US embassy cable - 03ABUDHABI1100

C O N F I D E N T I A L ABU DHABI 001100 
 
SIPDIS 
 
STATE FOR NEA/ARP AND NEA/RA 
 
E.O. 12958: DECL:03/08/13 
TAGS: ENRG, PGOV, ETRD, OM, TC 
SUBJECT: ABU DHABI ALUMINUM SMELTING PROJECT FOR OMAN 
REVEALS CONTINUING STRATEGIC VISION OF THE UAE OFFSETS GROUP 
 
 
1.  (U)  Classified by Ambassador Marcelle M. Wahba for 
reasons 1.5 (b and d). 
 
2. (C) The UAE Offsets Group (UOG) has under the aegis of de 
facto Defense Minister Muhammad bin Zayid Al-Nahyan (MBZ) 
become Abu Dhabi Emirate's strategic business development 
platform, responsible for many innovative projects serving 
both practical and broader strategic objectives.  UOG's 
best-known venture, the ongoing Dolphin Project to pipe 
natural gas from Qatar to Abu Dhabi, was as much about 
achieving political reconciliation between the estranged Al- 
Nayhan and Al-Thani (hurt feelings derived from President 
Zayid giving refuge to the deposed father of the current 
Qatari Amir) as it was about meeting the UAE's burgeoning 
demand for gas.  Similarly, UOG's project to build a 200 
million cubic feet per day desalination plant in Fujairah 
Emirate (with the water to be pumped to Al-Ain in Abu Dhabi 
Emirate), was at first about Abu Dhabi rewarding the well- 
regarded leadership of Fujairah with a multi-billion dollar 
project.  That vision has now expanded to encompass a major 
power component at the plant, which will be used to run a 
projected two billion USD aluminum smelter at Sohar in 
neighboring Oman. 
 
3.  (C)  The head of the New Ventures Unit at UOG, Khaldun 
Al-Mubarak, told Econchief and Econoff March 3 that Offsets, 
after having "created value" by envisioning how such a 
cross-border joint venture could have both economic and 
political benefits for Abu Dhabi, has now turned the 
aluminum smelter project over to ADWEA -- the Abu Dhabi 
Water and Electricity Authority.  ADWEA will work with the 
Omani authorities and the private sector (including Aluminum 
Canada - ALCAN) to move forward with the project, which 
should produce significant revenue and, more importantly for 
Oman, jobs.  Asked by Econchief how the Dubai Aluminum 
smelter firm, Dubal, had reacted to the creation of such a 
near-by competitor, Al-Mubarak observed that the Dubai 
authorities were not pleased, but had no reason to complain 
as they had been offered a chance to participate in the 
Sohar project but had declined, claiming that they would 
only join in the venture if it were located in Dubai 
Emirate.  "Perhaps they thought we would not proceed without 
them," the UOG official stated, "but they were wrong." 
 
4.  (C)  Comment:  The UAE, as part of its resolution of a 
long-running border dispute with Oman last summer, committed 
to significant cross-border investment (although the details 
that were shared with us focused more on tourism and road 
development along the coast between Muscat and Sur).  The 
Fujairah desal plant, which began life as a means to water 
the extensive Al-Ain farms and gardens of the Abu Dhabi 
shaykhs, has now morphed -- in a move that is vintage UOG -- 
to reflect that broader strategic vision.  Perhaps equally 
interesting is the success with which MBZ has used UOG to 
bring into his ambit two of his half-brothers, ADWEA's 
Shaykh Dhiyab (whose mother is from the well-connected Al- 
Darmaki tribe and whose full brothers include Amiri Guard 
Chief Nahyan and Abu Dhabi Seaport head Said) as well as 
Hamed -- who as the head of Union Water and Electricity 
Company (UWEC) is overseeing the construction of the 
Fujairah plant.  Hamed also serves as head of the Abu Dhabi 
Economic Department, with which UOG is working to create a 
development plan for Abu Dhabi's Musafah industrial zone. 
Hamed's full brothers include the the de facto Interior 
Minister, Shaykh Saif, and Ahmed, who heads the Abu Dhabi 
Investment Authority, responsible for managing the 
government's huge overseas investments.  It is also worth 
noting that UOG -- as an Abu Dhabi Emirate institution -- 
sought participation in the Sohar project from Dubal, but 
clearly believed that proceeding to cement ties with Oman 
even without such involvement was worth whatever ill 
feelings such action might engender in Dubai. 
 
Wahba