US embassy cable - 05MANAMA1182

C O N F I D E N T I A L SECTION 01 OF 02 MANAMA 001182 
 
SIPDIS 
 
E.O. 12958: DECL: 08/14/2015 
TAGS: PREL, PGOV, ECON, EPET, BA, SA 
SUBJECT: BAHRAIN EXPECTS CONTINUED STRONG RELATIONS WITH 
SAUDI, HOPES FOR RESUMPTION OF OIL GRANT 
 
 
Classified by Charge d'Affaires Susan L. Ziadeh for reasons 
1.4 (b) and (d). 
 
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Summary 
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1.  (C) In the widespread public and private expressions of 
condolences for the death of Saudi King Fahd, Bahrainis of 
all backgrounds have registered their appreciation for Fahd's 
support for Bahrain's development.  Foreign Minister Shaikh 
Mohammed said that Bahrain strives always to have strong 
relations with Saudi Arabia and hopes to regain the 50,000 
barrel/day oil grant that expired last summer.  He said a new 
generation of leaders should assist in speeding up the pace 
of reform.  Saudi Ambassador to Bahrain Al Kuwaiz noted a 
personal link between King Hamad and Crown Prince Sultan and 
thought that bilateral relations could grow stronger.  He 
said Bahrain had not made a case for resumption of the oil 
grant and questioned whether it was really necessary. 
Bahrainis are constantly reminded of their country's reliance 
on Saudi Arabia, particularly during the summer when the 
vehicles of vacationing Saudis clog the roads.  End Summary. 
 
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Condolences, Congratulations for Saudi Kings 
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2.  (U) Bahrainis from across the political and religious 
spectrum have publicly and privately expressed their 
condolences for the death of Saudi King Fahd and 
congratulations for King Abdulla's ascension to the throne. 
Following the August 1 announcement of Fahd's passing, 
Bahrain's newspapers were filled with statements from King 
Hamad on down recalling Fahd's accomplishments and support 
for Bahrain's development.  Many identified the King Fahd 
Causeway linking Bahrain with the Eastern Province as a 
practical and symbolic expression of the late King's 
assistance to Bahrain. 
 
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ForMin:  More Oil, More Reform 
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3.  (C) Deputy Prime Minister/Foreign Minister Shaikh 
Mohammed bin Mubarak Al Khalifa told the Charge August 10 
that Bahrain strives always to maintain the best possible 
relations with Saudi Arabia.  He recognized there have been 
problems recently - in summer 2004, Saudi Arabia did not 
renew its grant of 50,000 barrels/day of oil, and in December 
2004 the SAG publicly expressed its anger over the 
U.S.-Bahrain free trade agreement (FTA).  Shaikh Mohammed 
said that the FTA flap was now over and that Bahrain hoped to 
reach a "satisfactory conclusion" on the oil grant.  Bahrain 
needs more, not less, assistance from Saudi Arabia, the 
ForMin said. 
 
4.  (C) Shaikh Mohammed hoped that a new generation of 
leaders in Saudi Arabia would make their presence felt.  King 
Abdulla was talking the language of reform, had released some 
political prisoners, and should now focus on speeding up the 
reform process.  Shaikh Mohammed commented that reforms in 
Saudi Arabia were "important for them and for us." 
 
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Saudi Ambassador:  Does Bahrain Need Oil Grant? 
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5.  (C) Saudi Ambassador to Bahrain Al Kuwaiz told the Charge 
August 15 that in his view bilateral relations are good, 
there are no major problems, and he forecasts they will grow 
stronger under the new Saudi leadership. "Sultan has a strong 
personal relationship with the King here, and now that he is 
Crown Prince, he's in a position to be more helpful."  He 
thought that King Abdulla may want to make a goodwill gesture 
toward Bahrain at the beginning of his reign, but had no 
specific ideas on what form this might take. 
 
6.  (C) In response to the Charge's question, Al Kuwaiz 
asserted that the offshore Abu Safa oil field belongs to 
Saudi Arabia, which chooses to share production with Bahrain 
as a means of assistance.  (Note:  In an earlier conversation 
with the Ambassador,  King Hamad claimed a treaty concluded 
by his father, the late Amir Issa, with the Saudis specified 
that the two countries split production 50/50. End Note.) 
Bahrain receives some 150,000 barrels/day as a result of the 
production sharing. 
 
7.  (C) With regard to the 50,000 barrel/day oil grant, Al 
Kuwaiz said that Saudi Arabia's assistance to Bahrain is, 
after all, needs based, and that Bahrain has not demonstrated 
or even stated a real need for additional assistance.  The 
grant started when oil was $18/barrel.  Now that the price is 
over $60/barrel, Bahrain is enjoying windfall revenues from 
its share of Abu Safa production. He noted that Bahrain 
increased the pace of public sector projects at the end of 
last year in order to spend unexpected government revenues 
from high oil prices, raising the question whether Bahrain 
really required additional assistance. 
 
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Oil A "Gracious Gesture" from King 
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8.  (C) A Ministry of Commerce official who works closely 
with Saudi Arabia on trade issues told Econoff that Saudi-GCC 
relations were growing warmer as the countries became more 
comfortable with bilateral (vice GCC-wide) trade agreements. 
His improved relations with Saudi counterparts lead him to 
believe that Saudi Arabia will resume the oil grant sometime 
soon.  A Bahraini economics professor agrees, telling Econoff 
that doing so would be a "gracious gesture" by King Abdulla. 
 
9.  (SBU) Among press commentaries, Sayed Dhia Al Mousawi's 
column in the August 2 Al Wasat newspaper was notable.  Al 
Mousawi, who is both a widely respected columnist and a 
leading Shia scholar, wrote that Saudi Arabia has played a 
major role in serving Arab and Islamic causes, in particular 
the Palestinian issue and Iraq's invasion of Kuwait.  He 
states that Bahrain and Saudi Arabia should be considered as 
"one entity" in the political, economic, social, and security 
fields.  Al Mousawi's generous statements are surprising 
given the traditional friction between the Saudi government 
and Shia Muslims. 
 
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Comment 
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10.  (C) Bahrain's reliance upon Saudi Arabia is never far 
from the minds of Bahraini citizens, particularly in the 
summer months when roads become clogged with the vehicles of 
Saudi visitors.  Most people anticipate no real changes in 
the bilateral relationship, mainly because Abdulla's 
ascension only formalizes the control he has held for a 
decade.  Bahrainis are hopeful Saudi Arabia will resume the 
oil grant, perhaps as a gift from the newly crowned king.  In 
this era of sky-high oil prices, an additional 50,000 
barrels/day would have a significant impact on this small 
economy. 
 
ZIADEH