US embassy cable - 05CAIRO5945

C O N F I D E N T I A L SECTION 01 OF 03 CAIRO 005945 
 
SIPDIS 
 
NEA FOR FO, NEA/ELA 
 
E.O. 12958: DECL: 08/02/2015 
TAGS: PTER, ECON, ASEC, PREL, EG, Bombing, Tourism, Terror attacks 
SUBJECT: SHARM AFTERMATH UPDATE 
 
REF: CAIRO 5650 AND PREVIOUS 
 
Classified By: CDA Stuart E, Jones for reasons 1.4 (b) and (d) 
 
------- 
Summary 
------- 
 
1. (C) Resilience among tourists and shock-absorbers in the 
economic system may be calming initial fears regarding the 
economic fallout of the July 23 Sharm El Sheikh attacks, but 
near-term pain is still expected.  Security forces reported 
on August 2 that they had killed a prime suspect in the Taba 
bombings of last October, Mohamed Ahmed Salih Fulayfel. Some 
are linking him to the July 23 attacks.  Security in Sharm 
has been visibly increased, with new barriers and screening 
points in and around the hotels.  Hotel bookings are off, but 
some recovery is anticipated in October with the traditional 
arrival of Russian tourists and a campaign by Egyptian 
celebrities to make Sharm a Ramadan destination for Arabs. 
The GOE is partnering with state-owned enterprises and the 
private sector to coordinate and fund rebuilding and to avoid 
mass layoffs.  Minister of Tourism El Maghrabi called on the 
Charge July 31 to personally express his condolences for the 
death of Amcit Kristina Miller.  The official GOE death figure 
stands at 64,however it likely underestimates the number of 
British dead.  The family held the funeral for Ghaleb 
Tappouzzada, son of Embassy Cairo LES Ramy Tappouzzada, 
August 1 in Cairo.  End summary. 
 
------------------ 
Security Situation 
------------------ 
 
2. (C) Egyptian security forces reported on August 2 that 
they had killed a prime suspect in the October 2004 Taba and 
Nuweiba bombings, Mohamed Ahmed Saleh Fulayfel, during a 
clash near Mount Ataqa (11 miles west of the town of Suez). 
According to reports, security forces were conducting 
investigative operations in connection with the Sharm attacks 
when the clash ensued.  Fulayfel's wife was reportedly 
wounded and was transported to a nearby hospital.  Fulayfel 
was being tried in absentia for his suspected role in the 
2004 bombings.  Some sources have been linking Fulayfel to 
the July 23 bombings.  Authorities announced on July 28 that 
forensic evidence identified what is believed to be the lone 
suicide bomber in the Sharm attacks as Yusuf Badran, a known 
Islamist militant from the Northern Sinai. 
 
3. (C) Minister of Tourism El Maghrabi told Charge that 
security in Sharm and other tourist destinations was being 
scrutinized and enhanced where necessary.  Tourism contacts 
and local press reports confirm increased physical security 
barriers around hotel car parks and the broader 
implementation of vehicle access restrictions, such as a 
requirement to surrender of one's drivers license upon entry. 
 Additional security measures have also been put in place to 
restrict lobby access. 
 
4. (C) ECPO LES employees report that many of their contacts 
accuse Minister of Interior Habib Al Adly of incompetence, 
saying that, even in light of the October 2004 bombings, Al 
Adly's attentions have been more focused on confronting 
political demonstrations than counterterrorism preparations. 
Those who expected his firing shortly after the bombings -- 
as happened to his predecessor after the 1997 Luxor massacre 
-- now believe that Mubarak doesn't want to risk any 
instability in the MoI in the run-up to elections this fall. 
The MoI has been on a 24/7 "state of alert" since the blasts 
and all employee leave has been cancelled indefinitely.  Some 
contacts in Ministry circles still believe Al Adly is on his 
way out, and mention the names of Assiyut Governor Ahmed 
Hammam and Kafr El Sheikh Governor Salah Salama as potential 
replacements. 
 
--------------- 
Economic Impact 
--------------- 
 
5. (U) Tourism is Egypt's largest foreign exchange earner, 
directly accounting for 10 percent of GDP and employing 10 
percent of the workforce. 
 
6. (U) Although it's still early, the overall economic impact 
of the attacks seems to be less than initially feared.  The 
Ministry of Tourism estimates a 10 percent drop in tourism 
revenues for 2004-2005, from USD 6.5 billion to USD 5.85 
billion.  A July 25 EFG-Hermes study of previous negative 
shocks to the tourist industry finds that the periods of 
decline in tourist arrivals subsequent to a shock have been 
relatively short, with a recovery usually occurring within 
six months. 
 
7. (U) The study also offers two aftermath scenarios: one 
based upon a 14 percent drop in tourism revenues in 2004-2005 
to USD 5.5 billion and one assuming a 35 percent drop to USD 
4.2 billion.  In both cases, the current account balance is 
forecast to drop from pre-attack estimates of 4.2 percent of 
GDP to 2.8 percent (optimistic) and 2.1 percent 
(pessimistic). The study also posits that Egypt's status as a 
net exporter of liquified natural gas, a comfortable level of 
reserves at the Central Bank (USD 19.2 billion as of 6/05) 
and of net foreign assets in the financial system (USD 13 
billion as of 5/05) will serve as shock absorbers for the 
overall economy. 
 
------ 
Hotels 
------ 
 
8. (C) Fergus Stewart, the general manager of the Hyatt 
Regency Sharm El Sheikh (please protect) painted for us a 
challenging, but not bleak, picture of the months ahead.  He 
noted that his hotel is still 60 percent booked for August 
(down from 92 percent prior to the blasts), but he expects a 
weak September.  According to press reports, hotel occupancy 
rates overall in Sharm have dropped from nearly 100 percent 
occupancy to about 60 percent. 
 
9. (C) He added, though, that October brings hopes for 
recovery with the arrival of what is traditionally a big 
season for undeterred Russian tourists.  Egyptian actors and 
other public figures have launched a campaign to promote 
travel by Arabs to Sharm during the upcoming Ramadan season 
(roughly October 4 - November 2, 2005).  The Hyatt GM, 
although admittedly optimistic as compared to many of his 
colleagues, anticipates occupancy rates to be back to normal 
by November.  The outlook for hotels catering to 
Egyptian/Arab tourists is gloomier, however, with business 
having "dried up" for August.  Occupancy rates in Cairo, 
Luxor and Aswan are reportedly at normal levels. 
 
10. (SBU) Anecdotal evidence suggests that hotel 
cancellations are trending along national lines.  Italians 
left en masse after the bombings while hoteliers describe the 
British market as "strong as ever."  The Coral Reef Hotel, 
which caters primarily to Italian clients, is fielding only 
10 percent occupancy at present.  (Press reports indicate 
Italy lifted its travel warning August 2.) The fact that UK 
tour operators allowed fully refundable cancellations only in 
the first week after the attacks may have aided the British 
tourists' resiliency. 
 
11. (SBU) Local government has stepped in to try and prevent 
any mass layoffs of hotel workers.  According to hotel 
managers, the South Sinai governate issued a circular to all 
hotels and businesses instructing them not to lay off workers 
or they would face "penalties," and providing a hotline for 
any workers that are let go.  Hotels, some of which have 
transferred labor to extra maintenance duties, may be forced 
to begin layoffs barring an October recovery.  Press reports 
indicate that some hotels are assigning mandatory leave and 
reducing salaries. 
 
--------- 
Transport 
--------- 
 
12. (U) Egypt Air Chairman Sherif Galal reported on July 31 
that "bookings have returned to their levels of before the 
attacks," due perhaps in part to 30 percent discounts on 
Egypt Air's Sharm-bound flights.  The Holding Company for 
Maritime and Inland Transport reduced rates on bus services 
to Sharm from Cairo and Alexandria by 35 percent in an effort 
to attract tourists to the resort city. 
 
13. (C) Caltex Egypt Country Chairman Ehab Eissa (please 
protect) told Econoff he is keeping a close eye on what 
effects fewer tourists will have on his downstream petroleum 
sectors such as aviation fuel.  Caltex focuses primarily on 
retail products here and is a major concessionaire for 
aviation fuel to Egypt's airports, including enjoying a 100 
percent concession at the Marsa Alam airport which services 
Egypt's southern Red Sea coast.  He noted that, as of last 
week, flight numbers had not decreased, but the passenger 
numbers were heavily skewed towards departures.  (Marsa Alam 
is served primarily by charter flights from Europe.) 
 
-------------------- 
Coordinated Response 
-------------------- 
 
14. (U) Minister of Investment, Dr. Mahmoud Mohieldin, has 
formed a delegation, including the heads of some of the 
state-owned insurance, contracting, and tourism companies, to 
visit Sharm and provide rapid assistance to the commercial 
sector there.  Private companies in the construction, 
tourism, and other sectors have donated cash, expertise and 
free materials to assist in the rebuilding effort.  Public 
pharmaceutical companies allocated LE 2 million (USD 350,000) 
to aid the cause.  The Egyptian press has reported that most 
businesses in Sharm do not carry terrorism insurance. 
 
---------------------------------------- 
Minister of Tourism Pays Condolence Call 
---------------------------------------- 
 
15. (C) Minister of Tourism Ahmed El Maghrabi and a 
delegation of Egyptian Tourism Federation (ETF) officials 
visited the Embassy July 31 to express the GOE's condolences 
on the death of Amcit Kristina Miller in the Sharm bombings. 
Charge thanked the delegation for the gesture, reiterated 
U.S. condolences for the loss of Egyptian life, and commended 
the GOE's emergency response efforts.  Charge relayed the 
appreciation for the GOE actions expressed by Kristina 
Miller's father following his visit here.  El Maghrabi said 
that the GOE and the ETF will reach out to the Miller family, 
possibly inviting them to return to Egypt.  The tour "would 
not be a publicity event" but done quietly as a "humanitarian 
gesture." 
 
16. (C) El Maghrabi observed that if a silver lining did 
exist in this tragedy, it is that Egyptian civil society has, 
for perhaps the first time, gone beyond relativism and 
strongly denounced terrorism. 
 
17. (C) Regarding the Embassy's July 23 Public Announcement, 
El Maghrabi said the GOE was "very understanding" and there 
would be "no pressure" to rescind the announcement.  He also 
noted that the traveling public "reads advisories in a 
realistic fashion" and, given the presence of President 
Mubarak in Sharm and the upcoming Arab summit there, he feels 
that people will perceive Sharm as a safe destination. 
Charge explained our announcement/advisory system and said 
that the U.S would work proactively to monitor the security 
situation in the South Sinai governate and would amend the 
announcement as the situation warranted. 
 
--------------- 
Casualty Update 
--------------- 
 
18.  (C) State Security sources reported that there are 64 
identified remains plus an additional 10 - 13 unidentified 
partial remains.  Officially, there are 15 foreigners dead: 6 
Italians, 5 Turks, 1 Amcit, 1 Czech, 1 British and 1 
unidentified foreigner.  However, British Consul Mark 
Rakestraw (please protect) told ConOff that they are 
operating with the number of their dead at 10.  Of those, 
Rakestraw said that they have five with good identification, 
two others that they will likely be able to confirm shortly, 
and three that will have to await DNA results.  Thus, the end 
figure is likely to be higher than the current official 
count.  British forensic teams are on the ground in Sharm 
solely to ID British victims; GOE has appreciated offers of 
British assistance but has yet to accept any.  Official 
estimates put the number of injured at 107 with 20 of those 
being foreigners. 
 
--------------------------------- 
Condolences for Ramy Tappouzzada 
-------------------------------- 
 
19.  (U) The family of Embassy Cairo Human Resources LES Ramy 
Tappouzzada held the funeral on August 1 for his 16 year old 
son, Ghaleb, who was killed in the attacks. 
 
 
Visit Embassy Cairo's Classified Website: 
http://www.state.sgov.gov/p/nea/cairo 
 
You can also access this site through the 
State Department's Classified SIPRNET website. 
 
JONES