US embassy cable - 04ABUDHABI503

UNCLAS SECTION 01 OF 04 ABU DHABI 000503 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EB, EB/IFD, NEA/ARP 
 
E.O. 12958: N/A 
TAGS: PREL, PGOV, ECON, AF, IR, IS, IZ, TC 
SUBJECT: SCENESETTER FOR A/S WAYNE VISIT TO ABU DHABI 
FOR THE IRAQ DONOR'S MEETING 
 
 
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SUMMARY 
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1. (SBU) Assistant Secretary Wayne: We look forward to 
welcoming you back to the UAE for your February 28- 29 
visit.  In addition to the donor's conference, we have 
scheduled bilateral meetings for you with Minister of 
State for Finance and Industry, Dr. Mohamed Khalfan 
bin Khirbash, MFA Assistant Under Secretary for 
Political Affairs, Abdullah Rashid Al-Noaimi, and 
Central Bank Governor Sultan Nasser Al-Suwaidi.  In 
addition, it would be our pleasure to invite you to a 
reception that the Ambassador is hosting the evening 
of February 28 to mark your visit, the visit of 
Commerce Under Secretary Kenneth Juster, and an OPIC 
delegation.  We will schedule a press availability for 
you with local media at which you can discuss the U.S. 
role in Iraq reconstruction and the excellent 
bilateral relationship. 
 
2. (U) The UAE has the third largest economy in the 
Arab world.  It also possesses between 9% and 10% of 
the world's proven oil reserves and the 4th largest 
reserves of natural gas.  The overwhelming majority of 
these reserves are in the Emirate of Abu Dhabi. 
Despite this mineral wealth, the UAE has succeeded in 
diversifying its economy away from oil to a large 
degree.  Only about a third of the GDP comes from 
crude oil.  Unusually for countries in this region, 
the UAE has never completely nationalized its upstream 
oil industry.  The individual emirates have majority 
control of the oil industry in each emirate, but 
international oil majors (including Exxon Mobil) are 
minority shareholders and bring their expertise to the 
table.  The Emirate of Dubai has responded to its 
dwindling oil supplies to push for diversified growth 
and is the home of the largest and most successful 
free zone in the world, the Jebel Ali Free Zone.  Abu 
Dhabi, in contrast, is still more dependent on oil for 
its economic growth, but is the only emirate in the 
UAE that has privatized its power and water sectors. 
 
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BILATS 
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3. (SBU) You will be meeting with the following 
individuals. 
 
-- H.E. Dr. Mohammed Khalfan bin Khirbash, Minister of 
State for Finance and Industry.  He is an American- 
educated technocrat (BU and Harvard) and has been the 
UAEG's point person on a number of high-profile 
issues, including the IMF/WB Annual Meetings in Dubai 
and on the UAE-USG TIFA negotiations.  He will lead 
the delegation to the U.S. and sign the TIFA agreement 
with the U.S.  He will be looking for an idea about a 
date for a TIFA signing (currently proposed for March 
12 or 15) and will likely be interested in how quickly 
the UAE can move to FTA negotiations.  You will want 
to let him know that UAE agency laws and labor laws 
are likely topics for TIFA meetings and that the UAE 
should be prepared to discuss them.  (We believe that 
they will be the most difficult issues to resolve and 
are much less concerned about IPR where the UAE's 
record is excellent.)  In addition, you will want to 
reinforce the message that the UAE will need to meet 
with key actors on Capital Hill, in the 
administration, and in the private sector in order to 
build support for a FTA. 
 
-- H.E. Ambassador Abdullah Rashid Al-Noaimi, 
Assistant Under Secretary for Political Affairs at the 
Ministry of Foreign Affairs.  He is another friend of 
the U.S. and one of the Embassy's main interlocutors 
on bilateral and multilateral political issues.  As 
the MFA has taken the lead on a number of donor 
coordination issues, he is a regular participant in 
the weekly Iraq donors' calls.  He and Dr. Khirbash 
are both very involved in the current donors' 
conference.  You will want to thank him for the UAE's 
active support for Iraqi Reconstruction and the core 
group.  You will also want to raise the issue of a UAE 
donation to the UN Trust Fund.  Currently the UAE is 
not a member of the Donors' Committee and does not 
appear to be ready to commit the $10 million required 
to join the committee. 
 
-- H.E. Sultan Nasser Al-Suwaidi, Governor of the UAE 
Central Bank.  He is another U.S.-educated official, 
with a bachelor's degree from San Diego State 
University. He is a regular contact of the Embassy and 
has been a tireless champion of the UAE's anti money 
laundering and anti terrorist finance efforts.  He 
receives generally high praise from bankers here for 
his efforts and his commitment.  Over the last few 
months, we have noticed that he has been increasingly 
"prickly" in his remarks to the press about 
cooperation with the U.S.  Much of this can be traced 
to some negative press articles on the UAE financial 
system, one written by a New York Times reporter who 
was on Secretary Snow's traveling press squad during 
the IMF/WB Annual Meetings.  Minister of State for 
Foreign Affairs Hamdan Bin Zayed Al-Nahyan and the 
Governor called on Treasury Secretary Snow in October 
to raise this issue.  Secretary Snow's answer was that 
the article did not reflect the official U.S. view of 
the UAE.  You will want to reinforce the message that 
Washington appreciates his cooperation.  You will also 
want to note that you understand that Central Bank's 
cooperation with our law enforcement agencies has been 
excellent and vital.  We know that the UAE is actively 
issuing search and freeze orders on suspicious 
accounts, but you may want to press for more 
information on their actions.  You will also want to 
ask the governor about his plans to host the 2nd 
Hawala Conference and encourage him to do so. 
 
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Issues 
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4. (SBU) Trade - The UAE is very interested in 
negotiating a Free Trade Agreement with the U.S.  As a 
first step, they negotiated a TIFA with us over the 
last several months.  For our side, due to the 
importance of the bilateral relationship in a number 
of areas and due to the size and diversity of the UAE 
economy, we also want to push the process forward as 
quickly as possible and would like to see UG - UAE FTA 
negotiations begin before U.S. Presidential elections 
this November.  The UAE is a significant trading 
partner, with a rapidly growing economy and U.S. 
business presence.  As it has become the region's 
center for trade, banking, transport and tourism, a 
FTA with the UAE could advance the President's MEFTA 
goal by providing an attractive platform into which 
other regional states could "dock."  We have recently 
concluded negotiations on an English language text for 
the TIFA and language services is working on 
reconciling the Arabic text (both texts are equally 
valid).  The UAE has proposed to come to the U.S. for 
a signing ceremony on either March 12 or 15 and we are 
waiting to see if that will fit on Ambassador 
Zoellick's schedule. 
 
5. (SBU) The clear preference here is for the UAE and 
the U.S. to pursue a FTA bilaterally rather than 
through the GCC.  In that regard, the GCC 
Secretariat's proposal to initiate region-wide free 
 
SIPDIS 
trade negotiations with the United States has put UAE 
officials in the uncomfortable political position of 
having to support the GCC 'party line,' while at the 
same time, vigorously pursuing a bilateral TIFA and 
FTA agreement with Washington.  We want to use the FTA 
to resolve some of the bilateral economic irritants 
that we have with the UAE, including restrictive 
agency laws and U.S. concerns about labor rights 
(especially the right of association).  In contrast 
the UAE's record on IPR protection is excellent. 
 
6. (SBU) Donors Coordination Issues - The two key 
interlocutors are MFA Under Secretary Al-Noaimi, who 
has been the primary senior-level working person on 
the Iraq donors issue, and Dr. Khirbash, who led the 
UAE delegation to Madrid and will also chair the UAE's 
participation in this conference.  As a member of the 
Iraq Core Donors's Group, the UAE has played an active 
role in providing humanitarian and reconstruction 
assistance to the Iraqis.  The UAE pledged $215 
million at the Madrid Donors' Conference.  Abdullah 
Rashid told the DCM in Early February that the UAE has 
disbursed this amount on humanitarian assistance and 
Siemens generators for four power plants.  As of the 
end of last year, we had estimated that the UAE had 
provided $80 to $100 million in assistance to Iraq 
(including in-kind assistance) some of which was 
included in the $215 million pledge.  The problem has 
always been that the assistance is provided by 
different governmental arms and from the Emirate of 
Abu Dhabi, which makes it very difficult for anyone 
(including the UAE) to provide an accurate total. 
Despite their generosity, the UAE prefers to provide 
assistance bilaterally and has -- so far -- declined 
to pledge any money to the UN trust fund.  The host of 
the conference, therefore, is not a member of the 
donors' committee.  The UAE also committed to forgive 
most of Iraq's $7 billion bilateral debt after meeting 
with Special Presidential Envoy James Baker.  We would 
want to see the UAE continue its key role in Iraqi 
reconstruction and to encourage its support for 
multilateral efforts.  We would hope your meeting and 
the conference would help us (and them) better 
understand how much assistance they have already 
given. 
 
7. (SBU) The UAEG has maintained a robust assistance 
package to the Palestinians.  With more than $75 
million in project assistance to Palestinians in the 
West Bank and Gaza since September 2000, the UAE has 
been a major Arab donor to the Palestinians since the 
Intifada began three years ago.  In 2003, the UAE Red 
Crescent Authority gave $11.8 million in humanitarian 
aid to the Palestinians, with development projects 
accounting for the lion's share (42 percent), and 
seasonal programs, such as Ramadan iftar meals and Eid 
Al Adha meat donations 20 percent.  The efforts are 
carefully monitored and very much support our strategy 
to ensure that funds do not fall into the wrong hands. 
 
8. (SBU) The UAE continues to play a very helpful role 
in Afghanistan, particularly in the provision of 
humanitarian and reconstruction assistance.  UAE 
humanitarian and military programs in Afghanistan are 
ongoing, and we expect the final price tag to far 
exceed the $150 million already spent. 
 
9. (SBU) Cooperation on Anti Terrorist Financing:  The 
UAEG has been very cooperative in the fight against 
terrorist financing.  We continue to share information 
on exchanging records in connection with terrorist 
financing and other money laundering cases on an ad 
hoc basis.  Although the U.S. Mission perceives that 
our relationship with the UAEG on money laundering and 
terrorist finance is close and cooperative, the UAE 
Central Bank Governor publicly criticized the United 
States at the IMF/World Bank meetings in September 
about failing to provide data, documents, and evidence 
on cases of suspected money laundering to the UAEG. 
Since September 11, the UAE has provided thousands of 
pages to the U.S. in support of investigations into 
the September 11 terrorist attacks.  We want to ensure 
that the cooperation continues and that the UAE 
continues to share information with us.  You will want 
to be prepared to answer the charge that the 
cooperation is all one way, with the UAE always 
providing information but receiving little in return. 
If this comes up, you may want to note that we have 
asked the Central Bank for a list of cases, where the 
USG has not provided information and will be happy to 
follow up on any cases for which the Central Bank 
provides us with the information. 
 
10. (U) The UAEG implemented a law to criminalize 
money laundering, to include terrorist financing, in 
January 2002.  The Central Bank has circulated to all 
financial institutions under its supervision the lists 
of individuals and entities suspected of terrorism and 
terrorist financing included in UN Security Council 
resolutions.  To date, the Central Bank has frozen a 
total of USD 3.13 million in 18 bank accounts in the 
UAE since 9/11.  In 2002, the UAEG worked in 
partnership with the United States to block terrorist 
financing and froze the assets of more than 150 named 
terrorist entities -- including significant assets in 
the UAE belonging to the Al-Barakat terrorist 
financing group. 
 
11. (SBU) Although we assess the formal financial 
sector in the UAE as being effectively controlled, the 
UAE is home to an unknown number of informal money 
remitters (known as hawala brokers).  They are 
required to register with the Central Bank and about 
100 have done so.  So far, the Central Bank is trying 
to bring the hawala dealers in to the system "gently," 
but does have plans to seek out unregistered Hawala 
dealers in the future.  The new attention on hawala is 
encouraging more people to use regulated exchange 
houses in the UAE.  Traders in Dubai's Central Souk 
said hawala exchange rates are now only 3 percent 
cheaper than formal exchange houses, persuading many 
to use the formal, and more secure, banking network. 
We understand that the Central Bank plan to host 
another conference on Hawala in April and would be 
interested in learning how the planning is going. 
 
12. (SBU) The UAEG carefully monitors registered 
charities in the country and requires the 
organizations to keep records of donations and 
beneficiaries.  The Ministry of Labor and Social 
Affairs regulates charities and charitable 
organizations in the UAE.  The UAEG is much more 
sensitive post-9/11 to the oversight of charities and 
accounting of transfers abroad.  In 2002, the UAEG 
mandated that all licensed charities here interested 
in transferring funds overseas must do so via one of 
three umbrella organizations:  the Red Crescent 
Authority, the Zayed Charitable Foundation, or the 
Muhammad Bin Rashid Charitable Trust.  These three 
quasi-governmental bodies are properly managed, and in 
a position to ensure that overseas financial transfers 
go to legitimate parties. 
 
WAHBA