US embassy cable - 05MANAMA176

C O N F I D E N T I A L MANAMA 000176 
 
SIPDIS 
 
STATE PASS USTR/NOVELLI 
 
E.O. 12958: DECL: 02/07/2015 
TAGS: ETRD, PREL, ECON, BA, SA 
SUBJECT: CONTINUING SAUDI CONCERNS ABOUT BAHRAIN FTA 
 
REF: MANAMA 145 
 
Classified By: Ambassador William T. Monroe.  Reason: 1.4 (B)(D) 
 
1. (C) Bahrain officials have indicated both publicly and 
privately to us that the crisis with Saudi Arabia over the 
U.S.-Bahrain Free Trade agreement has ebbed, and that it is 
full speed ahead on ratification and implementation.  Saudi 
Ambassador to Bahrain Abdulla Al-Kuwaiz, in a February 6 
discussion with the Ambassador, probed extensively on 
possibilities for delay in implementation, suggesting that -- 
from the Saudi point of view -- concerns remain. 
 
2. (C) After stating flatly that Saudi lawyers have 
determined that the FTA violates GCC agreements, Al-Kuwaiz 
asked when exactly the FTA would come into effect.  Once the 
U.S. Congress ratified it, how long before it actually was 
enacted?  Was there a time limit by which the Bahrain 
parliament had to ratify?  Was there a way to delay 
implementation for, say, one year, to give Saudi Arabia more 
time to deal with outstanding trade-related issues?   The 
Ambassador, in replying, stressed the importance the USG 
attached to the FTA, and the significance it had for our 
bilateral relationship with Bahrain.  He reminded Ambassador 
Al-Kuwaiz that both the President and Secretary had 
highlighted in recent remarks the importance we gave to 
economic and political reform in the region.  He expressed 
the hope that Saudi Arabia, rather than focusing on its 
concerns with the Bahrain FTA, would concentrate on moving 
forward on its own trade agenda with the U.S., including the 
WTO. 
 
3. (C) Comment: It is unclear whether Al-Kuwaiz's comments 
reflected official policy, or simple probing by a local 
Ambassador.  Nonetheless, Washington and Riyadh may wish to 
reengage with the SAG to reinforce our desire that the FTA 
move forward expeditiously.  End comment. 
 
4. (C) On a separate Saudi-Bahrain issue, Al-Kuwaiz reviewed 
the history of the 50,000 b/d Saudi oil grant to Bahrain that 
was ended recently and continues to be a sore point for the 
Bahrain leadership (reftel).  Al-Kuwaiz said that the grant 
was given on annual or biannual bases with no promise that it 
would continue indefinitely.  He said that there was 
resistance to renewing the grant at a time when Bahrain has a 
budget surplus and Saudi Arabia suffers unemployment and 
other economic difficulties.  Nonetheless, the SAG has 
advised the GOB that it will consider restoring at least some 
of the grant if Bahrain shows its budget numbers and 
demonstrates its need for the extra revenue.   So far, he 
said, the GOB has not responded. 
 
5. (C) Finally, Al-Kuwaiz said that he had no details on last 
week's two-day visit to the UAE by Bahrain's King and Prime 
Minister, but presumed it was related to economic assistance 
from the UAE.  In the past, he said, this aid had been based 
on the special relationship between King Hamid and Shaikh 
Zayed, and had been channeled from palace to palace.  UAE 
Shaikh Khalifa, as Crown Prince, had pushed for the 
establishment of a joint governmental committee to regularize 
the assistance.  So far, however, no money had been passed 
through the joint committee mechanism.  Al-Kuwaiz surmised 
that the King and PM traveled to Abu Dhabi to ensure that, 
with Shaikh Khalifa now in charge in the UAE, the aid flows 
continued. 
MONROE