US embassy cable - 03ABUDHABI5076

C O N F I D E N T I A L SECTION 01 OF 02 ABU DHABI 005076 
 
SIPDIS 
 
NOFORN 
 
DEPT FOR NEA/RA, NEA/ARP, INR/EC, EB/IEP, EB/CBA 
USDOE FOR INT'L AFFAIRS - COBURN, ALSO CALIENDO 
USDOC FOR 1000/OC/ 
USDOC FOR 4520/ITA/IEP/ONE 
USDOC FOR 4530/ITA/MAC/ONE/DGUGLIELMI 
4500/ITA/MAC/DAS/WILLIAMSON 
3131/CS/OIO/ANESA 
 
E.O. 12958: DECL 11/23/08 
TAGS: EAIR, ECON, EPET, PGOV, PREL, SOCI, TC 
SUBJECT: UAE: TALK ABOUT TOWN 
 
 
1.  (U) Classified by Charge d'Affaires Richard A. 
Albright, for reasons 1.5 (B) and (D). 
 
2.  (U) This is the first in a series of "Talk About Town" 
cables that the U.S. Mission in Abu Dhabi and Dubai hopes 
to provide on a periodic basis.  These cables will report 
on local business atmospherics and commercial developments 
and, although uncorroborated by UAE officialdom and 
anecdotic in nature, should provide Washington audiences 
with the information we hear frequently in the majlises and 
living rooms throughout the UAE. 
 
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Come Fly The Friendly Skies 
--------------------------- 
 
3.  (C) Econchief recently attended inauguration ceremonies 
for Al-Ittihad Airways -- the so-called "national airline 
of the UAE" -- which began commercial operations on 
November 12.  Abu Dhabi Crown Prince Sheikh Khalifa bin 
Zayid has openly acknowledged his patronage of the airline, 
which already has 200 crewmembers and 3 leased aircraft and 
is wholly owned by the Emirate of Abu Dhabi.  Al-Ittihad 
initially will fly Abu Dhabi to Beirut, and the company 
intends to purchase 6 Airbus aircraft next year and expand 
its operations as quickly as possible.  Although Al-Ittihad 
officials denied to Econchief that the new airline would 
take business away from Dubai's Emirates Air or the 
regional Gulf Air, it appears that Al-Ittihad will in fact 
compete directly with Emirates for prime international 
routes to the United Kingdom and Indian subcontinent. 
Rumors that Bahrain is lining-up financing to buyout Gulf 
Air (currently owned jointly by Bahrain, Abu Dhabi, and 
Oman) have fueled speculation that Khalifa will pull Abu 
Dhabi's support for the regional airline once he becomes 
UAE President. 
 
------------------------ 
Drowning In Good Fortune 
------------------------ 
 
4.  (C/NF) The UAEG-owned power plant at Shweihat 
reportedly is pumping 100 million gallons of unused 
desalinated water a day into the sea, at a cost to the Abu 
Dhabi Water and Electric Authority (ADWEA) of nearly 5 
million dirhams each day in lost revenue.  ADWEA selected 
CMS Energy to build and operate the Shweihat power and 
water plant two years ago, and while CMS finished 
construction of the plant 3 months ahead of schedule -- the 
plant began producing desalinated water in September -- the 
contract to build the network of pipelines from Shweihat to 
Abu Dhabi ultimately (and after several rounds of re- 
tendering) was awarded to a French company.  This delay in 
the award process pushed the construction of the pipeline 
network behind schedule by 8-9 months, and FCS specialists 
have learned that the pipelines will not be ready until 
October 2004. 
 
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Shaykhly Shenanigans 
-------------------- 
 
5.  (C/NF) Shaykh Mansour bin Zayid, Director of the 
President's Office, reportedly is becoming more active in 
Abu Dhabi business circles.  Local oil executives say he is 
proposed building an artificial island near Abu Dhabi as a 
petroleum free zone.  "Oil Island" would capitalize on 
Dubai's free zone model, but with Abu Dhabi's obvious 
appeal as the oil capital of the UAE.  Local transportation 
companies also are complaining that Mansour recently 
manipulated UAE law to win a contract for the transport of 
pipes from Mina Zayid to Shweihat power plant.  UAE law 
states that the 160cm diameter pipes must be transported on 
trucks measuring 12 x 3 meters.  Mansour's transportation 
company owns trucks with wider dimensions, and local 
businessmen claim that the UAE law regulating the size of 
the trucks was recently altered -- requiring wider trucks 
to transport 160cm diameter pipes.  Mansour's company 
reportedly was the only firm in the running with a fleet of 
wide-bed trucks, and outbid the closest competitor by more 
than 10 million dirhams. 
------------------------------ 
Dolphin's Days May Be Numbered 
------------------------------ 
 
6.  (C/NF) Despite signing long-term gas supply agreements 
with the UAE's major power suppliers in October, local 
businessmen speculate that the Dolphin project has stalled. 
The project has lost steam, reportedly because Qatar signed 
a $12.5 billion deal with ExxonMobil to produce and liquefy 
Qatari gas and ship it to the United States.  The UAE and 
the Dolphin project, more generally, have become less 
important to the Qatari leadership, which has not yet 
finalized the production agreement with the Dolphin 
consortium.  Dolphin has not secured either upstream 
pricing agreements with Qatar or downstream pricing 
agreements with customers in the UAE (see Abu Dhabi 4694), 
and Dolphin execs privately have said they require $2 per 1 
million cubic feet of gas in order for the project to turn 
a profit.  It is going to be difficult for Abu Dhabi to 
reach an agreement on pricing with Dubai (which currently 
receives highly subsidized gas from Abu Dhabi) that is also 
acceptable to Dolphin's international partners.  Adding to 
Dolphin's nervousness is the fact that ADNOC also recently 
announced in its five-year strategic plan that the national 
oil company will shift its short-term focus to gas 
production -- an ominous sign perhaps from Abu Dhabi's 
leadership that it has little faith the Dolphin project 
will ever come to fruition.  The Dolphin project is a make- 
it-or-break-it deal for U.S. company Occidental Petroleum, 
which offered $350 million for a 24.5 percent stake in the 
Dolphin project. 
 
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You've Got Mail...But That's It! 
-------------------------------- 
 
7.  (SBU) Some Embassy families were surprised to learn 
this week that the local telecom monopoly, Etisalat, has 
blocked access to the popular American software and 
browser, America Online (AOL).  Indeed, Embassy officials 
confirmed with Etisalat that the UAE's proxy server (a 
firewall providing extra security and restricting access to 
certain objectionable Internet content) is now configured 
to block the Internet port used by the AOL desktop 
software.  AOL account users can still access their email 
via the web and other browsers, such as Netscape and 
Explorer, but have lost the standard AOL features (Instant 
Messenger, AOL chat rooms, etc.) accompanying the AOL 
desktop software.  Working level Etisalat staff could not 
explain the change in policy or why AOL desktop software is 
objectionable, but noted that the UAE Government -- not 
Etisalat management -- would have made such a decision. 
 
Albright