US embassy cable - 05MANAMA145

C O N F I D E N T I A L MANAMA 000145 
 
SIPDIS 
 
STATE FOR NEA/ARPI BERNS AND EB JFINN 
STATE PLEASE PASS USTR BUNTIN 
COMMERCE FOR ITA/MAC/ONE LOUSTAUNAU AND HOFFMAN 
 
E.O. 12958: DECL: 01/29/2015 
TAGS: ECON, ECIN, ENRG, EPET, PREL, BA 
SUBJECT: MINISTER OF INDUSTRY AND COMMERCE DISCUSSES NEW 
CABINET PORTFOLIOS, OIL PRICES, BILATERAL RELATIONS. 
 
REF: MANAMA 0064 
 
Classified By: Ambassador William T. Monroe for reasons 
1.4 (b) and (d). 
 
1.  (C) Summary.  On January 29, Ambassador and Minister of 
Industry and Commerce Hassan Fakhro discussed cabinet 
portfolios after the recent shake-up, the impact of the Saudi 
cut-off of its 50,000 barrel per day oil grant, and 
U.S.-Bahrain relations.  Fakhro said that, for now, the 
Minister of Finance would remain in charge of the FTA.  End 
Summary. 
 
Cabinet Portfolios 
------------------ 
 
2.  (C) Fakhro said in the old cabinet the Ministry of 
Finance and National Economy (MOFNE, now just the Ministry of 
Finance) oversaw many aspects of the economy, despite the 
contradictory goals of conservative budgetary policies and 
liberal economic growth.  In the new cabinet, appointed by 
the King on January 14, the plan is for the Ministry of 
Finance to work on purely treasury issues, with 
macro-economic planning falling under the Economic 
Development Board, with micro-economic strategy eventually 
being folded into the Ministry of Industry and Commerce.  The 
Minister also stated that responsibility for the various 
industrial companies formerly under MOFNE, including aluminum 
company Alba, would eventually be passed to Industry and 
Commerce.  It was still unclear what would happen with the 
Ministry of Oil, and the companies under its purview.  One 
option under consideration had been to merge it with 
Industry.  Another possibility would be to put it with 
Electricity and Water to form a Ministry of Energy. 
 
Free Trade Agreement 
-------------------- 
 
3.  (SBU) The Ambassador asked who would have responsibility 
for the free trade agreement now that National Economy was 
moving out of Finance.  The Ambassador stressed that it would 
be important to have an FTA point of contact as we moved 
towards ratification.  Fakhro indicated that the point had 
not been addressed, and promised to get back to the 
Ambassador with an answer.  The next day, Fakhro called to 
say that, for the time being, responsibility for the FTA 
would remain with Finance (that is, new Minister of Finance 
Shaikh Ahmed bin Mohamed Al Khalifa). 
 
Oil Fields and Prices 
--------------------- 
 
4.  (C) The Minister said the GOB is still trying to reverse 
Saudi Arabia's decision to discontinue the 50,000 barrel per 
day oil grant to Bahrain (reftel).  He stated that, a recent 
report by the McKinsey group calculated that Bahrain requires 
a net price of $33 per barrel (roughly $37 gross - cost of 
oil and transportation) to have a balanced budget.  This is 
significantly higher than the $25 needed by Saudi Arabia and 
the $17 per barrel required by the UAE and Kuwait.  Fakhro 
dwelled at some length on the hardship the loss of 50,000 bpd 
was causing the government, and welcomed any help from the 
USG in convincing the Saudi's to restore the grant. 
 
U.S.-Bahrain Relations 
---------------------- 
 
5.  (C) The Ambassador briefed the Minister on the state of 
play with the Bahrain School, saying that he expected to 
deliver a letter shortly to the Crown Prince reaffirming its 
continued operation as a DOD school, but asking for financial 
help to cover this budget year's shortfall.  Fakhro told the 
Ambassador that in terms of U.S. public relations efforts, 
the best program we had going was the Bahrain School.  He 
also noted that the Crown Prince and the King have expressed 
interest in bolstering U.S.-Bahraini relations through public 
activities that serve to highlight how Bahrain benefits from 
the relationship.  When asked, Minister Fakhro also said he 
would happily support the newly-formed AmCham by speaking at 
and/or attending events. 
MONROE