KUWAIT TRIES TO DOWNPLAY IMPORTANCE OF VISITS BY

C O N F I D E N T I A L KUWAIT 000095

SIPDIS

NEA/ARP, NEA/RA

E.O. 12958: DECL: 01/31/2020
TAGS: PREL ECON EPET ENRG IR KU
SUBJECT: KUWAIT TRIES TO DOWNPLAY IMPORTANCE OF VISITS BY
IRANIAN SPEAKER LARIJANI; IRANIAN ECONOMIC TEAM
ACCOMPLISHES LITTLE

REF: KUWAIT 61

Classified By: Political Counselor Pete O'Donohue for reasons 1.4 b and
d


1. (C) Summary: Kuwaiti officials took pains to downplay the
importance of a January 26 - 27 visit by Iranian Parliament
Speaker Ali Larijani and the preceding week's visit by an
Iranian economic team. Officials insisted that the Larijani
visit had come at the invitation of Kuwait's Parliament
Speaker Jassem Al-Khorafi and that his meetings with the Amir
and Prime Minister had been largely "protocollary." GOK
officials stressed that Larijani's Kuwaiti interlocutors'
including members of Parliament's Foreign Affairs Committee
(FAC) had all used their face time with Larijani to state
their concerns about Iran's nuclear program, while
reiterating their appeal for peaceful dialogue to resolve the
issue. An Iranian economic delegation that hit the ground
ahead of Larijani's visit also accomplished relatively
little, according to Kuwaiti participants, and discussions on
the shared Dora field and potential Kuwaiti purchases of
Iranian natural gas made no headway. Notwithstanding Kuwaiti
protestations that the visits were non-events, the GOK
nonetheless effectively provided Larijani a bully pulpit from
which to criticize publicly the U.S. and to warn Gulf states
not to allow U.S. military bases to be used for attacks
against Iran. Cowed by its larger neighbor, the GOK is
trying to walk a delicate tightrope -- quietly siding with
the international community on the Iran nuclear issue, while
participating in reciprocal senior visits in an effort to
deflect Iranian ire, and -- Kuwait being Kuwait -- pursuing
parochial economic interests justified as creating strategic
buffers. End Summary.


Kuwait Used Visit to Reiterate (Quietly) Nuclear Concerns
-------------- --------------


2. (C) MFA Asia Department Counselor Rashid Al-Hajri
insisted to Polcouns on January 31 that the January 26 - 27
visit of Iran's parliament Speaker Ali Larijani had been
largely a ceremonial affair and that not much of consequence
had emerged from the latter's meetings with the Amir, Prime
Minister Shaykh Nasser Al Sabah and Speaker of the Kuwaiti
parliament Jassem Al-Khorafi. Stressing that Larijani had
visited Kuwait at Speaker Al-Khorafi's invitation, Al-Hajri
argued that the visit's agenda was more parliamentary than
inter-governmental; Larijani's meeting with the Amir and
Prime Minister, Al-Hajri said, had been largely
"protocollary." Al-Hajri claimed, however, that Kuwaiti
officials in both sets of meetings had taken pains to
reiterate their concerns about Iran's nuclear program as well
as the GOK's "clear and unchanging" positions that Iran must
abide by IAEA safeguards and that all actors must avoid
military options for dealing with problems in the Gulf.
"Iran knows very well Kuwait's position on its nuclear
program," Al-Hajri added. (Note: If the GOK, did, in fact,
take Larijani to task on the nuclear file, it did so in a
quiet voice. None of these points were publicly discussed or
communicated to the press. End Note.)



3. (C) Al-Hajri acknowledged that the Amir is contemplating
accepting a long-standing invitation from Iranian President
Ahmadinejad by way of maintaining a dialogue between the two
neighbors, but that "nothing has been scheduled." The GOK
views dialogue with its larger neighbor as essential,
Al-Hajri noted, notwithstanding its concerns about Iranian
nuclear developments. Al-Hajri downplayed the importance of
bilateral commercial exchanges that had taken place during
the visit, characterizing these as mere "follow-up" to
earlier discussions, but noted that "technical committees"
from both governments will meet at an unspecified time to
discuss pending issues regarding the two countries' maritime
border and other commercial matters.


Larijani Tells MPs that Nuclear Program is "Peaceful"
-------------- --------------


4. (C) Kuwaiti MP Ali Al-Rashed, rapporteur of parliament's
Foreign Affairs Committee (FAC),told Poloff on January 31
that the FAC had used its January 27 meeting with Larijani
(Speaker Al-Khorafi met with Larijani separately on January
26) to convey concerns over Iran's "nuclear file" and to urge
Iran to comply with its UN obligations in a transparent
manner; the Iranians responded with assurances that Iran's
nuclear intentions are peaceful and complained about a


perceived U.S. double standard given the U.S. position on
Israel's nuclear arsenal. Al-Rashed said the two sides also
discussed the issue of drug smuggling (without providing any
details) and agreed that all statements emanating from either
country should contribute to improving bilateral relations.
The FAC "warmly" accepted an invitation from Larijani to
visit Tehran at a time yet to be determined. (Note:
Al-Rashed expressed to Poloff a concern that the real nature
of Iran's nuclear program might be "blown out of proportion
by Zionist media pressures" in the U.S. Al-Rashed said he
viewed frictions arising from the June 2009 elections in Iran
as a positive development, but worried that U.S.
saber-rattling could unify Iranians in support of the
regime. The Iranians also complained about scrutiny of their
investment accounts in Kuwait. End Note.)



5. (C) In a January 27 conversation, Kuwaiti Iran-watcher Dr.
Sami Al-Faraj told Poloff he believed the Larijani visit
signaled the Iranian regime's "desperation" and growing
political isolation. Iran's "nearly overt" backing of the
Houthis in Yemen, he suggested, has cost Tehran any remaining
credibility with its neighbors and left Iran seeking to
improve relationships with countries like Kuwait in order to
balance its damaged relations with KSA and other Gulf
countries.


Economic Team Accomplishes Little
--------------


6. (C) Kuwait Petroleum Corporation General Counsel Shaykh
Nawaf Al-Sabah told Econcouns on January 31 that the Iranians
had sent an economic delegation to Kuwait in advance of the
Larijani's visit. According to Nawaf, the Kuwaiti
coordinator for the visit was Prime Ministerial Advisor
Ismail Shatti, who claimed to be tasked with coordinating
"all of the bilateral economic issues." Shaykh Nawaf said he
participated in two different meetings, one with the general
economic team and a second follow-up meeting with
representatives from the Iranian "gas people" on the
continuing discussions about Kuwait possibly buying natural
gas from Iran. He described the meetings as unproductive.
As an aside, he noted that he had mentioned to MFA U/S Khalid
Al-Jarallah that he would be meeting Econcouns to discuss the
Iranian visit and Jarallah's response was "tell him he's
wasting his time," the implication being that nothing
important had come out of the discussions.



7. (C) That said, Kuwait is awash in rumors that Larijani
had proposed establishing a joint airline company, with
shares divided between the governments of Kuwait and Iran (30
percent each) and 40 percent for the public in order to help
Iran evade any more stringent sanctions that might be
implemented. In February 2 discussions with Ambassador,
Kuwaiti Chamber of Commerce and Industry President Ali
Al-Ghanim noted that Iran was a big economy and that closer
Kuwait-Iran business ties made sense. He added, somewhat
wryly, that Iran viewed Kuwait as a potential base of
operations for bypassing U.S. sanctions. He cautioned,
however, that the Iranian government was "not trustworthy"
with regard to making deals, citing the case of a Kuwaiti
investor who lost millions on a real estate investment on an
island where the Iranians subsequently discovered natural
gas. Although the Iranians told him to seek compensation,
years later "he was still waiting." (Note: Although Kuwaits
being Kuwaitis will seek economic advantage wherever they
can, the general distrust of the Iranian government as a
business partner seems to be strong here. End Note.)


Continental Shelf Discussions Go Nowhere
--------------


8. (C) Shaykh Nawaf said the Iranians and KPC discussed the
issue of the shared (Kuwait, Iran, Saudi Arabia) Dora field,
with the Iranians probing for information on Kuwaiti
development plans. According to Shaykh Nawaf, KPC's position
was that Kuwait could develop the clearly undisputed part of
the field and that such activity should not be of concern to
Iran. He added that the Iranians had tried to argue that the
issue could be solved bilaterally without involving the
Saudis, to which the response was that the Kuwaitis and
Saudis were negotiating as a bloc. Nawaf went on to explain
that under the terms of the
agreement with Saudi Arabia, the field was part of the joint
operations zone (i.e., neutral zone) and production would be
E


split 50-50. In response to Econcouns' question, Shaykh
Nawaf confirmed that KPC would be interested in developing
the field as it contained considerable reserves of natural
gas. With regard to the broader question of Iranian-Kuwaiti
continental shelf discussions, the Iranians were told to
raise it with the MFA. According to Shaykh Nawaf, the
Iranians subsequently met with MFA U/S Al-Jarallah, but that
Jarallah raised the issue, not the Iranians. "They were
there for the tea," he noted sardonically. (Note: Shaykh
Nawaf confirmed that the dispute over the continental shelf
essentially is a dispute over ownership of offshore fields,
primarily the Dora field. End Note.)


Natural Gas Sales a Pipeline too Far
--------------


9. (C) Shaykh Nawaf stressed that no progress had been made
in the long-running negotiations with Iran on potential
Kuwaiti purchases of Iranian natural gas. He said that
Shatti had asked him to brief the Iranian economic delegation
on the natural gas negotiations, but that it quickly became
clear that the delegation had no knowledge on the history or
details of the negotiations. He explained that an oil sector
team had arrived the next day to continue the discussion.
Shaykh Nawaf said that the biggest problem was the Iranians'
unwillingness to accept the price that had already been
agreed on in 2005, because it did not "meet their economic
development agenda." Nawaf pointed out that the price,
agreed on when oil was approximately $20 per barrel, had an
escalation clause, tied to the price of oil. The current
natural gas price (at $80 per barrel for oil) would be about
4-times the 2005 price. He said, at this price, the pipeline
gas would be approximately as expensive as LNG. That said,
Kuwait would still be happy to purchase gas at the agreed on
price. The Iranians, however, were pushing for a price about
two and half times the current price, far more expensive than
LNG. The Iranians were not willing to come down on the price
and the Kuwaitis were not willing to raise their offer.



10. (C) In addition, Nawaf noted, the Iranians were pushing
the Kuwaitis to take some ownership over any
Iranian-Kuwaiti pipeline. The Kuwaiti position was that the
Iranians should own the pipeline and Kuwait would purchase
the gas. According to Shaykh Nawaf, the Kuwaitis were
willing to take a 10-15 percent ownership stake in the
pipeline if it would help the deal go forward, but the
Iranians were pushing for a 20 percent or greater Kuwaiti
ownership share. When Econcouns raised long-standing USG
policy and legal concerns about investment in the Iranian
hydrocarbon sector, Shaykh Nawaf stressed that any Kuwaiti
pipeline ownership would be clearly within Kuwaiti territory.
He reiterated, however, that the negotiations had gone
nowhere. In fact, he added, he had left before the meetings
had concluded "to get some work done".



11. (C) Comment: Kuwait's small size and proximity to Iran
militate in favor of allowing others to do the heavy lifting
on this contentious issue. The GoK largely contents itself
with trying to be seen as diplomatically helpful in providing
a conduit for expression of GCC (particularly Saudi) concern
- and perhaps carrying occasional water for the international
community in quietly urging Iran to limit its nuclear program
to purely civilian uses. But Kuwait nonetheless uses its
contacts with Iran to assure Tehran of its continued
friendship and to pursue parochial economic interests, to
include off-shore oil field development and access to gas.
Iran also stands to benefit from Kuwaiti engagement by using
high-level visits to portray itself as not isolated
regionally - and as the larger and more powerful player is
certainly much more in the driver's seat than Kuwait, a fact
borne out by Larijani's decision to embarrass the GoK and
abuse Kuwaiti hospitality by using his visit here to lash out
publicly at the U.S. and its Gulf allies.



12. (C) Comment continued: Shaykh Nawaf's read-out of the
Iranian oil and gas negotiations track with both his previous
remarks and the comments of other oil sector officials
involved in negotiations with the Iranians over natural gas.
Given the geographical proximity and the very real Kuwaiti
need for gas, their interest in negotiating with Iran (and
their other gas rich neighbors) makes sense, but Kuwaitis are
not inclined to overpay for gas they can get elsewhere. The
apparently consistent Iranian tactic of
reopening an already agreed upon point also fills Kuwaiti


negotiators with skepticism that any deal wQl be reached.
End Comment.



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For more reporting from Embassy Kuwait, visit:
visit Kuwait's Classified Website at:

http://www.intelink.sgov.gov/wiki/Portal:Kuwa it
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JONES