SCENESETTER FOR YOUR MEETINGS WITH EU POLITICAL

UNCLAS SECTION 01 OF 02 MADRID 000021 SENSITIVE SIPDIS FOR UNDER SECRETARY BURNS AND ASSISTANT SECRETARY GORDON FOR P STAFF AND EUR FRONT OFFICE E.O. 12958: N/A TAGS: PREL EU IR SP SUBJECT: SCENESETTER FOR YOUR MEETINGS WITH EU POLITICAL DIRECTORS JAN. 15 MADRID 00000021 001.3 OF 002 Summary -------------- ¶1. (SBU) Embassy Madrid welcomes your visit for the EU Political Directors meeting hosted by Spain. The GOS seeks to strengthen EU (and GOS) ties with the USG during its presidency, and your interlocutors will be eager to meet with you. U.S.-Spain relations are strong and based on shared global interests, including our association in NATO, the fight against terrorism, and growing economic ties. Spaniards are enthusiastic about President Obama, and President Zapatero's desire for closer bilateral relations and enhanced engagement is reflected in GOS stances on Afghanistan and Guantanamo. On Iran, although Spain prefers dialogue to sanctions in almost any situation, it recognizes that action may be necessary if Iran continues its present course. Bilateral Relations -------------- ¶2. (U) We value Spanish cooperation on security issues and in the fights against terrorism and narcotics. Spain is a strong bilateral defense partner, despite differences in the past over its sudden pullout from Iraq in 2004 and its poorly coordinated 2009 withdrawal from KFOR. Spain operates a Provincial Reconstruction Team in Afghanistan with about 1,000 troops participating in ISAF. Zapatero was criticized for his poor relations with the USG during the Bush Administration (a result of his Iraq pullout). His enthusiasm for President Obama and his desire for closer bilateral relations have resulted in GOS willingness to send 511 more troops to Afghanistan, pending legislative approval, and to take 5 Guantanamo detainees. In both cases, he has faced public criticism that he has subordinated Spain's interest to President Obama's. Spain also allows us the use of two military bases, Rota and Moron, that are crucial transit points between the U.S. and Afghanistan and Iraq. Counter-terrorism and law enforcement cooperation is strong, and business ties are increasing. Political Context -------------- ¶3. (U) President Zapatero won re-election to a second term in ¶2008. His center-left Spanish Socialist Workers Party (PSOE) is seven seats shy of a Congressional majority and fared poorly in regional and European Parliament elections in 2009. Zapatero's popularity and credibility have suffered because of the long recession and high unemployment, his initial unwillingness to acknowledge the seriousness of the economic situation, and his continued claims that things will get better soon. The conservative opposition Popular Party (PP) has not capitalized on Zapatero's unpopularity, as it has suffered internal divisions and has been dogged by corruption accusations. That said, recent polls suggest that the PP could win an election over the Socialists if the vote were held today. Economic Context -------------- ¶4. (U) Spain grew much faster than the EU average over the 15 years through 2007 and now has the world's 9th largest economy. The rapid growth was driven by a housing boom that ended in 2007, after which the world economic crisis aggravated the economy's woes. Spain has been in recession for almost two years. The economy is expected to continue contracting until later in 2010, which would make it the last large economy to begin to recover, and the eventual recovery is expected to be sluggish. Unemployment, now over 19%, is expected to pass 20% this year. The GOS has responded with a major fiscal stimulus. This has boosted the budget deficit to around 10% of GDP, and the GOS will have to limit spending significantly between now and 2013 to meet EU deficit requirements. Zapatero's government is working to reorient Spain's economy towards more sustainable sectors, with renewable energy a key priority. Spain, the 10th largest foreign investor in the U.S., is especially active in wind and solar power, banking, and road construction. The U.S. is also a major investor in Spain. EU Presidency -------------- ¶5. (SBU) Spain,s presidency of the Council of the EU gives Zapatero an opportunity to emphasize an international role to counter the negative domestic economic situation. He seeks to use the presidency to show that he is taking a leading international role in responding to the economic crisis; this ties in with his argument that the crisis is an international MADRID 00000021 002.3 OF 002 problem for which his government should not be held responsible. The GOS has been stung by foreign press criticism (in the Economist, Financial Times, and New York Times) of Spain's intentions for its presidency. At his January 8 press conference with Van Rompuy and Barroso to mark the start of Spain's presidency, Zapatero had to argue that Spain's economic difficulties did not disqualify it from helping lead EU economic recovery efforts. ¶6. (SBU) The need to adjust to the new roles of President Van Rompuy and High Representative Ashton will be both a major focus of the Spanish presidency and a factor that will reduce the prominence of Spain's role from what it might have been. Initial GOS aspirations to use the presidency to address a wide range of issues seem to be giving way to a greater focus on key issues. For example, Zapatero now acknowledges that strengthening EU ties with Cuba will not be a major focus of Spain,s presidency, contradicting earlier GOS statements. However, the less-than-ideal coordination between the Presidency and the Foreign Ministry, and within the Ministry, may muddle the government,s message at times. ¶7. (SBU) Zapatero and his officials have repeatedly cited strengthening transatlantic relations as a key aim of Spain's presidency. For domestic political reasons, they intensely want a US-EU summit, and the lack of a Presidential visit would be seen as a major failure of Zapatero and a sign of USG disinterest. This desire will give you an opportunity to press your interlocutors for specific Summit deliverables before we can commit, as well as for Spanish leadership during the presidency on issues such as Afghanistan, Iran, and Guantanamo. Iran -------------- ¶8. (SBU) The GOS traditionally prefers dialogue and engagement to sanctions and criticism in almost any case, including Iran, Cuba, and Venezuela. Many also are skeptical that additional sanctions will influence Iranian actions. However, Zapatero and senior officials increasingly acknowledge that international action will be necessary if Iran does not change course. At times in the past, other EU countries' officials have identified Spain as one of the member states resisting increasing sanctions, but this position may be evolving. Spain implements UNSC resolutions and EU sanctions conscientiously. ¶9. (SBU) Even if it accepts the need for additional sanctions, it would be difficult for the GOS to support sanctions on investment in Iran,s oil and gas sector, because of the interests of the formerly state-owned firm Repsol. In 2008, USG pressure led Repsol and the Dutch firm Shell to decide against moving forward for the time being with a joint venture to develop an Iranian gas field. That project remains on hold, though the company maintains frequent contact with the GOI and remains interested in developing the country's resources when possible. Repsol and Shell are currently negotiating to sell some of their stake in the project to a Chinese and/or an Indian company. Personal Security -------------- ¶10. (U) In general, Spain is safe. However, Madrid and other large cities attract a large number of criminals and pickpockets, and frequent crimes of opportunity against the unwary do occur. It is best to carry only essential items, including a photocopy of your passport's photo page. Visitors can protect themselves against crime by being street-smart, alert, and aware of their surroundings. Travelers are encouraged to review the most recent Worldwide Caution issues by the Department of State. As the Department of State continues to develop information on any potential security threats to Americans overseas, it shares credible threat information through its Consular Information Program, available on the Internet at http://travel/state.gov. Additional information regarding safety and security in Spain is available on the U.S. Department of State's website (www.embusa.es). SOLOMONT