US embassy cable - 05MUSCAT252

S E C R E T SECTION 01 OF 02 MUSCAT 000252 
 
SIPDIS 
 
TO CSAF POLAD AMBASSADOR FRAZIER FROM THE AMBASSADOR 
 
E.O. 12958: DECL: 02/14/2015 
TAGS: PREL, PGOV, OTRA, MU, Domestic Politics 
SUBJECT: SCENESETTER: YOUR VISIT TO OMAN 
 
Classified By: Ambassador Richard L. Baltimore III. 
Reason: 1.4 (d). 
 
1. (U) Greetings and welcome from Team Muscat.  We are 
confident you will gain a great deal from your participation 
in the upcoming MEAS IV Conference, and are proud that the 
Sultanate of Oman is hosting this year's event with excellent 
assistance and cooperation from CENTAF.  In addition to the 
briefing materials you will receive on the military aspects 
of your visit, I am pleased to provide the following 
political and economic backgrounder on some of the key issues 
in our bilateral relationship with Oman. 
 
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Political Development and Cooperation 
------------------------------------- 
 
2. (SBU) Oman continues to chart a careful path toward 
modernization while preserving a powerful and proud cultural 
heritage.  Sultan Qaboos exercises full authority in Oman, 
although he does delegate responsibility for government 
operations to a Cabinet of Ministers, which now includes four 
women.  A bicameral proto-parliament exists in the form of 
the Majlis Oman (Council of Oman), a consultative body 
composed of the appointive Majlis al-Dawla (State Council) 
and the elected Majlis al-Shura (Consultative Council). 
While not imbued with full legislative powers, these bodies 
can review important policy elements such as the state budget 
and offer formal recommendations.  The Majlis al-Shura is 
elected via universal suffrage for all Omanis over the age of 
21.  In the October 2003 elections, two women were elected to 
the 83-member council.  Nine of the 59 appointed members of 
the State Council are female.  The USG funds some limited 
training programs for State Council staff and, just recently, 
members too. 
 
3. (SBU) The thrust of Oman's foreign policy is to maintain 
amicable relations with all nations, particularly given 
historical tensions in the Gulf and the prickliness of 
several of the Sultanate's neighbors.  The U.S.-Oman 
relationship spans almost 200 years, as the Sultanate was the 
first Arab state to send an Ambassador to Washington.  More 
recently, Oman was one of the first nations to recognize the 
Iraqi Interim Government, and the Omani government also 
offered its strong support for the IIG's inclusion in the 
Arab League and other regional bodies.  An Iraqi Ambassador 
recently presented his credentials to the Sultan, though Oman 
has yet to reopen its embassy in Baghdad.  Despite generally 
positive press coverage of the January 30 elections, however, 
Oman remains one of the few states in the region not to have 
publicly acknowledged that historic development.  Oman's 
relationship with Iran is perhaps its most sensitive, as the 
two states share stewardship of the strategic Strait of 
Hormuz.  Iranian President Khatami paid his first-ever Oman 
state visit October 6-7, 2004.  The Sultan is determined to 
maintain cordial relations with Iran, with the topic of 
illegal immigration into Oman being perhaps the prickliest 
aspect of the relationship.  Oman is emphatic in urging 
diplomatic means and dialogue to resolve U.S. issues with 
Tehran. 
 
4. (S) A potential set-back in the foreign policy realm to 
which we are seeking clarification was a February 9 note from 
the Foreign Ministry that, while stressing Oman's commitment 
to proliferation security, stated that Oman would not "join" 
or "be committed" to the Proliferation Security Initiative 
(PSI).  This note came despite the Omani MOD's participation 
in a PSI-related event as part of the Beacon Flash 2005 
exercise later this month.  The Embassy is likewise heavily 
engaged with Omani agencies under the Export Control and 
Border Security (EXBS) program, with two seminars slated for 
2005, and an active counter-terrorism agenda through military 
programs and State DS's ATA program. 
 
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Political Waters Roiled 
----------------------- 
 
5. (C) Rumors of arrests in several parts of the country in 
recent months have captivated the Omani public's attention. 
While international wire services have reported wildly 
exaggerated statistics and theories about the detainees, the 
Omani government has assured the diplomatic community that 
"fewer than 20" persons have been detained for suspicion of 
belonging to an "illegal association."  While the actual 
number may be higher, the government's insistence that none 
of the detainees were captured with weapons or appeared to 
have violent intent seems to be true.  Our best guess is that 
the detainees were a network of Ibadhi Muslim scholars or 
activists who have taken issue with perceived moral decay in 
the Sultanate, and who may have been advocating for Oman's 
return to rule by an Imam rather than a Sultan.  The Sultan's 
father abolished the Imamate in the 1950's. 
 
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TIFA, FTA, and Beyond 
--------------------- 
 
6. (U) U.S. Trade Representative Robert Zoellick and Omani 
Minister of Commerce and Industry Maqbool bin Ali Sultan 
signed a Trade and Investment Framework Agreement (TIFA) on 
July 7, 2004 in Washington.  Minister Maqbool traveled to 
Washington again in September heading Oman's delegation for 
the first bilateral U.S.-Oman TIFA Council meeting.  On 
November 15, 2004, USTR announced its intention to begin 
negotiations with Oman (and the UAE) on a Free Trade 
Agreement.  While consultations have been actively underway, 
formal negotiations begin in Muscat in March.  USTR is 
hopeful the treaty can be concluded in short order.  The FTA 
would mark the most significant economic agreement in the 
history of our bilateral relationship with Oman.  The volume 
of bilateral trade is currently about USD 1 billion annually. 
 
------------------- 
Economic Conditions 
------------------- 
 
7. (SBU) Oman faces two major challenges as it heads into the 
35th year of Sultan Qaboos' reign: a young and growing 
population and declining oil production.  The government 
budget has been buoyed recently by high oil prices, with 
Omani crude attaining a historic high average in January of 
$39.26 per barrel.  This windfall has been offset, however, 
by the weak dollar and a significant drop in oil production, 
from over 950,000 barrels/day (b/d) in 2001 to around 780,000 
b/d today.  Oman's total oil reserves stand at just over 5.5 
billion barrels, good for around 18 years of production at 
the current pace.  Oil accounts for nearly 42 percent of GDP 
and over 70 percent of total government revenue, a clear 
indication that Oman's program of economic diversification 
urgently needs to show results. 
 
8. (SBU) Natural gas is one area showing signs of promise, as 
the government seeks to develop gas-based industry such as a 
petrochemical complex (with the American firm Dow), an 
aluminum smelter (to be announced with American firm 
Bechtel), fertilizer and methanol plants, a second oil 
refinery, and an expanded liquefaction facility for LNG 
exports.  Other prime avenues for diversifying the economy 
include tourism, fisheries, light manufacturing, IT, and 
filmmaking.  On the labor front, Oman's reliance on 
expatriate labor has led to an extensive program of 
"Omanization," or nationalization of the workforce.  Under 
this policy, employers in specific industrial sectors are 
given guidelines to follow regarding the minimum percentage 
of Omanis to be employed.  In addition, the government 
actively pursues training opportunities for young Omanis, 
although the demand for such training far outstrips supply. 
There is booming growth in the number of privately funded 
post-secondary schools. 
 
---------------------- 
2005 - A Landmark Year 
---------------------- 
 
9. (SBU) This year, 2005, is shaping up to be a banner year 
for U.S.-Oman relations in several ways.  In addition to 
marking the 35th anniversary of Sultan Qaboos' accession to 
the throne, 2005 will witness Oman's participation as the 
first Arab nation to be featured in the Smithsonian Folklife 
Festival on the Washington capital mall.  Beyond this 
valuable opportunity to introduce Americans to Omani culture 
and heritage, we are encouraging the government to send 
commercial and tourism officials to the U.S. to develop 
stronger economic ties and to promote the FTA.  Oman also 
plans to feature the first of its U.S.-built F-16's in the 
National Day celebrations -- coincident with the Sultan's 
65th birthday -- in November.  If things stay on track, 2005 
should see substantial progress and an elevated profile in 
U.S.-Omani relations. 
BALTIMORE