C O N F I D E N T I A L SECTION 01 OF 03 RIYADH 001338


LONDON FOR TUELLER; PARIS FOR ALLEGRONE

E.O.12958: DECL: OADR 1.6X6
TAGS: PGOV ECON PINR SA
SUBJECT: SAUDI ARABIA: THE CROWN PRINCE'S VIEWS ON
REFORM, GULF WAR SPENDING, ISRAEL AND IRAN

REF: A. RIYADH 0023, B. RIYADH 0029


1. (U) CLASSIFIED BY DCM THEODORE KATTOUF: 1.5 B,D.

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SUMMARY
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2. (C) A SELF-CONFIDENT CROWN PRINCE, OBVIOUSLY AT
HOME WITH HIS EXPANDED AUTHORITY, SEPARATELY LECTURED
FORMER U.S. AMBASSADORS TO SAUDI ARABIA, A/S RICHARD
MURPHY AND CHAS FREEMAN, ON THE UNFAIR FINANCIAL BURDEN
THE U.S. PLACED ON SAUDI ARABIA DURING THE GULF WAR.
ECHOING SENTIMENTS EXPRESSED MORE FORCEFULLY BY MERCHANT
FAMILIES AND OTHER COMMONERS, ABDULLAH STATED THAT THE
SAG SPENT "FAR TOO MUCH" AND QUESTIONED U.S. MOTIVES IN
EXACTING THE FINANCIAL TOLL. INDICATING THAT MORE
BELT-TIGHTENING WAS IN ORDER, THE CROWN PRINCE ALLUDED
TO THE NEED TO "UNIFY" THE SAUDI BUDGET, WHICH FREEMAN
INTERPRETED TO MEAN BRINGING ON-BUDGET THE MAMMOTH
OFF-BUDGET MONIES DEVOTED TO THE MOSQUE RECONSTRUCTION,
AL-YAMAMAH WEAPONS DEAL, AND THE STRATEGIC (OIL) STORAGE
PROJECT. ABDULLAH QUESTIONED U.S. ALLEGATIONS OF A
LIBYAN CHEMICAL CAPABILITY, PARTICULARLY IN LIGHT OF USG
SILENCE ON ISRAEL'S NUCLEAR WEAPONS PROGRAM. FINALLY,
ABDULLAH URGED THAT THE U.S. FIND COMMON GROUND ON WHICH
TO CONSTRUCTIVELY, OR AT LEAST COMMERCIALLY, ENGAGE
IRAN.


3. (C) ABDULLAH'S REMARKS, AND WE ASSUME THEY WERE
CONVEYED ACCURATELY BY THE TWO FORMER AMBASSADORS, SHOW
THAT THE CROWN PRINCE APPEARS WILLING TO CHALLENGE A
NUMBER OF BASIC TENETS OF RULE BY THE AL FAHD. PLACING
THE OFF-BUDGET ITEMS IN THE GOVERNMENT BUDGET, LONG A
GOAL OF REFORMERS HERE, WOULD WEAKEN THE ABILITY OF THE
ROYAL FAMILY TO CARRY OUT THE PERSONAL LARGESSE THAT IT
HAS OFTEN USED TO ENSURE FAMILY UNITY AND BUY THE
LOYALTY OF ITS SUBJECTS. (IT COULD ALSO PROVE
DETRIMENTAL TO THE PALACE CONSTRUCTION INDUSTRY.)
OVERALL, THE CROWN PRINCE'S VIEWS REFLECT A SAUDI RULER
WHO MIGHT TAKE REFORM OF THE OLD REGIME SERIOUSLY, WHO
LIKELY ENDORSES THE SAG'S LESS RESPONSIVE STANCE TO U.S.
REQUESTS FOR FINANCIAL SUPPORT FOR FOREIGN POLICY
INITIATIVES AND COMMERCIAL DEALS, BUT WHO MAY BE MORE IN
TUNE WITH THE SAUDI POPULACE. AN IMPORTANT CAVEAT,

HOWEVER, IS THAT IT IS A LOT EASIER TO ESPOUSE REFORM,
THAN IT IS TO ACHIEVE IT, PARTICULARLY IN A POLITICAL
SYSTEM BASED ON FAMILY CONSENSUS AND COMPROMISE. END
SUMMARY


4. (C) IN THE LAST WEEK, TWO FORMER AMBASSADORS TO
SAUDI ARABIA, RICHARD MURPHY AND CHAS FREEMAN, VISITED
RIYADH AND SEPARATELY RELATED TO THE AMBASSADOR AND POL
COUNSELOR THEIR IMPRESSIONS OF THE POST-GULF WAR SAUDI
POLITICAL ORDER, BASED ON MEETINGS WITH THE CROWN
PRINCE, MORE JUNIOR MEMBERS OF THE AL SAUD, AND MERCHANT
FAMILIES IN RIYADH AND JEDDAH. MURPHY IS A FREQUENT
TRAVELLER TO SAUDI ARABIA (THIS TRIP WAS UNDER THE
AUSPICES OF THE COUNCIL OF FOREIGN RELATIONS), WHILE
FREEMAN'S VISIT WAS HIS FIRST OPPORTUNITY TO CALL UPON
THE CROWN PRINCE SINCE HIS DEPARTURE IN AUGUST 1992.

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ABDULLAH ASCENDANT
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5. (C) FREEMAN DESCRIBED A RELAXED, YOUNGER-LOOKING,
AND MORE CONFIDENT CROWN PRINCE WHO, IN THE COURSE OF
THE HOUR LONG MEETING, DID NOT ONCE STUTTER. DESPITE
HIS IMPLICIT ACKNOWLEDGMENT THAT THE CURRENT POLITICAL
ARRANGEMENT -- WITH THE KING TECHNICALLY BACK IN CHARGE
BUT, FOR ALL PRACTICAL PURPOSES, ISOLATED IN JEDDAH --
IS AWKWARD, ABDULLAH EXUDED SELF-CONFIDENCE AND GREATER
AUTHORITY.


6. (C) MURPHY TOO COMMENTED ON ABDULLAH'S UNUSUALLY
RELAXED AND RELATIVELY LOQUACIOUS STYLE AND SECONDED
FREEMAN'S IMPRESSION THAT THE CROWN PRINCE IS ENJOYING
HIS EXPANDED RESPONSIBILITIES. MURPHY RELATED THAT
WHILE ABDULLAH SIMPLY STATED THAT FAHD IS "FINE," A
CLOSE ARAB FRIEND OF THE KING'S HAD TOLD HIM THAT DURING
A RECENT PHONE CONVERSATION WITH FAHD, THE KING FALTERED
AND THEN WAS HEARD ASKING SOMEONE "WHO AM I SPEAKING
WITH?" FREEMAN'S REQUEST TO MEET WITH THE KING WAS MET
WITH SILENCE BY ROYAL PROTOCOL.


7. (C) BOTH FORMER AMBASSADORS WERE TOLD BY FAMILIES
WHO ENJOY BUSINESS RELATIONSHIPS WITH THE AL SAUD THAT
FAHD'S BROTHERS ARE CONCERNED THAT HE MAY BE TAKEN
ADVANTAGE OF BY HIS AVARICIOUS IN-LAWS, THE
AL-IBRAHIMS. JEDDAH MERCHANT FAMILIES BELIEVE RIYADH
GOVERNOR PRINCE SALMAN'S CONTINUED PRESENCE IN JEDDAH BY
THE KING'S SIDE IS REQUIRED IN ORDER TO FEND OFF EFFORTS
BY AL-JAWHARA (THE KING'S FAVORITE WIFE), HER SON ABD
AL-AZIZ (THE KING'S FAVORITE SON), AND HER BROTHERS, THE
AL-IBRAHIMS, TO SECURE A GREATER PORTION OF THE KING'S
ASSETS. ACCORDING TO THESE REPORTS, AL-JAWHARA AND ABD
AL-AZIZ ARE UNEASY WITH THE GRADUAL CEDING OF POLITICAL
AUTHORITY TO THE CROWN PRINCE.

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PICKING UP THE TAB: THE UNPLEASANT GULF WAR MEMORY
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8. (C) ABDULLAH TOOK BOTH MEN TO TASK FOR WHAT HE
JUDGED TO BE THE UNFAIR FINANCIAL BURDEN PLACED ON THE
SAUDI ECONOMY BY THE U.S. DURING DESERT SHIELD/STORM.
REFERRING TO JIM BAKER'S MEMOIRES, THE CROWN PRINCE TOLD
FREEMAN HE APPRECIATED HIS EFFORTS DURING THE WAR TO
CONVINCE THE FORMER SECRETARY OF STATE TO MODERATE HIS
FINANCIAL DEMANDS. IN CONTRAST TO THE EMOTIONAL TRIBUTE
ABDULLAH PAID TO THE U.S. FORCES SIX MONTHS AFTER THE
WAR, IN THIS MOST RECENT MEETING WITH MURPHY THE CROWN
PRINCE SPONTANEOUSLY REMARKED, "WE SPENT FAR TOO MUCH ON
THE GULF WAR," AND QUERIED "WHY DID YOU GET US TO SPEND
SO MUCH?" IN RESPONSE, MURPHY STATED THAT AT THE TIME
WE WERE CONCERNED OVER ENGAGING THE FOURTH LARGEST ARMY
IN THE WORLD AND THAT OUR INTELLIGENCE ON IRAQ WAS
ALWAYS WEAK. ABDULLAH SNAPPED IN RESPONSE, "WHERE WAS
THE CIA, SLEEPING?...IS IT ANY BETTER NOW?" THE CROWN
PRINCE CONCLUDED BY NOTING, "WELL, THE MONEY IS GONE,
SPENT."


9. (C) AMONG THE PRIVATE SECTOR, REACTION TO THE
FINANCIAL AFTER-SHOCKS OF THE GULF WAR IS "VIOLENT,"
ACCORDING TO FREEMAN. WHILE CAREFUL TO COUPLE THEIR
CRITICISMS WITH APPRECIATION FOR THE U.S. MILITARY
RESPONSE, SAUDI BUSINESSMEN TOLD FREEMAN THAT THE U.S.
TOOK ADVANTAGE OF AN ALLY IN A TIME OF CRISIS.
FURTHERMORE, FREEMAN WAS LECTURED, THE PROMOTION OF
LARGE COMMERCIAL CONTRACTS AFTER THE WAR, SUCH AS THE
BOEING AIRPLANE DEAL, FURTHER REDUCES THE GOVERNMENT'S
ABILITY TO MAKE GOOD ON ITS DOMESTIC ARREARS. BASED ON
HIS MEETINGS WITH THE MAJOR MERCHANT FAMILIES, FREEMAN
HAZARDED THAT THE SAG OWES BETWEEN 12-15 BILLION USD IN
ARREARS. (NOTE: EMBASSY ESTIMATES PLACE ARREARS AT
10-13 BILLION USD.)

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ABDULLAH'S PLATFORM: UNITED BUDGET, LESS CORRUPTION
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10. (C) ABDULLAH INDICATED TO FREEMAN THAT HE WAS
PREPARED TO TACKLE SAUDI ARABIA'S FINANCIAL DIFFICULTIES
HEAD-ON. NOTING THAT MORE ECONOMIC BELT-TIGHTENING
WOULD HAVE TO BE IMPOSED, THE CROWN PRINCE AGREED THAT
SOME MEASURE OF AUSTERITY MIGHT PROVIDE A VALUABLE
LESSON FOR SAUDI YOUTH, WHO, ABDULLAH BELIEVES, HAVE
BECOME TOO SOFT DURING THE BOOM YEARS.


11. (C) IN RESPONSE TO LEADING QUESTIONS FROM
FREEMAN, THE CROWN PRINCE OPAQUELY COMMENTED ON THE
NEED TO "UNIFY" THE SAUDI BUDGET, WHICH FREEMAN READ TO
MEAN INCORPORATING INTO THE BUDGET THE OFF-BUDGET
EXPENDITURES RELATED O THE "RECONSTRUCTION" OF THE TWO
HOLY MOSQUES IN MECCA AND MEDINA, THE SAG-UK AL-YAMAMAH
WEAPONS PROGRAM, AND THE STRATEGIC STORAGE PROJECT.
(NOTE: IT IS FROM THESE PROJECTS, WHOSE ESTIMATED 12
BILLION USD BUDGETS SIDESTEP THE MINISTRY OF FINANCE,
THAT THE KING AND MINDEF SULTAN ARE BELIEVED TO DIVERT
GREAT SUMS INTO THEIR PERSONAL ACCOUNTS OR TO COMPANIES
IN WHICH ROYAL FAMILY MEMBERS HAVE AN INTEREST.) THE
CROWN PRINCE NOTED IN GENERAL TERMS THAT SUCH A TASK
WOULD NOT BE EASY.


12. (C) A FURTHER INDICATION THAT THE CROWN PRINCE
WILL EMBRACE AN ANTI-CORRUPTION DRIVE AS PART OF HIS
POLITICAL AGENDA, FREEMAN CONTINUED, IS THE TIGHT
SURVEILLANCE THAT ABDULLAH KEEPS HIS SONS UNDER WHEN IT
COMES TO PRIVATE BUSINESS DEALS. (COMMENT:
NEVERTHELESS, WE ARE AWARE THAT ABDULLAH'S PROGENY, SUCH
AS DEPUTY SANG COMMANDER PRINCE MITIB, ARE NOT LACKING
IN AVARICE.)

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ABDULLAH ON ISRAEL AND IRAN
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13. (C) COMING ON THE HEELS OF A TELEPHONE
CONVERSATION WITH EGYPTIAN PRESIDENT MUBARAK, THE CROWN
PRINCE QUESTIONED MURPHY CLOSELY ABOUT LIBYAN CHEMICAL
CAPABILITIES. ABDULLAH, MURPHY NOTED, REMARKED THAT THE
U.S. HAS MADE AGAIN ACCUSATIONS OF A COVERT WEAPONS
PROGRAM AGAINST LIBYA AND PAKISTAN, YET HAS SAID NOTHING
ABOUT ISRAEL'S NUCLEAR CAPABILITY. ABDULLAH EMPHASIZED
THAT ARAFAT CANNOT ACCEPT ANY SETTLEMENT WHICH IS UNJUST
AND STRONGLY CRITICIZED THE COLLECTIVE PUNISHMENT BEING
METED OUT BY ISRAEL AGAINST THE PALESTINIANS. MURPHY
URGED ABDULLAH NOT TO EXAGGERATE THE HUMANITARIAN
DIMENSION, WHICH CAN BE REMEDIED QUICKLY, BUT FOCUS ON
WHAT CAN BE DONE TO SHORE UP THE POLITICAL WILL OF BOTH
PERES AND ARAFAT TO MOVE THE PEACE PROCESS FORWARD.


14. (C) REPEATING COMMENTS WHICH HE FIRST MADE TO
MURPHY IN NOVEMBER 1995, THE CROWN PRINCE URGED THE
UNITED STATES TO FIND AN ARENA IN WHICH TO ENGAGE IRAN,
ESSENTIALLY ENDORSING THE EUROPEAN UNION'S POLICY OF
CRITICAL DIALOGUE. ABDULLAH CHARACTERIZED THE TRADE
EMBARGO AS COUNTERPRODUCTIVE TO THE U.S.'S LONG-TERM
INTERESTS.

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COMMENT
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15. (C) ABDULLAH'S REMARKS, AS REPORTED BY THE TWO
AMBASSADORS, REFLECT A RULER WHO TAKES ECONOMIC REFORM
SERIOUSLY; WHO, AS KING, LIKELY WILL SHARPEN THE PATTERN
OF THE LAST SEVERAL YEARS UNDER FAHD'S TENURE OF
DECLINING RECEPTIVITY TO APPEALS BY THE USG FOR DONOR
AID TO SUPPORT FOREIGN POLICY INITIATIVES; BUT WHO IS
MORE IN TUNE, ECONOMICALLY AND POLITICALLY, WITH HIS
SUBJECTS. WHILE FREEMAN DESCRIBED HIS CONVERSATION WITH
ABDULLAH ON ECONOMIC REFORM AS PART KABUKI THEATER, HE
LEFT THE MEETING CONVINCED (AS ABDULLAH'S RIGHT HAND
MAN, SHAYKH ABD AL-AZIZ AL-TUWAIJRI, HAS OFTEN TRIED TO
CONVINCE US - REFTELS) THAT ABDULLAH IS SERIOUS ABOUT
REFORMING BOTH THE SAUDI ECONOMY AND THE ROYAL FAMILY.


16. (C) IF HE WERE TO SUCCEED IN "UNIFYING" THE
BUDGET, WHICH HAS LONG BEEN THE GOAL OF SAUDI ARABIA'S
TECHNOCRATS, ABDULLAH WOULD REMOVE FROM THE
DISCRETIONARY SPHERE THE FUNDS WITH WHICH THE AL FAHD
HAVE USED TO SUPPORT THEIR LAVISH LIFESTYLE, AS WELL AS
DISTRIBUTING TO THEIR SUPPORTERS. ABDULLAH'S STATEMENTS
MAY REFLECT HIS OWN FRUSTRATION AT HAVING THE KINGDOM'S
DISCRETIONARY FUNDS TIED UP IN OFF-BUDGET, AL
FAHD-CONTROLLED, PROJECTS. NEVERTHELESS, IT IS EASIER
TO ENDORSE REFORM AS A CROWN PRINCE, THAN IT IS TO
EFFECT IT AS A KING. REGARDLESS OF ABDULLAH'S
CREDENTIALS AS A REFORMER, HIS POLITICAL AND ECONOMIC
AGENDA WILL REQUIRE HIS ACHIEVING A FAMILY CONSENSUS
THAT WOULD LIKELY INVOLVE COMPROMISES WITH THE VERY
PRINCES WHOSE LIVELIHOOD HIS REFORMS WOULD THREATEN.


MABUS