretary to convey his
best regards to the President.


13. (U) This message was cleared by Secretary Geithner's
staff.
RUNDELL