JEDDAH CHAMBER OF COMMERCE AND INDUSTRY HOSTS

UNCLAS SECTION 01 OF 02 RIYADH 000987

SIPDIS

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

E.O. 12958: N/A
TAGS: ECON EFIN EINV PREL KTFN KWBG SA
SUBJECT: JEDDAH CHAMBER OF COMMERCE AND INDUSTRY HOSTS
EVENTS FOR TREASURY SECRETARY GEITHNER


1. (U) Summary: In his July 14 visit to Saudi Arabia,
Treasury Secretary Timothy Geithner led a roundtable
discussion and delivered a speech at the Jeddah Chamber of
Commerce and Industry (JCCI). He discussed the economic
downturn and measures taken to stem the crisis, sharing his
outlook for the global economy and long-term U.S. reforms.
Secretary Geithner was accompanied by Charge d'Affaires
Ambassador Richard Erdman, Consul General Martin Quinn,
Assistant Secretary for Terrorist Financing and Financial
Crimes David Cohen, Acting Assistant Secretary for
International Affairs Andrew Baukol, Deputy Assistant
Secretary Andrew Williams, Deputy Treasury Attache Amanda
Edwards, and Special Assistant to the Secretary Sara Aviel.
End summary.

BUSINESS LEADERS ROUNDTABLE
--------------

2. (U) JCCI Chairman Muhammad Al Fadl hosted Secretary
Geithner at a roundtable with seven Saudi business leaders
(Abdulaziz Othman bin Sager, Lubna Olayan, Ahmed Mohamed Ali
Al Madani, Khaled bin Abdullah Al Molhem, Mohamed Abdullah
Sharbatly, Hamad Al Sulaiman, and Nahid Taher). Secretary
Geithner emphasized points he would later discuss in his
speech, to include expectations for growth in the second half
of 2009, the strength of the dollar, and support for
sustained fiscal stimulus and long-term fiscal and financial
sector reform. Geithner also highlighted the unknowns in the
health of Eastern European economies, the possibility of
commodity price increases, and the danger of governments
"putting on the brakes too quickly." Chairman Al Fadl
moderated the conversation with the roundtable attendees.


3. (U) Nahid Taher underscored participants' fears over the
large size of the U.S. fiscal stimulus package,
protectionism, and inflation, given Saudi Arabia's large
holdings of dollar assets. Geithner assured participants
that the U.S. is dedicated to contracting expansionary
policies at the appropriate time and emphasized the USG's
commitment to open investment.


4. (U) Khaled Al Molhem shared his insights on the Saudi
economy -- emphasizing that the banking sector was still
strong, but that there has been a mismatching of short-term
deposits and long-term lending. He was also confident that
Saudi investors were investing "everywhere," but that there
would be an adjustment period during the downturn. Al Molhem
and Geither agreed that student exchange programs are vital
to helping the long-term U.S.-Saudi relationship.


5. (U) Lubna Olayan asked about the global recovery,
inquiring if it would slow as a result of decreased U.S.
consumer spending. Olayan questioned who would lead the
global economy in consumer spending during this time of
crisis. The Secretary maintained that the U.S. consumer
would not lead the world out of recession, as it had in the
past. But, he emphasized that long-term growth in the U.S.
would benefit from positive household savings. Olayan was
also curious about the future of U.S. sanctions -- such as
those designed to address Iran, Sudan, and terrorist
financing -- and stressed her concern over their impact on
the international financial system. She felt that the USG
held a lot of power in this regard and expressed that other
countries may hold the view that the "U.S. is flexing its
muscle too much." Secretary affirmed that these programs
were designed to protect the financial system from abuse and
underscored the need to address illicit finance at a
multilateral level.

REMARKS TO THE GULF REGION: REFORM AND
COOPERATION NECESSARY FOR A STRONGER FUTURE
--------------

6. (U) In public remarks delivered at the JCCI to
approximately 100 businessmen and women, academics, and
members of the media, the Secretary discussed the global
economic downturn, underscored the importance of policies in
the U.S. and Gulf region that have been helpful in pulling
the global financial system from the edge of failure, and
described a four-part strategy to assist with the global
economic recovery. JCCI Chairman Al Fadl moderated questions
from the audience on issues ranging from reform to
development assistance.


7. (U) RECOVERY: On the global recovery, one attendee shared
his experience with the downturn in the shipping industry and
asked the Secretary if he was optimistic about our ability to

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face the current challenges facing global trade. Noting that
trade and credit dried up during the crisis, Geithner
highlighted some positive signs emerging in the broader
financial markets and observed that countries most reliant on
trade suffered the most as demand fell during the crisis.


8. (U) REFORM: Another participant raised concerns about the
long-term structural challenges facing the U.S. moving
forward, including the aging of U.S. baby boomers and USG
obligations to provide Social Security and Medicare benefits.
The Secretary discussed long-term health care reform as the
greatest challenge amongst these obligations. Geithner was
also asked about reform at the IMF and in the international
financial system. Geithner said reforms were necessary for
the financial system and international financial
institutions, and expressed the need for structural changes
in international bodies, such as the IMF, to give a larger
voice to underrepresented economies.


9. (U) DEVELOPMENT ASSISTANCE: During the
question-and-answer period, Geithner was also asked whether
food security in Asia and Africa was a U.S. priority.
Geithner stressed the need for partnership based on mutual
respect and interest, calling on countries around the world
to commit to this important task. The principal means of
decreasing poverty in the underdeveloped world is to increase
agricultural development, and he noted "that's the
commitment."


10. (U) ILLICIT FINANCE: Money laundering, terrorist
financing, and proliferation policies were also raised by the
attendees. In particular, one participant asked whether the
recent news about one Saudi company's possible involvement in
money-laundering would be raised during the visit. (Note:
This is a reference to the Saad Group. End note.) Geithner
made clear the importance of implementing effective
regulations to combat money laundering at the national and
international levels.


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