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PP RUEHDE RUEHDIR
DE RUEHAD #1430/01 3560917
ZNY CCCCC ZZH
P 210917Z DEC 08
FM AMEMBASSY ABU DHABI
TO RUEHC/SECSTATE WASHDC PRIORITY 1900
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE C O N F I D E N T I A L SECTION 01 OF 03 ABU DHABI 001430 
 
SIPDIS 
 
E.O. 12958: DECL: 12/20/2018 
TAGS:                      
SUBJECT: SENATOR BAUCUS'S VISIT TO THE UAE 
 
Classified by Ambassador Richard Olson, reasons 1.4 (b) and (d). 
 
 1. (U) This is a joint Embassy Abu Dhabi - Consulate General Dubai 
cable. 
 
Summary 
------- 
 
 2.  (C) During his December 13-15 visit to the United Arab Emirates, 
Senator Max Baucus (D-MT) and accompanying delegation from the Senate 
Finance Committee staff met with senior government and financial 
leaders to discuss bilateral political and economic relations, the 
impact of the global financial crisis, and the UAE's development 
goals.  UAE officials said they are working to improve relations with 
Congress and hope the 123 agreement will be approved "soon."  Baucus 
asked his interlocutors for their advice to the new U.S. President 
and Congress; many expressed their hope that the Arab-Israeli issue 
could be solved.  End Summary. 
 
 3. (SBU) In Abu Dhabi, Senator Baucus, joined by the Ambassador, met 
with Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed Al Nahyan 
(reported septel), Minister of Foreign Trade Sheikha Lubna Al Qasimi, 
Minister of State for Foreign Affairs Dr. Anwar Gargash, Abu Dhabi 
Investment Authority Chief Investment Officer Jean-Paul Villain, 
Masdar Future Energy Company CEO Dr. Sultan Al Jaber, and Mubadala 
CEO Khaldoon Al Mubarak. In Dubai, the Senator met with UAE Vice 
President, Prime minister and Dubai Ruler Sheikh Mohammed bin Rashid 
al Maktoum (MbR), had an extensive discussion with members of the 
American business community and addressed students at Zayed 
University. 
 
U.S. PERCEPTION OF THE UAE 
------------------------ 
 
 4. (C) Baucus told his interlocutors that many in the United States, 
particularly in Congress, are not aware of the depth of US-UAE 
cooperation.  Baucus urged the UAE to do more to educate Americans 
about the country.  Sheikha Lubna agreed that general perceptions 
about the Middle East influence opinions and that the UAE was at 
fault for not visiting more of the United States, particularly those 
states in which the UAE had made investments.  Mubadala CEO Khaldoon 
al Mubarak praised US-UAE government, private sector and security 
cooperation, but said unfortunately the warmth of this relationship 
has not always extended to Congress. 
 
123 AGREEMENT 
------------- 
 
 5. (C) Sheikha Lubna noted recent press articles about US-UAE efforts 
to conclude a 123 Agreement for nuclear cooperation.  She argued the 
UAE had cooperated on many sensitive export control and 
nonproliferation issues and asked that the Administration convey this 
to Congress.  Failure to conclude the agreement would only ensure 
that the UAE turns to the UK or France for technology cooperation. 
Al Mubarak said the UAE is actively working on its Congressional 
engagement.  Officials will continue to explain future nuclear energy 
needs (20-25 percent of total electricity generation), with the hope 
of finalizing the 123 agreement "very soon."  Al Mubarak said there 
is U.S.-UAE cooperation on many technologies (e.g., energy, 
aerospace, health) and stressed the long-term opportunities for 
nuclear cooperation. 
 
ABU DHABI AND DUBAI FINANCIAL ISSUES 
------------------------------------ 
 
 6. (C) ADIA officials told Baucus that ADIA had done better than many 
US pension funds because the sovereign wealth fund (SWF) had "totally 
avoided" exposure to sub-prime investments and had not invested in 
corporate credit.  Chief Investment Officer Jean-Paul Villain said 
ADIA returns are generally similar to those of Yale's endowment. 
(Note: Yale reported on December 16 that it had lost 13.4 percent 
between July and October. End Note.)  Although ADIA (like other SWFs) 
was not historically leveraged, Villain said today it is very 
efficient to be leveraged. 
 
 7. (C) ADIA officials opined that Dubai has a debt problem, 
particularly in the real estate sector.  Villain told Baucus there 
was too much investment in luxury properties, despite high demand for 
small apartments.  He predicted that the northern emirates would 
suffer more than Dubai from declines in the real estate market, as 
commuter residents would move into Dubai as prices fell.  Villain 
criticized some large Dubai infrastructure projects (e.g. airport, 
metro) that were financed with cheaper short term capital although 
they will have long term returns.  While Abu Dhabi can help its 
brother emirate, ADIA officials said there will be conditions on any 
assistance. 
 
GLOBAL FINANCIAL CRISIS 
----------------------- 
 
 8. (C) Global stimulus plans, though some were initially unclear, 
have allowed the world economy to return to "normal" and purchasing 
power is on the rise.  ADIA officials said those firms that do 
 
ABU DHABI 00001430  002 OF 003 
 
 
survive the downturn will exit the crisis much stronger.  Villain 
noted that greater pricing transparency in the credit default swap 
market would attract more investment.  Several officials told Baucus 
that they thought the proposed bailout for the U.S. auto industry is 
a "must," due to unemployment concerns, but said the industry is 
obviously not competitive.  Mubadala COO Waleed Al Mokarrab told 
Baucus that, given global economic ties, the United States must "come 
roaring back," with a transparent regulatory framework.  He and Al 
Mubarak praised the recent CFIUS revisions, noting that fair, static 
and transparent regulations encourage greater foreign direct 
investment.  Mubadala will be looking at opportunities across asset 
classes, but everyone has been affected by the downturn. 
 
ADVICE FOR THE NEW PRESIDENT AND CONGRESS 
----------------------------------------- 
 
 9. (C) Iran: MinState for Foreign Affairs Gargash complimented 
Secretary Rice's efforts to keep Gulf countries informed about U.S. 
policy on Iran, noting that partners need -- and deserve -- such 
explanations.  GCC foreign ministers remain concerned about the next 
round of incentives for Iran, particularly European intentions.  He 
warned that Iran is very aggressive diplomatically and uses the media 
to advance these efforts. 
 
 10. (C) Peace Process: Dubai Ruler Sheikh Mohammed bin Rashid 
expressed optimism over the Peace Process, but advocated for greater 
engagement with the Palestinians.  He reminded Senator Baucus of the 
UAE's commitment to supporting Abu Mazen, but encouraged us not to 
shut out Hamas.  MinState Gargash said the United States must engage 
robustly and early on the Peace Process, so that we build on existing 
progress. The Arab Peace Initiative is still on the table, and 
Sheikha Lubna noted that the Middle East represented a great market 
for Israel. 
 
 11. (C) U.S.-UAE Free Trade Agreement/Labor Issues: Sheikha Lubna 
expressed an interest in the status of trade promotion authority in 
 2009.  Baucus said he would support it, but cautioned that the UAE 
cannot expect a "carve-out" for oil and gas and must be prepared to 
address labor concerns.  Sheikha Lubna said the UAE is working to 
address some labor issues, but unionization is "hard for us." 
Gargash told Baucus that the UAE is striving to improve living 
conditions for expatriate workers, and will work to meeting all UN 
Labor standards except those relating to labor unions and the right 
of collective bargaining (on the ground that unions and collective 
bargaining would constitute a national security threat in a country 
where the vast majority of workers are not citizens). Sheikha Lubna 
added that the UAE is a great gateway for US products to the region 
and noted that the UAE is primarily a capital exporter to the United 
States.  Liberalization -- in the form of reduced trade barriers, 
documentation and visa difficulties -- is good for business. 
 
 12. (C) Renewable Energy: Masdar CEO Al Jaber said the United States 
should be a model for alternative energy, given its demonstrated 
competitive advantage in education and research and development. 
Despite failing oil prices, the UAE will continue its efforts to 
develop a knowledge-based economy, including its focus on alternative 
energy. Al Jaber suggested the USG develop a model for public private 
partnerships that rewards innovation based on actual power 
generation.  Masdar continues to seek investment opportunities in the 
United States. 
 
 13. (C) US Business Interests: During a breakfast hosted by the 
American Business Council in Dubai, the Senator also discussed 
objectives for a new Administration and Congress.   He heard strong 
views on how the US tax code creates disincentives for US firms to 
hire Americans abroad, and the importance of the Congress not to 
respond to the current economic crisis by turning to anti-trade and 
other protectionist approaches. 
 
UAE AS A MODEL 
-------------- 
 
 14. (C) Echoing what Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed 
told Baucus (septel), Gargash said the UAE is a modern successful 
Islamic country breaking stereotypes.  Al Mubarak said Abu Dhabi has 
taken steps to upgrade its health infrastructure, including universal 
health insurance, and invested in education.  Abu Dhabi aims to break 
the ranks of the top five governments "in every category," by 
measuring its restructuring, privatization and service performance 
efforts against international metrics.  Because human resources 
remain a challenge, al Mubarak said Abu Dhabi is also investing 
heavily in education.  These reform efforts have been so successful 
that it is not uncommon to find Abu Dhabi policies and regulations 
being modeled -- if not copied -- in other parts of the Arab world. 
 
 15.  (U) Senator Baucus was accompanied by: 
-- William Dauster, Senate Finance Committee (SFC), Professional 
Staff Member (PSM) 
-- Demetrios Marantis, SFC PSM 
-- Carol Guthrie, SFC PSM 
-- Melodee Hanes, SFC PSM 
-- Janis Lazda, SFC PSM 
-- Jonathan Selib, SFC PSM 
 
ABU DHABI 00001430  003 OF 003 
 
 
-- Chelsea Thomas, SFC PSM 
OLSON