US embassy cable - 90STATE32618

S E C R E T  STATE 032618 
 
MACDILL FOR POLAD 
 
E.O. 12356: DECL:OADR 
TAGS:  PREL, ECON, EAID, YE 
SUBJECT:  THE SECRETARY'S MEETING WITH YAR PRESIDENT 
SALEH: AID AND ECONOMIC SUBJECTS 
 
1.  SECRET - ENTIRE TEXT 
 
2.  SUMMARY:  ON JANUARY 24, SECRETARY BAKER HOSTED 
PRESIDENT SALEH AND HIS DELEGATION AT THE DEPARTMENT OF 
STATE FOR A ONE AND A HALF HOUR EXCHANGE INCLUDING A 
WORKING LUNCHEON.  THE TWO SIDES DISCUSSED THE MIX OF U.S. 
ASSISTANCE FOR FY 90 TOTALLING 47.5 MILLION DOLLARS IN 
ECONOMIC, FOOD, AND MILITARY ASSISTANCE. THERE WAS ALSO 
DISCUSSION OF YEMENI UNITY, U.S.-PDRY RELATIONS, PDRY'S 
SUPPORT FOR TERRORISM, AND THE PEACE PROCESS, SUBJECTS 
WHICH ARE COVERED SEPTEL. A LIST OF PARTICIPANTS IS AT 
PARA 11. 
 
U.S. ASSISTANCE TO YAR 
 
3.  ON JANUARY 24, THE SECRETARY HOSTED PRESIDENT SALEH AND 
SENIOR MEMBERS OF HIS DELEGATION. DURING THE 30-MINUTE 
MEETING WHICH PRECEDED LUNCH, DISCUSSION FOCUSED ON THE FY 
 
90 U.S. ASSISTANCE PROGRAM TO YEMEN.  THE U.S. CONFIRMED 
THAT TOTAL U.S. FY 90 ASSISTANCE WILL BE 47.5 MILLION 
DOLLARS AS FOLLOWS: 
 
-- 21 MILLION DOLLARS IN ECONOMIC ASSISTANCE, 
-- 25 MILLION DOLLARS IN FOOD ASSISTANCE PL-480 TITLE I, 
-- 500,000 DOLLARS IN FMS, AND 
-- 1 MILLION DOLLARS IN IMET. 
 
4. THE U.S. SIDE DESCRIBED THE BREAKDOWN OF THE 25 MILLION 
DOLLARS IN PL-480 AS FOLLOWS:  AN AGREEMENT FOR 5 MILLION 
DOLLARS IN RICE UNDER TITLE I PL-480 HAS ALREADY BEEN 
SIGNED.  THIS IS THAT PORTION OF THE FY 89 PROGRAM WHICH 
MOVED TO FY 90.  THE U.S. AND YEMEN ARE PREPARED TO SIGN 
SCHEDULED FOR JANUARY 25 A SECOND AGREEMENT ON 10 
MILLION DOLLARS IN ADDITIONAL RICE.  THE U.S. GOVERNMENT 
ALSO AGREED TO PROVIDE 5 MILLION DOLLARS FOR A NEW FEED 
GRAIN PROGRAM.  AID ACTING ADMINISTRATOR EDELMAN ADDED 
THAT HE COULD NOW ALSO ANNOUNCE U.S. WILLINGNESS TO ADD AN 
ADDITIONAL 5 MILLION DOLLARS IN FEED GRAINS TO THE 5 
MILLION DOLLARS PREVIOUSLY APPROVED.  HE ATTRIBUTED THIS 
NEW DEVELOPMENT TO THE EFFECTIVE EFFORTS OF AMBASSADOR 
DUNBAR DURING THE DAYS PRECEDING THE VISIT.  THE YEMENI 
SIDE WAS TOLD THAT 20 MILLION DOLLARS OF THIS FOOD 
ASSISTANCE NOT INCLUDED IS THE 5 MILLION DOLLARS IN RICE 
CARRIED OVER FROM FY 89 WOULD BE PROVIDED UNDER EXTRA 
CONCESSIONAL TERMS, WHICH INCLUDES A TEN-YEAR GRACE PERIOD 
AND A 40-YEAR REPAYMENT SCHEDULE. 
 
5. PRESIDENT SALEH EXPRESSED APPRECIATION FOR U.S. 
ASSISTANCE TO THE YAR.  HE TOLD THE SECRETARY THAT HE 
WANTED HIS VISIT TO HAVE A MAJOR IMPRINT ON U.S.-YEMENI 
RELATIONS -- A LAUNCHING POINT FOR A STRONGER BILATERAL 
RELATIONSHIP.  THIS WAS ALL THE MORE IMPORTANT IN LIGHT OF 
THE RECENT DRAMATIC DEVELOPMENTS IN THE WORLD.  HE ASKED 
FOR FURTHER U.S. ASSISTANCE AND SUPPORT FOR YEMEN'S 
EFFORTS TO DEVELOP ITS ECONOMY.  HE REQUESTED U.S. HELP IN 
OBTAINING LOANS FROM THE WORLD BANK IN SUPPORT OF YEMEN'S 
FIVE-YEAR PLAN. 
 
6. THE SECRETARY CONFIRMED THAT WE DO SUPPORT YEMEN'S 
BORROWING FROM THE IDA BUT THAT HE UNDERSTANDS YEMEN 
CURRENTLY HAS 250 MILLION DOLLARS IN UNDISBURSED LOANS. 
THE SECRETARY ASKED THE PRESIDENT IF THERE WAS SOMETHING 
MORE SPECIFIC THAT WE COULD DO TO ASSIST YEMEN.  MINISTER 
ATTAR RAISED THE 220 KILOMETER HUTH-HARAD ROAD PROJECT. 
HE SAID YEMEN HAS WORLD BANK SUPPORT FOR 10 MILLION 
DOLLARS BUT NEEDS AN ADDITIONAL  15 MILLION DOLLARS. 
FURTHER, THE YAR WISHES TO PAY 20 PERCENT OF THE LOCAL 
COSTS OF THE PROJECT FROM THE LOCAL CURRENCY GENERATED BY 
PL-480 SALES.  FINALLY, THEY HOPE THE WORLD BANK WILL 
AGREE TO "FORCED ACCOUNT," WHEREBY THE PROJECT IS EXECUTED 
SOLELY BY YEMENI ENTERPRISES.  THE SECRETARY REPLIED THAT 
WE WOULD GET THE DETAILS AND SEE HOW WE CAN HELP. 
 
7. THERE THEN FOLLOWED A RATHER DISJOINTED DISCUSSION OF 
MONEY WHICH THE YEMENIS BELIEVED HAD BEEN GIVEN TO THEM BY 
THE SAUDIS FOR THEIR MILITARY, BUT WHICH THEY HAVE NEVER 
RECEIVED.  PRESIDENT SALEH THOUGHT THERE REMAINED 17 
MILLION DOLLARS FROM THE ORIGINAL SAUDI COMMITMENT OF 400 
MILLION DOLLARS IN 1978 TO PAY FOR U.S. PLANES AND TANKS. 
HE ARGUED THAT THE U.S. HAD THIS BALANCE IN ITS ACCOUNTS 
AND SHOULD GIVE IT TO THE YEMENIS RATHER THAN RETURNING IT 
TO THE SAUDIS.  THE U.S. SIDE ATTEMPTED TO TO EXPLAIN 
THAT, IF INDEED THE SAUDIS HAD DEPOSITED ALL OF THE 400 
MILLION DOLLARS INTO THE FMS ACCOUNT, THAT MONEY REMAINED 
LEGALLY THEIRS.  THE U.S. SIDE WAS NOT CERTAIN, IN FACT, 
THAT THERE WAS A BALANCE FROM THE ORIGINAL 1978 PROGRAM. 
THE SECRETARY ASKED FOR CLARIFICATION AS TO WHETHER 
PRESIDENT SALEH WAS ASKING US TO WEIGH IN WITH THE SAUDIS, 
INDICATING THAT WE WOULD CONSIDER IT IF THAT WERE THEIR 
REQUEST.  PRESIDENT SALEH DID NOT SPECIFICALLY RESPOND TO 
THE SECRETARY BUT PROCEEDED TO DESCRIBE THE AWKWARD 
TRILATERAL RELATIONSHIP WHICH THE U.S., SAUDI ARABIA, AND 
YEMEN HAVE IN SUPPORT OF THE MILITARY PROGRAM IN THE YAR. 
HE SEEMED TO CONFUSE THE EARLIER ISSUE OF A 17 MILLION 
DOLLAR BALANCE IN THE ACCOUNT WITH SAUDI REFUSAL TO 
DELIVER A SIMILARLY VALUED AMOUNT OF AMMUNITION AND SPARE 
PARTS.  THE FOREIGN MINISTER INTERJECTED THAT A FEW YEARS 
AGO THE U.S. HAD OFFERED YAR 14 MILLION DOLLARS IN FMS 
CREDITS, BUT THAT THE CREDITS WERE OFFERED AT SUCH A HIGH 
INTEREST RATE THAT THEY CAN NEVER BE USED.  HE SUGGESTED 
THAT MAYBE SOMETHING CAN BE DONE TO IMPROVE THE TERMS. 
THE SECRETARY SAID WE WOULD LOOK INTO IT. 
 
//GSM PROGRAM// 
 
8. THE PRESIDENT AGAIN RAISED FOOD ASSISTANCE.  HE SAID 
YEMEN NEEDS FIVE HUNDRED THOUSAND TONS OF WHEAT ANNUALLY 
AND HE NEEDS U.S. HELP IN OBTAINING THAT VOLUME OF WHEAT 
ON THE SAME CONDITIONS CURRENTLY ENJOYED BY ALGERIA AND 
EGYPT.  MINISTER ATTAR NOTED THAT YEMEN NOW GETS ONLY 
THREE YEARS FOR REPAYMENT AND WANTS EITHER FIVE OR SEVEN 
YEARS TO REPAY.  AMBASSADOR DUNBAR, NOTING THAT THE YEMENI 
SIDE WAS TALKING ABOUT THE GSM PROGRAM, EXPLAINED THAT 
YEMEN WAS IN ARREARS IN ITS PAYMENT ON PAST GSM PROGRAMS 
AND THERE WAS LITTLE LIKELIHOOD OF SUCCESS IN TALKS FOR 
BETTER TERMS WHILE THE ARREARAGES REMAIN.  PRESIDENT SALEH 
SAID THAT HE PERSONALLY WOULD SETTLE ALL ARREARAGES 
IMMEDIATELY.  ALL WOULD BE PAID. 
 
9. THE SECRETARY REFERRED TO PRESIDENT SALEH'S EARLIER 
REMARKS ABOUT THE IMPORTANCE OF HIS VISIT TO WASHINGTON 
AND SAID THAT WE WILL LOOK AT THE GSM PROGRAM IN THAT 
SPIRIT IF THE PRESIDENT CAN GET THE ARREARAGE ISSUE BEHIND 
US.  ONCE THE ARREARAGES ARE PAID, WE WILL ASK THE 
AGRICULTURE DEPARTMENT TO SEE IF THEY CAN BE MORE 
FORTHCOMING IN THE TERMS THEY OFFERED.  PRESIDENT SALEH 
SEEMED PLEASED AND SAID AGAIN THAT ALL ARREARS WILL BE 
PAID.  HE QUIPPED THAT THE SOVIETS HAD A SIMILAR BUT MUCH 
BIGGER PROBLEM WITH YEMEN.  "WE HAVE 2 BILLION DOLLARS IN 
DEBTS TO THE SOVIETS WHICH WE RESCHEDULE EVERY YEAR.  NOW 
THAT THEY ARE CAPITALISTS, IT WILL BE MUCH TOUGHER TO 
RESCHEDULE."  "YOU WILL FIND MANY OF US," HE SAID, 
"WISHING THEY HAD REMAINED SOCIALISTS:"  THE SECRETARY 
SUGGESTED SALEH TRY TO GET SOVIET AGREEMENT TO PAY OFF THE 
ENTIRE DEBT IN RUBLES BECAUSE THEN THE YAR COULD WIPE OUT 
ITS DEBT IN ONE DAY. 
 
//INVESTMENT LAW// 
 
10. THE SECRETARY ASKED ABOUT THE STATUS OF YEMEN'S  NEW 
INVESTMENT LAW.  PRESIDENT SALEH SAID THE LAW WAS 
PRESENTLY IN DRAFT.  HE DESCRIBED IT AS ONE OF THE BEST 
INVESTMENT LAWS IN THE WORLD.  HE THANKED THE U.S. AND 
SOME EUROPEAN COUNTRIES FOR THEIR GREAT ASSISTANCE.  THE 
LAW WILL SOON BE SENT TO PARLIAMENT FOR APPROVAL.  IN HIS 
WORDS, EVERYTHING IS ON TRACK. 
 
11. PARTICIPANTS: 
 
//U.S.// 
 
THE SECRETARY 
AMBASSADOR DUNBAR 
DEPUTY NATIONAL SECURITY ADVISOR GATES 
U/S BARTHOLOMEW 
AID ACTING ADMINISTRATOR EDELMAN 
A/S KELLY 
S/P DIRECTOR ROSS 
NEA/DAS GNEHM NOTETAKER 
 
//YEMENI// 
 
PRESIDENT SALEH 
DEPUTY PM/FOREIGN MINISTER ABDULKARIM AL-ERYANI 
 
DEPUTY PM/DEVELOPMENT MINISTER MOHAMED AL-ATTAR 
YAHYA AL-MUTAWAKEL, MEMBER OF CONSULTATIVE COUNCIL 
MOHAMED BASENDWAH, MEMBER OF CONSULTATIVE COUNCIL, MEMBER 
OF CONSULTATIVE ASSEMBLY PARLIAMENT 
OIL MINISTER AHMAD AL-MOHANY 
MINSTATE FOR UNITY AFFAIRS YAHYA AL-ARASHI 
ALI AL-ANESI, DIRECTOR OF PRESIDENTIAL OFFICE 
HUSSEIN AL-AMRI, MEMBER OF CONSULTATIVE ASSEMBLY 
AMBASSADOR MOHSIN ALAINI 
 
 
BAKER