US embassy cable - 05SANAA3136

C O N F I D E N T I A L SECTION 01 OF 04 SANAA 003136 
 
SIPDIS 
 
E.O. 12958: DECL: 10/26/2015 
TAGS: PREL, PTER, KDEM, ECON, EAID, MASS, MARR, PINS, YM, COUNTER TERRORISM, DOMESTIC POLITICS, DEMOCRATIC REFORM 
SUBJECT: SCENESETTER FOR PRESIDENT SALEH'S VISIT TO 
WASHINGTON 
 
Classified By: AMBASSADOR THOMAS C. KRAJESKI, FOR REASONS 1.4 (B) AND ( 
D). 
 
1.  (C)  Summary:  President Ali Abdullah Saleh arrives in 
Washington looking for increased military support and 
economic deliverables for Yemen, while at home he has shown 
little willingness to make the tough decisions necessary for 
the future of his country.  Yemen remains an important 
regional ally in the GWOT and the ROYG has cooperated, albeit 
inconsistently, on counter-terrorism issues.  Democratic 
reform appears stalled amidst growing concerns on press 
freedom and the 2006 elections.  Corruption is undermining 
Yemen,s economy and discouraging investment, and is 
increasingly becoming a threat to stability.  For Yemen to 
overcome its many challenges, it is imperative that Saleh 
choose the path of reform.  End Summary. 
 
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Background:  Saleh's Stark Choices 
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2.  (C)  When President Saleh visits Washington in November, 
he will be seeking affirmation of Yemen,s achievements in 
security cooperation, democracy and economic development.  He 
believes Yemen should be "rewarded" for these achievements by 
graduating to a strategic relationship with the United States 
-- a relationship for which his government has not completed 
the groundwork.  Since unification in 1990, the ROYG has 
recorded notable successes in close coordination with the 
USG, including the creation of the Yemen Coast Guard, 
multi-party elections, and partial economic reforms. The 
current reality, however, is more troubling.  Yemen is 
resting on its past laurels and has yet to make the hard 
decisions necessary for long-term reform.  When it comes to 
counter-terrorism, fighting corruption, and expanding 
democratic freedoms, the President generally says the right 
things, but has not completely followed through. 
 
3. (C)  Given the challenges facing Yemen in the next decade, 
the President can no longer have his cake and eat it too. 
For Yemen to become a more effective partner in the GWOT, the 
USG requires sustained cooperation on CT issues, including 
comprehensive intelligence sharing and effective control of 
Small Arms/Light Weapons (SA/LW).   On the economic and 
political fronts, cooperation with the United States and 
other donor countries continues to suffer from the lack of a 
genuine commitment to reform. 
 
4. (C)  Yemen,s stability is threatened by one of the 
fastest growing populations in the world, diminishing oil and 
water resources and stagnant economic growth.  Last summer,s 
nationwide riots in response to price hikes and an unsettled 
situation in the northern region of Saada, demonstrate lack 
of confidence in the central government in many areas of the 
country.  This environment of instability, coupled with a 
largely unregulated arms trade and increasing frustration 
over rampant high-level corruption, offers fertile ground for 
extremism. 
 
5. (C)  Saleh, Yemen,s president since 1978, has time and 
again proven an astute short-term political tactician, 
maintaining a political balancing act between tribal and 
regional interests that has kept Yemen relatively stable 
during his 27 years in power. Unification pushed Saleh to 
start down a democratic path, and the country,s extreme 
poverty has compelled him to seek the favor of the 
international community by engaging donors on reform.  He has 
grown comfortable with the recognition and benefits that come 
with the "reformer" mantle, yet despite its head start, Yemen 
now lags behind other countries in the region. 
 
6. (C) In July, Saleh issued a highly publicized announcement 
that he would not run in the 2006 presidential election, a 
promise he is now predictably in the process of retracting. 
This decision will likely prove positive for Yemen,s 
short-term stability, but it demonstrates the extent to which 
Yemen continues to be governed by the President,s whim. 
Saleh has yet to demonstrate a long-term vision for the 
country, at a time when the Yemeni state is on the brink of 
failure )- a sobering prospect with serious implications for 
regional stability and the GWOT.  If Saleh,s greatest 
achievement -- the stability and unity of the country -- is 
to survive beyond his rule, he must take bold steps to 
strengthen and reform Yemen,s military, democratic, and 
financial institutions.  He must also demonstrate greater 
tolerance for genuine opposition and criticism.  Allowing the 
opposition to field a serious candidate to run against him 
would be a real coup for democratic reform. 
 
7. (C)  The following paragraphs offer further details on the 
challenges and opportunities for USG-ROYG cooperation, 
including CT cooperation and SA/LW proliferation, democratic 
and economic reform, and corruption. 
 
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CT Cooperation and SALW Trade 
----------------------------- 
 
8.  (C)  Yemen remains an important regional partner in the 
GWOT, with a post-9/11 string of CT successes.  The ROYG has 
stepped up its own efforts against terrorist cells in Yemen, 
leading to significant arrests over the past few months.  The 
Political Security Organization has also provided acccess to 
information on several of the detainees on a case-by-case 
basis.  Routinizing this access, however, has been a problem. 
 ROYG action to put SA/LW traders out of business has also 
not materialized. 
 
9.  (C)  Complicating our CT cooperation is the fact that 
Saleh performs a delicate balancing act between competing 
interests.  He clearly recognizes the threat terrorist 
elements pose to regime stability and is appreciative of USG 
support to strengthen the security forces.  At the same time, 
he is careful not to provoke arms dealers, tribal leaders and 
others who oppose closer ties with the United States.  Saleh 
maintains power through a complex network of deals and 
alliances, and has been less than enthusiastic about engaging 
in more comprehensive and consistent bilateral cooperation 
that could threaten that delicate network. 
 
10.  (C)  Despite these obstacles, the USG and the ROYG have 
succeeded in creating out of whole cloth Yemen's two premier 
CT forces:   the Central Security Forces ) Counter Terrorism 
Unit (CSF-CTU) and the Yemen Coast Guard (YCG) within the 
Ministry of Interior (MOI).  With USG training and equipment, 
CSF-CTU and YCG have become capable and professional forces 
that have already logged notable successes in a short period 
of time. 
 
11. (C)  The next phase for CT cooperation will be to expand 
and normalize cooperation with the MOD.  Spurred on by MOI 
success, MOD is now seeking a better working relationship 
with the USG.  Post is encouraged by the recent submission of 
MOD,s 3-5 year Counter Terrorism and Border Security Plan, 
but given MOD,s direct involvement in fueling Yemen,s 
robust illegal arms trade, a political commitment to an 
inventory control system within MOD -- as a clear condition 
for continued assistance -- remains the highest priority. 
 
----------------------------- 
Democracy and Economic Reform 
----------------------------- 
 
12. (C)  ROYG officials generally contend that Yemen is 
already a democracy, a change it undertook independently 
following unification in 1990.  Yemen held successful 
multi-party parliamentary elections in 1997 and 2003, and 
created elected local councils in 2001.  Parliament began 
using its power to draft legislation and call up ministers 
for questioning for the first time this year.  Optimism 
regarding the country,s political future has been offset in 
2005, however, by increased attacks on the press and by harsh 
criticism of opposition political parties. 
 
13. (C)  Ambassador recently generated a storm of debate when 
he suggested in a newspaper interview that Yemen,s democracy 
had &stalled," due largely to a marked deterioration in 
press freedom in 2005.  The high-profile imprisonment of the 
editor-in-chief of the independent &Al-Shura8 newspaper 
ended on March 24 with a presidential pardon, but in the 
months that followed, four papers reported closures and at 
least seven journalists were attacked for criticizing the 
Government. The Government,s repeated attempts to restrict 
speech have had a decidedly chilling effect on public 
discourse over corruption and other important issues.  The 
President continues to deflect criticism of press freedom 
restrictions as unacceptable meddling in internal matters. 
 
14. (C)  Few are taking seriously Saleh's claim that he will 
not run again, especially since the ruling General People's 
Congress (GPC) leadership has told us they fully intend to 
nominate Saleh at their annual convention in November.  A 
coalition of opposition parties called the Joint Meetings 
Party (JMP) coalition has unofficially declared that it 
intends to run a candidate, but it is far from certain that 
Saleh would be facing a serious challenger this summer. In 
addition, the ROYG has yet to pass essential electoral law 
reform, and continues to drag its feet on redistricting 
requirements. 
 
15. (C)  Of greatest import to most ordinary Yemenis, 
however, is the increasingly fragile economy.  Yemen's 
rapidly decelerating GDP growth has been temporarily offset 
by high oil prices, but Yemenis continue to be buffeted by 
high inflation.  In July, the ROYG finally began 
implementation of an IMF/World Bank reform package by 
reducing fuel subsidies, reforming the civil service, levying 
a sales tax and reducing customs tariffs.  Many of these 
initiatives, however, remain stalled or only partially 
implemented and have provoked significant opposition from the 
business community and the broader population. 
 
16. (C)  Even with reform measures and projected revenues 
from natural gas exports, the World Bank projects a large 
fiscal deficit and balance of payments gap that the ROYG will 
be unable to fill without extensive administrative reforms 
and growth in the non-oil production sector.   This does not 
bode well for average Yemenis who live on an average annual 
income of only USD 650.  Further austerity measures without 
an effective program for economic development will have a 
devastating effect on the populace and would likely bring 
renewed social unrest. 
 
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Corruption Threatening Stability 
-------------------------------- 
 
17.  (C)  Corruption permeates every level of Yemen,s 
economy, from oil and telecommunications to teachers, 
salaries.  Smuggling reportedly comprises over half of 
imports and military officers have derived considerable 
profits from diesel smuggling.  Corruption creates hardships 
for Yemeni citizens, and has become a destabilizing factor: 
frustration and anger with the corrupt political and tribal 
elites was one of the causes of nationwide riots in July 
sparked by increased fuel prices. 
 
18. (C)  The President has publicly condemned corruption on a 
number of occasions, but has taken few measurable steps to 
solve the problem.  Saleh has long depended on direct payment 
to tribes and political supporters to maintain his rule, but 
such practices are robbing the treasury of much-needed 
revenue and are hampering investment. 
 
19. (C)  On October 18, for example, the Cabinet formally 
announced that it would not renew Hunt Oil,s production 
sharing agreement in Block 18, one of the richest fields in 
Yemen.  Hunt has been operating in Yemen since 1984, and had 
agreed on a five-year contract extension with the Ministry of 
Oil. Parliament rejected the agreement, charging corruption, 
and the ROYG has acquiesced by granting drilling rights to 
the Yemeni-owned Safer Company.  Hunt executives intend to 
litigate for breach of contract, and will likely announce the 
lawsuit during the President,s visit to Washington. Most 
sources believe that Saleh is behind the ROYG decision to 
effectively nationalize Block 18, but there is a possibility 
that he will attempt to use it as a bargaining chip during 
his visit. 
 
-------------------------------------- 
U.S. Programs Offer Support for Reform 
-------------------------------------- 
 
20. (C)  Modernizing elements within the ROYG are pushing a 
reform agenda to improve the investment climate, rule of law, 
and good governance.  These initiatives are increasingly 
catching Saleh,s interest, but they must ultimately obtain 
his full support if they are to succeed.  At the center of 
these efforts is the Millennium Challenge Account (MCA). 
Yemen's concept paper for the MCA Threshold program has been 
accepted, and the ROYG submitted its implementation plan to 
Washington for approval in September, with a focus on 
reforming the judiciary and the administration of land 
titles.  MCA has proven a valuable tool for the Mission to 
encourage the ROYG to tackle corruption, which has been 
designated as a cross-cutting theme throughout the action 
plan. 
 
21. (C)  MEPI programs are also playing a key role in 
bringing political and economic reform to Yemen.  Supoprted 
by MEPI-funded efforts, Yemen,s political parties appear 
ready to announce a quota for women candidates in upcoming 
elections, and Parliament is becoming increasingly vocal in 
challenging executive power.  The President recently 
announced plans for the direct election of governors and 
district officials, a product of MEPI support for 
decentralized government. 
 
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Status Quo Not Enough 
--------------------- 
 
22.  (C)  Saleh,s meetings in Washington offer an important 
opportunity to firmly nudge Saleh towards needed reforms and 
better cooperation on CT efforts.  Previous U.S.-Yemeni CT 
cooperation offers a good foundation and Yemen continues to 
be central to U.S. regional aims.  As such, it is critical 
that Yemen make the transition from ad hoc cooperation to a 
fully developed security partnership.  In the past, Yemen has 
done enough on political and economic reform, relative to its 
neighbors, to remain in our good graces.  With Yemen facing a 
looming economic crisis and a stalled democratic process, 
however, if Yemen continues to merely tread water, it will 
drown.  Saleh must offer Yemen the leadership it needs by 
fully supporting economic and political reforms.  On both 
fronts, we need to dangle the carrot of pushing for more 
military and economic assistance if Saleh demonstrates 
serious political will in fulfilling his promises to us and 
to the donor community at large. 
Krajeski