US embassy cable - 03KUWAIT509

C O N F I D E N T I A L SECTION 01 OF 02 KUWAIT 000509 
 
SIPDIS 
 
STATE FOR NEA/NGA, NEA/ARP 
 
E.O. 12958: DECL: 02/03/2013 
TAGS: ETRD, PREL, MARR, IZ, KU 
SUBJECT: MANAGING A NEW IRAQ 
 
Classified By: CDA Frank C. Urbancic for Reason 1.5 D. 
 
1. (SBU) SUMMARY:  During a private dinner with two prominent 
Kuwaiti businessmen -- one Islamist, the other liberal -- the 
topic of conversation centered on doing business in 
post-Saddam Iraq.  This pair of 40-something 
movers-and-shakers was extremely interested to know who will 
run economic and commercial affairs in the immediate 
aftermath of a regime change, as they position themselves and 
their family enterprises for potential windfalls.  They both 
hoped that whatever management structure is put in place, it 
is done so quickly, transparently, and in a manner that does 
not unfairly benefit any single country (namely the United 
States).  Their interests and concerns might be seen as a 
barometer for the thinking of a larger segment of 
well-established, trade-minded Kuwaitis at this time.  END 
SUMMARY. 
 
2. (SBU) THE DINNER GUESTS: EconOff met February 1, 2003, at 
the luxurious home of Faisal al-Zamel, an Islamist Kuwaiti 
businessman and investor in his mid-40s, who received an MBA 
from the University of Connecticut, specializing in banking. 
Al-Zamel is a board member of the Arabi Holding Group, an 
international shareholding company, and chairman and general 
manager of several Kuwaiti firms.  He is affiliated with the 
Kuwait Finance House, Kuwait's lone Islamic bank, and writes 
a regular column for Al-Watan newspaper with a decidedly 
Islamist bent.  The Al-Zamel family is extensive throughout 
the Gulf, especially in Kuwait and Saudi Arabia, where 
Al-Zamel Industries does large-scale business in oil, real 
estate, construction, and other ventures. 
 
3. (SBU) Joining Al-Zamal as dinner guest was Loay Jassem 
al-Khorafi, son of Kuwaiti's Speaker of Parliament Jassem 
al-Khorafi, and a member of one of the more influential 
business families in Kuwait.  Among its multi-billion dollar 
global interests, the al-Khorafi Group operates the Kuwait 
Food Company (of which Loay is a board member), the Mars Alam 
International Airport in Egypt, and is opening a Four Seasons 
Hotel in Syria.  Loay al-Khorafi is chairman and managing 
director of Kuwait Metal Pipe and Oil Service Company, a 
manufacturing venture he hopes will be doing business soon 
in, as he puts it, "new Iraq." 
 
4. (C) TABLE TALK: The question of who will manage 
post-Saddam Iraq lies front and center in the minds of 
al-Zamel, al-Khorafi, and the Kuwaitis they routinely speak 
to during their daily affairs and in their nightly forays to 
diwaniyas (informal gatherings of Kuwaiti men).  Over fresh 
fish and kababs, Al-Zamel relayed how he had heard on the 
diwaniya circuit a plan being hatched in which the US will 
manage military and security operations, while Britain 
manages civilian aspects of a new Iraq.  If true, he thought 
the British were well suited for this role, as they have a 
long history in the region, seem to comprehend the culture, 
and are respected for their ability to have run governments 
and civil societies far better than the Ottoman Turks.  He 
added that there was much the USG could learn from British 
rule in the Middle East, but was afraid, as were many of his 
compatriots, that American leaders do not understand the 
region and will make similar mistakes to those made in Iran, 
Afghanistan, and other countries that came under American 
influence. 
 
5. (C) Al-Zamel's historical commentary served as a prelude 
to the crux of the dinner conversation: concern over the 
management entity that will run post-Saddam Iraq.  Al-Khorafi 
said he desires doing business there, but only if he feels 
secure with those in power.  This notion rules out any Iraqi 
entity, which he said could not be trusted to uphold a 
contract.  Al-Khorafi pointed out how throughout its history 
Iraq has depended on a series of dictators to hold its ethnic 
and religious factions in check, yet there was presently no 
individual on the horizon capable of running the country. 
 
6. (C) His question, then, was who would manage Iraq.  The 
US?  Britain?  The UN?  He stressed that it was critical for 
there to be a management structure in place and publicly 
known immediately after the turnover of power.  Otherwise, he 
feared confusion would ensue, with the potential for 
political and economic chaos.  Further, he and his associates 
fear that should a US-led structure prevail, business tenders 
would naturally favor American companies.  For this reason, 
Al-Khorafi would prefer to see a UN-led coalition remove 
Saddam, rather than unilateral action by the US, which might 
usher in American domination of Iraq.  (NOTE: Several months 
ago, al-Khorafi publicly blamed the USG of meddling in 
Kuwaiti business affairs after a US company was awarded a 
tender his own company had sought, only to later apologize 
for the accusation.  END NOTE.) 
 
7. (C) The two Kuwaitis said that a decision should be made 
now on who will manage economic and commercial affairs in 
Iraq, but agreed that it would be difficult for the US or the 
UN to do so, as this would make it appear like Saddam's 
removal was a fait accompli.  They hoped that such 
discussions were being conducted behind closed doors. 
 
8. (C) Al-Khorafi said that Kuwaiti businessmen were starting 
to feel hampered by the uncertainty caused from the threat of 
warfare to the north.  He said that just that day the Kuwaiti 
stock market, which has continued to prosper throughout the 
global market crisis, suffered its largest single-day drop. 
(NOTE: The local stock exchange did plummet 89.3 points 
February 1, coinciding with the announcement by Kuwait's 
Deputy Premier and Interior Minister Shaykh Mohammed 
Al-Khaled Al Sabah that the country was increasing its alert 
status and placing 4,000 fully-armed special forces on 
Kuwaiti streets, as well as with President Bush's statement 
that conflict could occur in "weeks, not months.")  Al-Zamel 
added that during his visits to diwaniyas he had been hearing 
Kuwaitis say they were exchanging  dinars for dollars as a 
cautionary move. 
 
9. (C) JUST DESSERT: Over sweets and Arabic coffee, 
Al-Khorafi said he does not believe there will be armed 
conflict in Iraq, but rather a coup led by one or more 
members of Saddam's inner circle.  (NOTE: His father the 
Speaker has expressed this same view.  END NOTE.)  When 
confronted with the choice of being killed by invading forces 
or dying at the hands of Saddam for trying to flee the 
country, al-Khorafi thought that at least one of his deputies 
would decide instead to assassinate Saddam and beg for mercy 
from the international community.  Al-Khorafi added that he 
had heard wealthy Iraqis were looking for ways to move their 
money out of the country, where they or their families might 
later retrieve the wealth. 
 
10. (C) Even if Saddam is removed in this manner, an 
international entity must still enter the country and 
establish a new government, al-Khorafi said.  Returning to 
his point that no one person can rule Iraq, he thought that a 
partition of the country was inevitable.  He wondered aloud, 
however, how the southern section of Iraq would be permitted 
to form its own nation state, since the center and northern 
sections would not want to forfeit the rich southern oil 
fields, plus Iran would not accept a new oil-rich and 
Shia-dominated country on its border. 
 
11. (C) Both al-Zamel and al-Khorafi said that Iran is the 
key to the region.  They suggested that the USG needs to use 
both "carrots" and "sticks" to keep Iran in check.  A useful 
"carrot" was the promise of economic aid, should Iran reform 
politically.  A useful "stick" was threatening Iraq's 
partition, a scenario Iran was firmly against. 
 
12. (C) COMMENT: While these remarks directly reflect the 
opinions of just two Kuwaiti businessmen, they can also be 
seen as incorporating a much wider view held by an extremely 
influential segment of society; if not forming a consensus, 
these ideas at least frame a serious debate now taking place 
in the country.  Given their proximity to Iraq and their 
previously well-established network of economic ties to that 
country, Kuwaitis are especially keen to learn the shape 
their northern neighbor will take under a new regime.  The 
more transparent the process, and the more Kuwait feels it is 
being treated by America as a partner rather than merely a 
stepping stone, the more likely its support and goodwill are 
apt to endure.  We note the irony of (Kuwaiti) Arabs (a) 
dismissing the prospect of any Iraqi entity being able to 
rule Iraq effectively, and (b) assuming partition is 
inevitable; but living with contradiction, ambiguity, and 
uncertainty is a Kuwaiti hallmark. 
URBANCIC