US embassy cable - 04ABUDHABI4468

C O N F I D E N T I A L SECTION 01 OF 02 ABU DHABI 004468 
 
SIPDIS 
 
DEPT FOR NEA/RA, NEA/ARP, INR/EC, EB/IEP 
USDOE FOR INT'L AFFAIRS - COBURN 
USDOE FOR OFFICE OF THE SECRETARY - RHONDA HUDOME 
 
E.O. 12958: DECL: 12/08/2014 
TAGS: EPET, ENRG, ECON, PGOV, TC 
SUBJECT: PRESIDENTIAL ADVISOR SUPPORTS MODERATE OIL PRICES, 
IMPROVING STANDARDS OF LIVING IN NORTHERN EMIRATES 
 
REF: DUBAI 5253 
 
 
(U) Classified by Ambassador Michele Sison for reasons 1.4 
(B) and (D). 
 
1. (C) Summary: Presidential Advisor and Supreme Petroleum 
Council Member Al-Suwaidi told Ambassador December 8 that the 
UAE supports a stable oil price that was fair to both 
producers and consumers.  He said that overly high prices 
were not in the UAE's long-term interest and added that the 
UAE had plans to expand production capacity substantially if 
the economics justified it.  In addition, Al-Suwaidi spoke 
about the need for the UAEG to take steps to share political 
power and to address the economic differences between 
emirates.  End Summary. 
 
2. (C) Ambassador called on Abu Dhabi Supreme Petroleum 
Council member Mohammed Habroush Al-Suwaidi on December 8. 
Al-Suwaidi is the most powerful and influential advisor to 
Sheikh Khalifa on financial and budget issues.  He is a 
key-behind the scenes player in almost all of Abu Dhabi's 
main financial institutions and is, in many ways, the keeper 
of Abu Dhabi's purse.  Habroush is a Member of the Abu Dhabi 
Executive Council, which decides all important Abu Dhabi 
Emirate governance issues.  He is the chairman of the 
National Bank of Abu Dhabi, where the ruling Al-Nahyan do 
their banking and chairs Abu Dhabi's overseas investment 
authority ADIA.  His position on the Supreme Petroleum 
Council (SPC) is also important, because the SPC effectively 
sets UAE oil production policy. 
 
3. (C) Al-Suwaidi reaffirmed the UAE's policy of supporting 
"reasonable and sustainable oil prices" that benefited both 
consumers and producers.  He stressed that exceptionally high 
oil prices were not in the UAE's (or OPEC's) long-term 
interest.  He added that, just as OPEC needed to abide by 
quota restrictions to stop exceptionally low prices, its 
members had the obligation to increase production to meet 
demand.  Al-Suwaidi explained that Abu Dhabi's policy was to 
have enough spare capacity to meet unexpected increases in 
demand.  He noted that the UAE, unlike many of its OPEC 
partners, had never completely nationalized the oil sector, 
allowing it to benefit from the experience of the 
international oil companies, which are its joint venture 
partners. 
 
4. (C) In answer to the Ambassador's question, Al-Suwaidi 
said that -- in the long term -- Abu Dhabi had a plan to 
expand oil production capacity to 4 -4.5 mb/d.  He stressed, 
however, that this was just a plan.  Actual expansion would 
depend on the economics.  (Note:  ADNOC sources have told us 
that ADNOC has a plan to increase production to 3 mb/d by 
2008, again depending on economic justification.)  Al-Suwaidi 
told the Ambassador that Abu Dhabi could increase production, 
both in operating fields and in currently undeveloped fields. 
 Al-Suwaidi assured Ambassador that Abu Dhabi was committed 
to evaluating the bids for the 28 percent stake in the Upper 
Zakkum field, in a fair manner.  (Note: Exxon/Mobil is a 
leading candidate for this project.) 
 
5. (C) Al-Suwaidi also talked briefly about the need for the 
UAE to begin to give its citizens more political power and 
authority.  He noted that, in some ways, the UAE had more 
political participation 30 years earlier; with a much smaller 
population, the Majlis system could deal with more issues 
directly.  He admitted that the UAE was a more complicated 
country to run than it had been 30 years ago.  This had 
reduced some of the opportunities for direct participation, 
but he stressed that the UAE would need to slowly take steps 
to share power.  He noted, in a globalized world, UAE 
residents saw that their counterparts elsewhere had political 
participation and would soon want it in the UAE. 
 
6. (C) Al-Suwaidi also talked about the need for Abu Dhabi 
and (to a lesser extent Dubai) to do more to address the 
sharp income inequality between Abu Dhabi/Dubai/Sharja and 
the four poorer northern emirates.  He praised Sheikh Zayed's 
policies of managing the UAE's wealth for all of its 
residents (and for future generations), but added "we need to 
do more."   He added that he thought that UAE President 
Khalifa was committed to helping the citizens of the poorer 
northern emirates, as were Dubai's rulers. 
 
 
7. (C) By way of illustration, Al-Suwaidi talked about his 
travels throughout the emirates.  Thirty years ago, he said, 
he traveled from emirate to emirate, without seeing much 
difference among them.  He described a more recent trip he 
took to the northern Emirates as like traveling to a 
different country.  He viewed the continuing differences in 
wealth between the individual emirates as a problem that 
needed to be dealt with.  If wealth is too concentrated, he 
noted, "people will get jealous."  He stressed, however that 
the solution was not for Abu Dhabi to transfer all its wealth 
to the poorer emirates, but to ensure that all Emiratis have 
"a secure minimum standard of living." This, he concluded, 
was his advice to the President, advice that he thought the 
President agreed with. 
 
8. (U) In other oil related news, the UAE's semi-official 
daily "Al-Itihad" also carried an editorial on the upcoming 
Cairo OPEC meeting.  It noted OPEC's efforts to provide 
stability and to promote world economic growth.  OPEC 
increased production to address the recent high prices. 
Currently, however, OPEC is facing falling prices, increased 
consumer country reserves, and a fall in the value of the 
dollar and needs to think about its own interests.  The 
editorial cited UAE Energy Minster Al-Hamili as stating that 
topics for the upcoming Cairo OPEC meetings would include the 
possibility of ending quota busting by members and looking at 
the possibility of cutting quota production if prices 
continue to drop.  He also said that OPEC members would look 
at raising the OPEC price band from the current USD 22-28 to 
USD 30-38.  Al-Hamili also stated that the UAE has a policy 
of supporting stability in the markets in such a way as to 
meet the needs for both producing ad consuming countries and 
to encourage international growth. 
SISON