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Saudi Cannot Pump Enough Oil To Keep A Lid On Prices

Posted on 10 February 2011 by hashimilion


¶1. (C) SUMMARY: On November 20, 2007, CG and Econoff met with Dr. Sadad al-Husseini, former Executive Vice President for Exploration and Production at Saudi Aramco. Al-Husseini, who maintains close ties to Aramco executives, believes that the Saudi oil company has oversold its ability to increase production and will be unable to reach the stated goal of 12.5 million b/d of sustainable capacity by 2009. While stating that he does not subscribe to the theory of “peak oil,” the former Aramco board member does believe that a global output plateau will be reached in the next 5 to 10 years and will last some 15 years, until world oil production begins to decline. Additionally, al-Husseini expressed the view that the recent surge in oil prices reflects the underlying reality that global demand has met supply, and is not due to artificial market distortions. END SUMMARY.

——————————————— ——-

¶2. (C) Dr. Sadad al-Husseini met with CG and EconOff on November 20 to discuss current trends in the international energy market, as well as his thoughts on the Saudi energy sector. Al-Husseini served as Executive Vice President for Exploration and Production from 1992 until his retirement in 2004. He also served as a member of the Aramco Board of Directors from 1996 to retirement. (COMMENT: Al-Husseini retired in the midst of an executive dispute, supposedly caused when he unsuccessfully attempted to engineer his ascension to the position of CEO. Although he continues to live at Aramco’s main camp and has close interpersonal relationships with key Aramco executives, many of al-Husseini’s views on Aramco are shaped by the perception that the company would be better off if he were running it. END COMMENT). It is al-Husseini’s belief that while Aramco can reach 12 million b/d within the next 10 years, it will be unable to meet the goal of 12.5 million b/d by 2009. The former EVP added that sustaining 12 million b/d output will only be possible for a limited period of time, and even then, only with a massive investment program.

¶3. (C) According to al-Husseini, the crux of the issue is twofold. First, it is possible that Saudi reserves are not as bountiful as sometimes described and the timeline for their production not as unrestrained as Aramco executives and energy optimists would like to portray. In a December 1 presentation at an Aramco Drilling Symposium, Abdallah al-Saif, current Aramco Senior Vice President for Exploration and Production, reported that Aramco has 716 billion barrels (bbls) of total reserves, of which 51 percent are recoverable. He then offered the promising forecast - based on historical trends - that in 20 years, Aramco will have over 900 billion barrels of total reserves, and future technology will allow for 70 percent recovery.

¶4. (C) Al-Husseini disagrees with this analysis, as he believes that Aramco’s reserves are overstated by as much as 300 billion bbls of “speculative resources.” He instead focuses on original proven reserves, oil that has already been produced or which is available for exploitation based on current technology. All parties estimate this amount to be approximately 360 billion bbls. In al-Husseini’s view, once 50 percent depletion of original proven reserves has been reached and the 180 billion bbls threshold crossed, a slow but steady output decline will ensue and no amount of effort will be able to stop it. By al-Husseini’s calculations, approximately 116 billion barrels of oil have been produced by Saudi Arabia, meaning only 64 billion barrels remain before reaching this crucial point of inflection. At 12 million b/d production, this inflection point will arrive in 14 years. Thus, while Aramco will likely be able to surpass 12 million b/d in the next decade, soon after reaching that threshold the company will have to expend maximum effort to simply fend off impending output declines. Al-Husseini believes that what will result is a plateau in total output that will last approximately 15 years, followed by decreasing output.

¶5. (C) Al-Husseini elaborated that oil field depletion rates also play a significant role in determining the Aramco - and

RIYADH 00002441 002 OF 003 12.5 MBD IN 2009

global - production timeline. Increasing output is not simply a function of adding new capacity to already existing operations. Instead, due to depletion rates, new reserves must be brought online to both replace depleted production and satisfy growth in consumption. The International Energy Agency (IEA) has estimated global depletion rates at 4 percent, while a 2006 Aramco statement has estimated Saudi Arabia’s overall depletion rate at 2 percent. Al-Husseini estimates that moving forward, satisfying increases in global demand will require bringing online annually at least 6 million b/d of worldwide output, 2 million to satisfy increased demand and 4 million to compensate for declining production in existing fields.

¶6. (C) The second issue that will limit any proposed Aramco output expansion can be broadly defined as a lack of supporting resources. For example, in al-Husseini’s estimation, it is not the amount of oil available that will prevent Aramco from reaching 12.5 million b/d by 2009, but rather issues such as a lack of available skilled engineers, a shortage of experienced construction companies, insufficient refining capacity, underdeveloped industrial infrastructure, and a need for production management (if too much oil is extracted from a well without proper planning and technique, a well’s potential output will be significantly damaged). As previously reported by post (Reftel), the Eastern Province economy is facing severe industrial expansion limits, and despite Aramco’s willingness to invest up to 50 billion USD to achieve the 2009 goal, availability of labor, materials and housing may end up as determinative factors.


¶7. (C) Considering the rapidly growing global demand for energy - led by China, India and internal growth in oil-exporting countries - and in light of the above mentioned constraints on expanding current capacity, al-Husseini believes that the recent oil price increases are not market distortions but instead reflect the underlying reality that demand has met supply (global energy supply having remained relatively stagnant over the past years at approximately 85 million barrels/day). He estimates that the current floor price of oil, removing all geopolitical instability and financial speculation, is approximately 70 - 75 USD/barrel. Due to the longer-term constraints on expanding global output, al-Husseini judges that demand will continue to outpace supply and that for every million b/d shortfall that exists between demand and supply, the floor price of oil will increase 12 USD. Al-Husseini added that new oil discoveries are insufficient relative to the decline of the super-fields, such as Ghawar, that have long been the lynchpin of the global market.

¶8. (C) COMMENT: While al-Husseini believes that Saudi officials overstate capabilities in the interest of spurring foreign investment, he is also critical of international expectations. He stated that the IEA’s expectation that Saudi Arabia and the Middle East will lead the market in reaching global output levels of over 100 million barrels/day is unrealistic, and it is incumbent upon political leaders to begin understanding and preparing for this “inconvenient truth.” Al-Husseini was clear to add that he does not view himself as part of the “peak oil camp,” and does not agree with analysts such as Matthew Simmons. He considers himself optimistic about the future of energy, but pragmatic with regards to what resources are available and what level of production is possible. While he fundamentally contradicts the Aramco company line, al-Husseini is no doomsday theorist. His pedigree, experience and outlook demand that his predictions be thoughtfully considered. END COMMENT.


¶9. (U) Dr. Sadad Ibrahim al-Husseini was born in Syria but raised in Saudi Arabia, his father a Saudi government official. He received a BS in Geology from the American University of Beirut in 1968, as well as an MS and Ph.D. in geological sciences from Brown University in 1970 and 1972, respectively. Al-Husseini also attended a Professional Management Program at Harvard Business School in 1982.

RIYADH 00002441 003 OF 003 12.5 MBD IN 2009

Joining Aramco in 1972, al-Husseini quickly advanced, becoming Senior Vice President for Exploration and Production in 1986. He was given the title Executive Vice President in 1992. Al-Husseini served on Aramco’s Management Committee from 1986 until 2004, and sat on the Aramco Board of Directors from 1996 - 2004. He retired on March 1, 2004. XXXXXXXXXXXX


Reference ID: 07RIYADH2441
Created: 2007-12-10 05:05

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Scenesetter For Special Representative Ambassador Holbrooke’s February 15-16 Visit To Riyadh

Posted on 06 February 2011 by hashimilion




E.O. 12958: DECL: 02/10/2020

Ref: KABUL 500

RIYADH 00000182 001.2 of 003

Classified By: Ambassador James B. Smith for reasons 1.4 (B) and (D)

¶1. (C) Ambassador Holbrooke, Embassy Riyadh warmly welcomes
you to Saudi Arabia, which, by virtue of its historical and
cultural ties to Central Asia; personal relationships between
Saudi, Afghani and Pakistani leaders; financial power; and
leadership of the Muslim world, can play a central role in
implementing the President’s strategy for Afghanistan and
Pakistan. Your visit comes at a time of great potential but
great uncertainty: the Saudi-Afghan relationship appears to
be warming up, while the traditionally close Saudi-Pakistani
relationship has grown increasingly strained. The Saudis are
broadly supportive of our approach to Afghanistan and
Pakistan, but occasionally express skepticism about our
timing or our approach. Your visit provides an opportunity
to mine the Saudis’ wealth of experience in dealing with
Afghanistan, Pakistan, and extremism, and further explore
ways to translate our shared goals into action in the unique
Saudi context. We have requested meetings with xxxxxxxxxxxx.

February 2-3 visit to the Kingdom, although richer in
symbolism than substance, was a sign that lukewarm
Saudi-Afghan relations may finally be warming up. In his
official statement at the London Conference, FM Saud
announced a $150 million pledge of additional financial
support for Afghan reconstruction. He expressed broad Saudi
support for reconciliation, adding that they would be willing
to assist at the request of President Karzai- on the
condition that the Taliban sever its relationship with
Al-Qaeda and cease providing refuge to its leaders. While
not as forward leaning as we may have liked, FM Saud’s
statement put the Saudis on the record and created an
opportunity to put reconciliation talks back in
motion-eventually. Saudi participation at the Turkish-led
regional conference on Afghanistan on January 26 was further
evidence of the Saudi commitment to engagement. Karzai’s
visit showed that the King was ready to deal with Karzai as a
legitimate, Muslim head of state. However, the Saudis
continue to have concerns about Afghan corruption and believe
greater political incorporation of the Pashtun community is
essential. Their apparent wish to downplay Karzai’s
visit-as compared to the Afghans (reftel)-may also indicate
the King’s desire to keep some distance and maintain his
credibility as a potential reconciliation mediator.

¶3. (s/nf) but mediation not ready for prime time:
Privately, the Saudis tell us it’s still “too soon” to be
publicly discussing technical and financial aspects of
reintegration efforts. xxxxxxxxxxxx has made
clear that his marching orders are to work through
intelligence channels only until progress becomes
sustainable, at which point foreign ministries will be
brought in. In a recent meeting with the Ambassador, xxxxxxxxxxxx
hinted at but did not provide details about what
appears to be significant movement on the Saudi mediation
effort, with visits by high-level Taliban and Afghan
officials, since the Hajj. We surmise that xxxxxxxxxxxx is
reluctant to share information because the talks remain
delicate and he fears U.S. involvement could derail progress.
He has also voiced concern about how to address UNSCR 1267
prohibitions on dealing with various Taliban members.

generally agree that there is a need to deny terrorists
safehavens in Pakistan, but question whether the methods we
have outlined will be effective. Despite tense relations
with the Zardari government, close military and intelligence
cooperation continues between Saudi Arabia and Pakistan. The
Saudis believe opposition leader Nawaz Sharif can play a
“great role” in working with tribal chiefs and that “money is
better than bullets” in the fight against the Taliban. They
have started to fulfill their pledge from the Tokyo donor,s
conference (over half of the $700 million pledged has been
disbursed) and have expressed a willingness to continue with
financial support for a stable Pakistan. Saudi interlocutors
stress the importance of remembering that Pakistan remains

Riyadh 00000182 002.2 of 003

pre-occupied with issues on its Indian border, coloring its
ability to deal with the Taliban.

¶5. (C) IN THE ARMY WE TRUST: The tumultuous democratic
process in Pakistan makes the Saudis nervous, and they appear
to be looking for “another Musharraf”: a strong, forceful
leader they know they can trust. In his January meeting with
General Jones, the King cited President Zardari as an
impediment to denying terrorist safehavens, calling him an
“obstacle” and “a rotten head” that was infecting the whole
body. He maintained that the Pakistani Army was capable of
being a strong partner for the U.S., and opined that U.S.
development assistance would rebuild trust. He asserted that
that the Army was staying out of Pakistani politics in
deference to U.S. wishes, rather than doing what it “should.”
FM Saud told General Jones that we must reach out to tribal
leaders and separate “those we could work with” from “those
we must fight.” He believed that using the military to fight
extremists posed certain dangers, and that the credibility of
the army must be maintained. The Saudis were pushing
Pakistan’s civilian leaders to work together, but “compromise
seemed alien to Pakistani politicians.”

¶6. (C) TURKI’S TAKE: During a recent meeting with
Ambassador, former GIP Director Prince Turki Al-Faisal called
Afghanistan a “puzzle,” where establishing trust with Afghan
leaders, and recognizing the links between Pakistan and the
Taliban, were keys to success. All financial aid to the
Afghan government should be conditional: benchmarks must be
set for the leadership, and aid must be withheld until these
are met. Recent Saudi efforts to assist in Taliban mediation
had failed, he said, when “both sides fell short.” He
described the Taliban leadership as “fractured,” and
suggested the U.S. and NATO needed to target criminal
elements more vociferously and re-focus our attention on
capturing Osama Bin Laden and Ayman Al-Zawahiri. He
suggested Saudi Arabia, the U.S., China, Russia, Afghanistan
and Pakistan could join forces and share assets in order to
capture or kill bin Laden and Al-Zawahiri. This would break
the terrorists’ “aura of invincibility” and allow the U.S. to
“declare victory” and move on.

¶7. (S/NF) TERRORISM FINANCE: Terrorist funding emanating
from Saudi Arabia remains a serious concern. Over the last
year, however, Saudi Arabia has made important progress in
combating al-Qaida financing emanating from the country.
Sensitive reporting indicates that al-Qaida’s ability to
raise funds has deteriorated substantially, and that it is
now in its weakest state since 9/11. The Kingdom is also
cooperating more actively than at any previous point to
respond to terrorist financing concerns raised by the United
States, and to investigate and detain financial facilitators
of concern. Nonetheless, sustained engagement is required to
maintain the current momentum, particularly in providing the
Saudis with specific details and actionable information.
Your visit provides another opportunity to welcome the
progress Saudi Arabia has made, and reiterate the importance
that President Obama and the USG place on curtailing
fundraising activity by global terrorist groups in Saudi
Arabia, particularly those that undermine the stability of
Afghanistan and Pakistan.

¶8. (S/NF) TERRORISM FINANCE, CONTINUED: While in the past
the KSA stood reluctant to pursue Saudi donors who backed
groups that did not directly threaten the Kingdom, the Saudi
Ministry of Interior (MOI) has now demonstrated willingness
to take action, and has begun to detain individuals involved
in funding networks for groups such as Lashkar e-Tayyiba
(LeT), the Taliban, and in some cases even Hamas. Our TF
cooperation with the MOI is of utmost strategic importance to
U.S. national security as donors in Saudi Arabia continue to
constitute a source of funding to Sunni extremist groups
worldwide. Available intelligence reflects that the Kingdom
remains an important fundraising locale-especially during the
Hajj and Ramadan-for the Taliban, LeT, and other terrorist
groups based in Afghanistan and Pakistan. The MOI remains
almost completely dependent on the CIA to provide analytic
support and direction for its counterterrorism operations. As
such, our success against terrorist financing in the Kingdom
remains directly tied to our ability to provide actionable
intelligence to our Saudi counterparts. In order to enhance
the USG’s ability to influence and direct Saudi efforts to

Riyadh 00000182 003.2 of 003

disrupt terrorist financing, in 2008 we stood up a Treasury
attach office in Embassy Riyadh. This office actively
contributes to the daily intelligence sharing process that
is led by CIA.

taken increasingly aggressive efforts to disrupt al-Qaida’s
access to funding from Saudi sources. An example of recent
progress by the KSA is the conviction of over 300 people for
involvement in terrorism, including some for providing
financial support. News reports suggest that appeals may be
opened to the media in order to enhance the deterrent effects
of such prosecutions. In addition, Assistant Interior
xxxxxxxxxxxx stated that
the Ministry of the Interior (MOI) deliberately timed its
August 19, 2009 press release regarding the arrest of 44
terrorist supporters to deter potential donors from giving
money to suspected terrorist groups during Ramadan. Although
a great deal of work remains to be done,xxxxxxxxxxxx
has given his commitment to work with the United States on
Taliban finance, and has said that the MOI will arrest
individuals involved in Saudi-based Taliban fundraising
activities - even if involved in the reconciliation process -
when provided with actionable intelligence.

expressed broad support for the President’s strategy on
Afghanistan and Pakistan, but often balk when asked to
designate an SRAP to coordinate policy with the USG and
others. In part, this reflects the centralized Saudi
decision-making process and the reality that issues related
to Afghanistan and Pakistan policy are not delegated, but
rather dealt with directly by the King and members of the
intelligence community. While the Saudis are hesitant to
delegate authority and tend to make only broad-based
commitments to high-profile, multilateral initiatives, they
appear ready, willing and eager to share their experiences
with us and identify greater opportunities for cooperation on
a bilateral basis. Your visit provides an opportunity to
further explore how we can best translate our shared goals
into action in the unique Saudi context.

Reference ID: 10RIYADH182
Created: 2010-02-12 12:12

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Presidential Assistant Brennan’s Sept 5 Discussion With Saudi Interior Minister Prince Nayif

Posted on 28 December 2010 by hashimilion

S E C R E T JEDDAH 000343



E.O. 12958: DECL: 09/12/2029


Classified By: CG Martin R. Quinn for reasons 1.4 (b) and (d)


1. (S/NF) During CDA Richard Erdman’s September 5 meeting
with Saudi Second Deputy Prime Minister and Minister of
Interior Prince Nayif bin Abdulaziz (reftel), John Brennan,
Assistant to the President for Homeland Security and
Counterterrorism, stressed USG condemnation of the August 28
terrorist attack on Assistant Interior Minister Prince
Mohammed bin Nayif (MbN) and strong USG support for Saudi
Arabia in combating violent extremism. Nayif emphasized that
the attack had in no way diminished the SAG’s resolve to
eliminate terrorism — despite the danger — and described
SAG’s multifaceted approach, which combines refuting
terrorist ideology, security operations, and rehabilitation.
The Prince also complained that Iran had breached its 2001
security agreement with KSA and was supporting aggression
against the kingdom; expressed frustration with European
nations for allowing terrorists to operate against KSA rather
than handing them over, and requested US intercession to
change this European policy. Both parties reaffirmed their
commitment to the US-Saudi relationship begun by FDR and King
Abdulaziz, especially the partnership between security
channels. End summary.


2. (S/NF) At a previously scheduled September 5 farewell call
on Prince Nayif, Charge introduced Mr. Brennan and asked him
to brief on Washington perspectives on current
counterterrorism challenges and efforts. Brennan opened by
conveying U.S. condemnation and concern over the August 27
attack on Assistant Interior Minister Mohammed bin Nayif as
well as our great relief that he had survived the cowardly
attack. In this regard, he said he had brought a personal
letter from President Obama to Prince Mohammed expressing our
concern and best wishes. The U.S., he continued, greatly
admired and appreciated the courageous work being done by the
Ministry of Interior and the Mabahith against violent
extremism and terrorism.


3. (S/NF) President Obama felt personally outraged by the
attack, Brennan said, and emphasized that it was critically
important that the U.S. and Saudi Arabia went forward in the
fight against violent extremism. Noting that he would be
visiting Yemen the following day, Brennan said he would
stress to President Saleh, in the strongest possible terms,
the importance of combating terrorism and resolving the
serious problems facing his country. Brennan also confirmed
to Prince Nayif that the USG was working very closely with
the Mabahith and would be discussing in the coming days how
to approach the threat coming from Yemen.

——————————————— ———

4. (S/NF) Thanking Brennan for USG support, Nayif emphasized
that the attack had not weakened SAG’s resolve to eliminate
terrorism. Following the incident, he said, the King met
with MbN, who stressed that acts of terror “would not keep us
from working and doing our job.” At the same time, the door
must always remain open to those militants who wanted to
return to society. These terrorists were attacking the
country as a whole and would not hesitate to attack anyone to
reach their goals. “Every Saudi official is at risk of
attack,” he said. “Despite this, we are still willing to put
forth more effort against terrorism, which is more dangerous
than any illness.” Fear of losing one’s life was not a
reason to stop working. We had a duty to defend the country,
and it was preferable to die doing one’s duty. “God
determined a person’s fate and everyone will go back to God.”

5. (S/NF) Nayif then described SAG’s approach to terrorism as
including countering terrorist ideology, armed
counterterrorism operations, and a rehabilitation program for
militants who surrendered. The SAG has created a strategic
communications center where intellectuals and imams worked to
explain to the public that terrorists were working against
the true ways of Islam and attacking Saudi society. In
countering the spread of jihadist ideology, Nayif added, the
Friday mosque sermons — delivered four times a month in the
country’s more than 15,000 mosques — were one of the most
effective vehicles.

6. (S/NF) Asked about the economic impact of the recent
attack, Nayif asserted that Saudi Arabia was better off than
any country in the region and among the best-situated
globally in terms of economic activity. Using a favorite
line, he said: “We know that capital is a coward and wants a
safe place.” For this reason, people could invest with
confidence in the Kingdom, the economy was growing, and the
government was continuing its development plans. The economy
was thriving and the security situation was good despite
being among the countries most subject to terrorist attacks.
Saudi Arabia had thwarted more than 200 terrorist operations,
he said, and only 5 percent of planned attacks had actually
occurred. “We’ve achieved many things in protecting the
country and, God willing, we will achieve many more things
with our friends.” Brennan praised SAG efforts to combat
terrorism: “I wish other countries in the world were as
willing and capable.” Saudi Arabia, he stated, was on the
front line of terrorism, a model in preventing individuals
from being corrupted by the propaganda of Al Qaeda, and thus
instrumental in demonstrating to the West and the U.S. that
Al Qaeda was a perversion of Islam and did not represent the
true faith.


7. (S/NF) Nayif complained that over the past two years Iran
has hosted Saudis (all Sunnis) — including Osama bin Laden’s
son Ibrahim — who had contacts with terrorists and worked
against the Kingdom. SAG considered this aggressive action a
breach of the 2001 security agreement between the two
nations. The SAG has informed Iran through its ambassador
and the MFA, asking the GOI to hand over these Saudis. Nayif
recalled that after the operations in Khobar in 1996, the SAG
tried to open channels with Iran and tried to improve
relations during Khatami’s presidency. He himself had met
personally with Iranian National Security Secretary General
Dr. Hassan Rohani (Iran’s Supreme Council on National
Security) and had signed a security agreement in which Iran
promised to show respect and not take any actions inside or
outside Iran against the Kingdom. Brennan agreed that Iran
had the capacity to cause trouble, and assured the Prince
that the USG was very concerned and looking carefully at the
situation. President Obama’s willingness to talk to the
Iranians did not mean he did not understand the problem.
Brennan emphasized the SAG’s strong friends in the White
House, including President Obama, wanted to work very closely
with Saudi Arabia on this front.


8. (S/NF) Nayif expressed frustration with the limited
cooperation of friendly European nations with whom the
Kingdom has security agreements. The governments, he
complained, shared information but did not take any action.
As a result, “terrorists roam around freely in their
countries,” and the Europeans have not handed over
terrorists. For example, Ibrahim (Salih Mohammed Al-Yacoub),
a very important suspect involved in the Khobar bombing, was
in Europe. Saudi Arabia asked several nations to hand him
over as a terrorist who had acted against the Kingdom and the
United States. Nayif complained that while these European
countries were friendly, had good relations, and shared
interests with the Kingdom, he failed to understand why
Europeans harbored terrorists working against Saudi Arabia in
their countries. If there were people in Saudi Arabia
working against friendly countries, the SAG would intervene.
Nayif requested USG help in convincing Europe to work more
cooperatively. Brennan commented that we had similar
frustrations with some countries.


9. (S/NF) Throughout the two-hour meeting, Nayif highlighted
the importance of bilateral security cooperation, noting that
the level of professional exchange has been excellent. Nayif
commented that there has been success in exchanging
information, procuring the best, newest, most updated
technology and in finding and preventing terrorist acts
before they happen. The final goal, he stressed, was to stop
terrorists and “dry out their resources.” Asked by Charge if
he meant terrorist financing, Nayif replied: “Yes. When we
say ‘resources’ we mean people, training, and money. We have
found huge sums of money on many terrorists we have caught.”
Nayif expressed the hope that through joint cooperation Al
Qaeda as the source of terrorism in the Kingdom and
throughout the world could be destroyed. He added that the
support from U.S.-Saudi leadership in this area was
critically important to reach the goal. Nayif thanked
President Obama for supporting strengthened security ties
between the two countries and said that King Abdullah was
strongly committed to cooperating with the United States
against terrorism. Recalling the 1945 visit between FDR and
King Abdulaziz, Nayif declared, “We’re acting upon what they
decided.” Brennan responded that President Obama would be
pleased to hear that the Saudi commitment to our special
relationship remained stronger than ever.

10. (U) This message was cleared by Assistant to the
President John Brennan.


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Tales Of a Prince: CG Meets With Governor Of Asir’s Fixer

Posted on 28 December 2010 by hashimilion

S E C R E T JEDDAH 000700



EO 12958 DECL: 11/08/2016

Classified By: Consul General Tatiana Gfoeller,for reasons 1.4 (b) and (d).

1. (S) On November 7 the CG met with a prominent Western businessman who is close to the Governor of Asir, Prince Khalid bin Faisal. The businessman is known as a “fixer” for Prince Khalid. During their conversation, he recounted to the CG a number of his interactions with the Prince.

2. (S) Their first encounter was at the prince’s majlis in Abha, the capital of Asir Province. The businessman described the majlis to the CG and spoke of its largesse, its lavish decor, and its eclectic makeup of people: tribesmen, mutawa, and others. During the proceedings, a waiter approached with coffee and tea. XXXXXXXXXXXX the businessman recalled, he knew that he and Prince Khalid would get along well.

3. (S) The businessman’s second encounter with the prince was not actually with the prince. He had been invited to the prince’s home to meet with his family. He recalled how surprised he had been at such a gesture. XXXXXXXXXXXX

4. (S) The businessman’s third encounter with Prince Khalid coincided with the visit of Prince Charles of the United Kingdom. He informed the CG that Prince Khalid and Prince Charles share a love of painting. Khalid opened a “painters village” in Abha, the capital of Asir, called Al Muftah. People, including faces, as well as objects are painted by Al Muftah artists, just as Khalid does in his own works of art. (Note: This is very interesting since painting is frowned upon by many conservative Saudis, and painting people and faces is forbidden according to the Wahabi interpretation of Islam. End note.) The businessman told the CG about a call that he received from a nervous Prince Khalid because of the party that he had offered to host for Prince Charles. During that time Prince Khalid, who has since built a new palace, was living in his father, the deceased King Faisal’s old palace. His mother, Queen Effet, lived upstairs on the second floor of the palace, but the first floor needed attention. The palace was described as aged and in dire need of renovation. The businessman recounted how he was called and asked by the Prince, to take care of renovating the ground floor of the palace for a party that would take place in three weeks from the time of the phone call. The businessman asked whether he had a choice, and when told an emphatic “no,” then agreed to do it.

5. (S) According to the businessman, the first thing that he did was cut off all electricity so that no one would be able to turn on the lights and see what was taking place. Secondly, he inserted styrofoam into the holes in the walls. Thirdly, he set up projectors to project colors and designs onto the walls. On the evening of the party candles were the only source of lighting throughout the house. The plan was successful as the Prince of Wales commented on how luxurious and beautiful the palace was, despite the fact that it was not. Prince Khalid was very happy and the relationship between the businessman and the prince was cemented. (Note: The prince’s old palace has since become a university. End note.)

6. (S) The next day Prince Khalid phoned this businessman and invited him to meet the Prince of Wales. What the prince did not know was that while the businessman had sacrificed three weeks to renovate the palace, his sister had been visiting from out of the country and he had other obligations, which he disregarded. The businessman ultimately declined the invitation to meet with the two princes. When he received a phone call and a summons, the next day, from Prince Khalid, he was frightened. He did not know what to expect and he feared the worst.

6. (S) When the businessman arrived to meet Prince Khalid he was pleasantly surprised to receive a painting by each of the princes, as gifts. He was also shocked to receive, what Prince Khalid called, a “tip,” in the amount of SR50,000 ($13,333). He confided to the CG that Prince Khalid is “known for being extremely cheap.” The businessman concluded by reiterating how close his relationship is to Prince Khalid and sharing more fond memories of the “phony dinner” at the prince’s palace.


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Underground Party Scene In Jeddah: Saudi Youth Frolic Under “Princely Protection”

Posted on 28 December 2010 by hashimilion

C O N F I D E N T I A L SECTION 01 OF 02 JEDDAH 000443

EO 12958 DECL: 10/31/2014

REF: A. JEDDAH 0292 B. JEDDAH 0079

JEDDAH 00000443 001.2 OF 002

Classified By: Consul General Martin R. Quinn for reasons 1.4 (b) and (d)

1. (C) Summary: Behind the facade of Wahabi conservatism in the streets, the underground nightlife for Jeddah’s elite youth is thriving and throbbing. The full range of worldly temptations and vices are available — alcohol, drugs, sex — but strictly behind closed doors. This freedom to indulge carnal pursuits is possible merely because the religious police keep their distance when parties include the presence or patronage of a Saudi royal and his circle of loyal attendants, such as a Halloween event attended by ConGenOffs on. [DETAIL REMOVED] Over the past few years, the increased conservatism of Saudi Arabia’s external society has pushed the nightlife and party scene in Jeddah even further underground. End summary.

Elite party like the rest of the world,

just underground

2. (C) Along with over 150 young Saudis (men and women mostly in their 20’s and early 30’s), ConGenOffs accepted invitations to an underground Halloween party at PrinceXXXXXXXXXXXX residence in Jeddah on XXXXXXXXXXXX. Inside the gates, past the XXXXXXXXXXXX security guards and after the abaya coat-check, the scene resembled a nightclub anywhere outside the Kingdom: plentiful alcohol, young couples dancing, a DJ at the turntables, and everyone in costume. Funding for the party came from a corporate sponsor, XXXXXXa U.S.-based energy-drink company as well as from the princely host himself.

Royalty, attended by “khawi,” keep religious police at bay
——————————————— ————-

3. (C) Religious police/CPVPV (Commission for the Promotion of Virtue and Prevention of Vice) were nowhere to be seen and while admission was controlled through a strictly-enforced guest list, the partygoers were otherwise not shy about publicizing the affair. According to a young Saudi from a prominent Jeddah merchant family, the Saudis try to throw parties at princes’ houses or with princes in attendance, which serves as sufficient deterrent to interference by the CPVPV. There are over 10,000 princes in the Kingdom, albeit at various levels and gradations — “Royal Highnesses” (“Saheb Al Sumou Al Maliki”) signified by direct descent from King Abdulaziz, and mere “Highnesses” (“Saheb Al Sumou”) from less direct branches of the Al Saud ruling family. Our host that evening,xxxxxx (protect), traces his roots to Thunayan, a brother of Mohammad, Amir of Diriyyah and Nejd (1725-65), King Abdullah’s direct ancestor, six generations back. Although PrinceXXXXXXXXXXXX is XXXXXXXXXXXX not in line for the throne, he still enjoys the perks of a mansion, luxury car, lifetime stipend, and security entourage. (Note: Most of the prince XXXXXXXXXXXX’s security forces were young XXXXXXXXXXXX men. It is common practice for Saudi princes to grow up with hired bodyguards from Nigeria or other African nations who are of similar age and who remain with the prince well into adulthood. They are called “khawi,” derived from the Arabic word “akh,” meaning “brother.” The lifetime spent together creates an intense bond of loyalty. End note.)

Availability of black market alcohol, prostitutes, and drugs
——————————————— —————

4. (C) Alcohol, though strictly prohibited by Saudi law and custom, was plentiful at the party’s well-stocked bar, well-patronized by Halloween revellers. The hired Filipino bartenders served a cocktail punch using “sadiqi,” a locally-made “moonshine.” While top-shelf liquor bottles were on display throughout the bar area, the original contents were reportedly already consumed and replaced by sadiqi. On the black market, a bottle of Smirnoff can cost 1,500 riyals when available, compared to 100 riyals for the locally-made vodka. It was also learned through word-of-mouth that a number of the guests were in fact “working girls,” not uncommon for such parties.
JEDDAH 00000443 002.2 OF 002
Additionally, though not witnessed directly at this event, cocaine and hashish use is common in these social circles and has been seen on other occasions.

5. (C) Comment: Saudi youth get to enjoy relative social freedom and indulge fleshly pursuits, but only behind closed doors — and only the rich. Parties of this nature and scale are believed to be a relatively recent phenomenon in Jeddah. One contact, a young Saudi male, explained that up to a few years ago, the only weekend activity was “dating” inside the homes of the affluent in small groups. It is not uncommon in Jeddah for the more lavish private residences to include elaborate basement bars, discos, entertainment centers and clubs. As one high society Saudi remarked, “The increased conservatism of our society over these past years has only moved social interaction to the inside of people’s homes.” End comment.


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Scenesetter for Secretary Clinton’s Feb 15-16 Visit To Saudi Arabia

Posted on 28 December 2010 by hashimilion

S E C R E T SECTION 01 OF 05 RIYADH 000178



E.O. 12958: DECL: 02/10/2020

REASONS 1.4 (B) & (D)


1. (C) Madam Secretary, Mission Saudi Arabia warmly welcomes
your visit to the Kingdom, a country which, by virtue of its
energy resources, financial power, counterterrorism efforts,
and leadership of the Muslim world, plays a critical role in
many global and regional issues of importance to us. Your
visit comes at a time of emerging opportunities for
engagement to advance the goals that you and the President
have laid out in your speeches in the region.

2. (C) Our alliance with Saudi Arabia, while complicated and
subject to occasional disjunctions, has proven durable.
Taking stock of where we stand, we see a mixed picture. The
good news is that the Saudi leadership still sees the United
States as its most important strategic partner and guarantor
of its stability. We also share many global and regional
objectives, including the need for global financial and
energy stability, a common view of threats posed by terrorism
and extremism, the dangers posed by Iran and destabilization
in Pakistan, and the linkage that progress toward Middle East
peace has to virtually all other regional issues. Finally,
Saudi Arabia has become one of our most important allies in
the fight against Al-Qaida and terror financing.

3. (C) The bad news is that we differ on tactics in some key
objectives, and we are often frustrated by Saudi
unresponsiveness and a dearth of interlocutors among an aging
collective leadership. The status of women, religious
freedom, and human rights are ongoing concerns. On the Saudi
side, King Abdullah believes we are not always reliable,
consistent, or willing to heed his advice on important issues
such as Iraq. Saud Al-Faisal and others have openly been
critical of U.S. policies they describe as having shifted the
regional balance of power in favor of arch-rival Iran.
Differences of opinion on some of these issues can be
exacerbated by our differing cultures and value systems,
which can introduce a degree of skepticism and hesitancy in
the relationship.

4. (C) Despite the problems, a negative assessment of the
bilateral relationship would miss a critical point relevant
to U.S. goals in the region: Saudi Arabia is a country in
transition, and the changes underway present opportunities
for engagement that can advance U.S. interests and national
security. Saudi Arabia faces transitions on multiple levels,
from the geopolitical, where its trade and energy relations
are shifting from west to east, to economic, where greater
integration in the world economy is steadily exposing Saudis
to international best practices. Domestically, greater
access to internet and cell phones is unleashing new forms of
social activism, something demonstrated by an outpouring of
Saudi spontaneous voluntary assistance in the aftermath of
the Jeddah floods.

——————————————— —

5. (C) Having faced down what amounted to an insurgency by
Al-Qaida from 2003 to 2006, Saudi Arabia’s leadership
acknowledged the pressing need for systemic reforms to combat
extremist ideology and provide for a rapidly expanding
population (the annual growth rate is about 2 percent). King
Abdullah’s strategy is two-pronged: he has attacked the
roots of the extremism that fed Al-Qaida through education
and judicial reforms to weaken the influence of the most
reactionary elements of Saudi Arabia’s religious
establishment. He is also promoting economic
diversification. The King is keenly aware of the urgent need
to make Saudi education more relevant to today’s workplace
and increase the role of women in the economy, goals which
remain controversial in this deeply conservative,
inward-looking desert Kingdom. Guided by a vision that
dovetails with some key elements of the President’s Cairo
speech, King Abdullah has begun to implement an ambitious
plan to transform Saudi Arabia’s economy away from excessive

RIYADH 00000178 002 OF 005

reliance on hydrocarbons and towards a knowledge-based
economy that can provide sustainable development for the
long-term. Achieving these goals will require nothing short
of a revolution in the education system and significant
changes in most aspects of Saudi society, especially the
status of women.

6. (U) Seen from the outside, the pace of political reform
seems glacial (a notable exception is that changes introduced
after the WTO negotiations have been very fast for any
country; regulatory agencies are also standing up quickly).
Yet for certain elements of Saudi society, the changes are
coming too fast. Whatever the pace, however, the reality is
that serious reforms are gradually but irrevocably changing
Saudi society. Recently implemented reform measures include
re-shuffling the Ministry of Education’s leadership last
February (bringing in the King’s pro-reform son-in-law as the
new minister); a top-to-bottom restructuring of the country’s
courts to introduce, among other things, review of judicial
decisions and more professional training for Shari’a judges;
the creation of a new investment promotion agency to overhaul
the once-convoluted process of starting a business here; the
creation of a regulatory body for capital markets; the
construction of the King Abdullah University for Science and
Technology (the country’s new flagship and
controversially-coed institution for advanced scientific
research); and a substantial budgetary investment in
educating the workforce for future jobs. The Saudi government
is also encouraging the development of non-hydrocarbon
sectors in which the Kingdom has a comparative advantage,
including mining, solar energy, and religious tourism. The
Kingdom’s 2010 budget reflects these priorities — about 25
percent is devoted to education alone — and amounts to a
significant economic stimulus package.


7. (SBU) Saudi officials have been candid in stressing the
importance they place on strong ties with the United States
to help them meet reform challenges, both through increased
engagement at the government level, including educational
exchanges and more FDI, particularly in energy, high tech,
and manufacturing. The past year has seen several large
investments by prominent U.S. firms in advanced technology
areas, and we are working to raise the profile of our trade
and investment relations, including through a major Saudi
exposition in Chicago at the end of April. The Mission has
also steadily expanded USG engagement in education, public
health, science & technology, entrepreneurship, and civil
society. There are now more than 22,000 Saudi students
studying in the US, exceeding pre-9/11 levels. Public health
engagement has included breast cancer awareness and CDC
cooperation to set up an advanced epidemic screening network
that protected this year,s 3 million Hajj pilgrims. Our
Science & Technology umbrella agreement is already expanding
cooperation, including new projects with NASA. Our MEPI
programs include a first-time ever exchange visit by a group
of Saudi judges, leadership development for women, prevention
of violence against women and children, and youth exchange
and study. One female participant in our Social
Entrepreneurship Forum was a finalist in the 2009 Global
Student Entrepreneur Awards. She and seven other Saudi
entrepreneurs will attend the President’s April summit.
Mission elements have also provided training to help the SAG
implement a new law to combat trafficking in persons.
Intensive engagement with the SAG on IPR is another success
story. You will want to congratulate Saudi officials for the
significant progress Saudi Arabia has made over the last
several years in improving IPR protection, which resulted in
the Special 301 Committee deciding to remove Saudi Arabia
from the Watch List.


8. (C) TURNING EAST: Saudi Arabia is trying to come to terms
with the shift in global energy and trade ties towards Asia,

RIYADH 00000178 003 OF 005

which has both political and economic consequences.
Bilateral trade with China has more than tripled, and China
will soon be Saudi Arabia,s largest importer. Saudi Arabia
has also committed significant investments in China,
including the $8 billion Fujian refinery. Increased trade
has also brought increased friction, including anti-dumping
complaints from both sides. Saudi Arabia is thinking through
how best to take a leaf from the Chinese playbook and use
these expanded trade ties to achieve important political
goals. In this regard, Saudi Arabia has told the Chinese
that it is willing to effectively trade a guaranteed oil
supply in return for Chinese pressure on Iran not to develop
nuclear weapons.

9. (S/NF) COUNTERING IRAN: We expect that Saudi Arabia will
continue to develop its ties with China, in part to
counterbalance relations with the West. While the King’s
preference is to cooperate with the U.S., he has concluded
that he needs to proceed with his own strategy to counter
Iranian influence in the region, which includes rebuilding
Riyadh-Cairo-Damascus coordination, supporting Palestinian
reconciliation, supporting the Yemeni government, and
expanding relations with non-traditional partners such as
Russia, China, and India to create diplomatic and economic
pressure on Iran that do not directly depend on U.S. help.
The King told General Jones that if Iran succeeded in
developing nuclear weapons, everyone in the region would do
the same, including Saudi Arabia.

10. (S/NF) The King is convinced that current U.S. engagement
efforts with Tehran will not succeed; he is likely to feel
grimly vindicated in his view by Ahmadinejad’s February 11
boast that having successfully enriched uranium to a level of
20 percent, Iran “is now a nuclear nation.” The King told
General Jones that Iranian internal turmoil presented an
opportunity to weaken the regime — which he encouraged —
but he also urged that this be done covertly and stressed
that public statements in support of the reformers were
counterproductive. The King assesses that sanctions could
help weaken the government, but only if they are strong and
sustained. The King will want you to elaborate on the
President’s statement that the time for sanctions has come.
He will also want to hear our plans for bolstering Gulf
defenses vis a vis Iran. (The King has invited General
Petraeus to his desert camp for discussion on this topic on

11. (C) CLIMATE CHANGE: Your visit offers an important
opportunity to head off a serious clash over climate change.
Saudi officials are very concerned that a climate change
treaty would significantly reduce their income just as they
face significant costs to diversify their economy. We want
to get beyond the obstructionism that Saudi negotiators have
often shown during the negotiations and persuade senior
leaders to work with us in a partnership to meet their
strategic concerns, including by cooperating on developing
solar and biomass energy. The King is particularly sensitive
to avoid Saudi Arabia being singled out as the bad actor,
particularly on environmental issues. Your conveying the
importance the President places on working as partners with
Saudi Arabia on the Copenhagen process will be very important
in making this dialogue more constructive. Secretary Chu
intends to explore specific areas of collaboration during his
February 21-23 visit.


12. (S) PREVENTING A COLLAPSE OF YEMEN: Saudi participation
in international diplomatic efforts to stabilize Yemen
reflect Saudi fears that instability on its southern border
is a clear and present danger. The King will tell you that
Yemen’s strategic location makes an Al-Qaida presence there
more threatening than in Afghanistan; he will stress the need
to support Yemeni unity, despite his mistrust of Ali Abdullah
Saleh. With respect to Saudi involvement in the war against
the Houthis, the King will stress that the SAG’s motivation
was self-defense. As Al-Qaida infiltrators from Yemen
multiplied, the SAG concluded that the Houthi rebellion had
distracted Saleh’s government to the detriment of Saudi

RIYADH 00000178 004 OF 005

security. The military intervention was triggered by a
Houthi incursion into Saudi territory, but it presented a
long-sought excuse to fortify the porous Saudi-Yemeni border.
On February 7, Prince Khalid also informed Ambassador Smith
the fighting is wrapping up, and that a ceasefire arrangement
could be in place by mid-February.

13. (C) GESTURES AFTER ALL?: The King appreciates the
President’s commitment to Middle East peace but is skeptical
the U.S. can bring sufficient and sustained pressure to bear
on Israel, especially regarding settlements. The King told
General Jones that progress on Middle East peace was only
possible if President Obama was willing to pressure Israel,
and Saudi officials have rebuffed U.S. requests for
confidence-building gestures to help restart negotiations.
Despite their adamant rhetoric, however, several members of a
private Jeddah-based think tank run by a retired Saudi
general have very quietly been participating in Track Two
discussions, apparently with SAG knowledge, and even put
forward a proposal on Gaza. In a more dramatic public
encounter that has provoked commotion in the region, former
Saudi Ambassador to the U.S. Prince Turki Al-Faisal shook
hands with Israeli Deputy FM Ayalon to settle a dispute over
joint seating at a Munich conference. Both sides have since
insisted the gesture did not signal changes in policy, with a
“senior Saudi diplomat” issuing a statement emphatically
denying that the incident constituted any form of recognition
for Israel.

14. (S/NF) AFGHANISTAN/PAKISTAN: King Abdullah firmly
believes that Asif Zardari is the primary obstacle to the
government’s ability to move unequivocally to end terrorist
safe havens there (“when the head is rotten, it affects the
whole body”). The King told General Jones that U.S.
development assistance would rebuild trust with the Army,
which he asserted was staying out of politics in deference to
U.S. wishes, rather than doing what it “should.” On
Afghanistan, the King has expressed support for the new U.S.
strategy, saying that spending on roads, schools, hospitals
and mosques would dissipate popular mistrust and help rebuild
the country. The King has not yet acknowledged the Saudi
role in Taliban mediation in conversations with USG
officials; GIP Director Prince Muqrin has explained to
several recent USG visitors that the SAG prefers to keep such
discussions in intelligence channels until any agreement is
reached. Perhaps reflecting this, the Saudi media downplayed
President Karzai’s recent visit and the Afghan Ambassador
reported that the meeting with the King lasted only ten


15. (C) The Custodian of the Two Holy Mosques will offer you
a traditional Saudi welcome at the desert “encampment”
outside Riyadh, where he likes to spend his winter vacations.
You will find in 86-year old King Abdullah a wry and
forthright interlocutor. Having struggled with a speech
impediment throughout his life, he tends to express himself
tersely. Reflecting his Bedouin roots, he judges his
counterparts on the basis of character, honesty, and trust.
He expects commitments to be respected and sees actions, not
words, as the true test of commitment; and he expects
good-faith consultations, not surprises. Once the King has
lost trust in a counterpart, as has been the case with Nouri
Al-Maliki or Asif Zardari, his personal antipathy can become
a serious obstacle to bilateral relations. On the other
hand, as with President Obama, the King’s esteem will help
navigate differences and at times change policies. The King
is undoubtedly looking forward to his discussions with you,
and Mission Saudi Arabia enthusiastically looks forward to
supporting your visit.


16. (U) The U.S. Mission in Saudi Arabia includes Embassy
Riyadh, and Consulate Generals Dhahran and Jeddah. The
entire Mission, representing ten agencies, consists of 605
staff (212 U.S. Direct Hire (USDH) and 393 Locally Engaged

RIYADH 00000178 005 OF 005

(LE) staff).

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Chinese FM Yang Visits Riyadh

Posted on 28 December 2010 by hashimilion

C O N F I D E N T I A L SECTION 01 OF 03 RIYADH 000123


E.O. 12958: DECL: 01/12/2015

B. 09 RIYADH 895

RIYADH 00000123 001.2 OF 003

Classified By: Ambassador James B. Smith for
reasons 1.4 (B) and (D)


1. (C) Chinese Foreign Minister Yang Jiechi met with King
Abdullah and FM Prince Saud Al-Faisal on January 13, during
the last stop of a five nation Africa and Middle East tour.
During the visit, FM Yang discussed deepening Saudi-Chinese
ties in a variety of fields, emphasizing trade, in
particular, with his Saudi counterparts. Responding to
statements made by FM Saud, Yang also briefly discussed
Chinese support for Iraq, concern about Iranian nuclear
ambitions, and hopes for the Middle East Peace Process. FM
Yang’s foray into regional political commentary appears to
have been a result of FM Saud’s prodding, both publicly and
behind closed doors, and is a reflection of the developing
Saudi-Chinese relationship.


2. (U) FM Yang arrived in Riyadh on January 13, the first
high-level visit since Chinese President Hu Jintao’s February
2009 “Trip of Friendship and Cooperation.” FM Yang’s visit
coincided with the 20th anniversary of Saudi-Chinese
diplomatic relations, and followed three days after Chinese
Trade Minister Chen Deming co-chaired the 4th session of the
Saudi-Chinese Joint Commission in Riyadh.

3. (U) The Chinese Foreign Minister has traditionally made
his first overseas trip of the new year to Africa, visiting
with African leaders and expressing Chinese goodwill and
improvements in trade relations. This year, FM Yang extended
his visit to include not only major trading partners like
Nigeria, Kenya and Morocco, but also Saudi Arabia. In a
January 13 statement to the press, FM Yang stressed the
importance of strengthening cooperation in “energy,
infrastructure, finance and science and
technology.” He said that both sides should carry out
cultural and education exchanges to deepen the bilateral
relationship and pressed the need for closer relations
between China and the GCC.

4. (U) These statements echoed similar announcements from
Chinese Trade Minister Chen who, in a January 10 press
conference, called for finalizing the Chinese-GCC free trade
agreement and increasing bilateral trade by 50%, from a total
annual value of $40 billion to $60 billion, over the next
five years (ref A). During the Joint Commission meeting,
Saudi Minister of Finance Ibrahim Al-Assaf reportedly urged
the Chinese to participate in more joint ventures, noting
that while bilateral trade increased 25 times over the past
ten years, the two countries only have 19 joint projects.
Al-Assaf also welcomed China’s 44 billion riyal ($11.7
billion) worth of infrastructure projects in the Kingdom.


5. (C) This call to increase Sino-Saudi trade comes on the
heels of a December 24 announcement that China would impose
anti-dumping tariffs of up to 13.6 percent on Saudi and
Taiwan-produced butanediol. Beijing began a dumping probe on
methanol and butanediol (BDO) from Saudi Arabia in July,
which caused an unusually public trade spat between the two
countries (ref B). Methanol and butanediol make up 10 to 15
percent of Saudi Arabia’s $2 billion in annual non-oil
exports to China. A Ministry of Commerce and Industry
official told Econoffs on January 13 that Saudi Arabia was
able to convince the Chinese not to impose tariffs on
methanol, but said the BDO case was still pending. The
Ministry recently appointed a new Deputy Minister for
Technical Affairs, Dr. Hamad Al-Awfy, who will handle all
anti-dumping issues, he said. Al-Awfy previously complained
to EconCouns that the SAG was increasingly frustrated by the
growing number of Saudi companies complaining about Chinese
dumping in Saudi Arabia. Other senior SAG officials have
caustically complained about the low quality of Chinese
construction and the “short-term, extractive” approach of
Chinese companies to investments in Saudi Arabia.

RIYADH 00000123 002.2 OF 003


6. (C) China recently surpassed the U.S. as the largest
importer of Saudi oil. Saudi Arabia’s investments in China
have increased significantly over the last few years,
including a $3.5 billion refinery in Fujian and a $2.86
billion joint-venture petrochemical complex in Tianjin.
Additionaly, President Hu Jintao commemorated the opening of
a cement plant when he visited Saudi Arabia in February 2009.
Saudi Arabia,s more forward-leaning approach, including
large-scale investments in China, indicates a maturing of the
bilateral relations and assumes a more pro-active, rather
than reactive, role towards economic engagement. (Note:
China is now the SAG’s number two trade partner after the
U.S. Saudi-Chinese bilateral trade was estimated at $40
billion in 2008, while Saudi-U.S. trade was estimated at $67
billion during the same time period. End note.)


7. (U) While trade issues dominated FM Yang’s agenda, both he
and FM Prince Saud-Al Faisal commented on the regional
political landscape in a press conference that followed their
bilateral meeting. FM Saud spoke out against Israeli
defiance of UN Security Council resolutions and called on
China, as a permanent member of the Security Council, to
“deal with world disputes in accordance to international
legitimacy…as stipulated in the Arab Peace Initiative.”
The meetings with FM Yang were “part of a framework of
coordination and consultation,” FM Saud continued, that
included not only the Palestinian cause but also Iran’s
nuclear file, Iraq and Yemen. In particular, he emphasized
China’s role as a member of the P5 plus 1 group and their
responsibility “to solve the (Iranian nuclear) crisis through
dialogue and peaceful means. “Our two nations are keen that
the Middle East and the Gulf should be free of all weapons of
mass destruction, including nuclear weapons,” he stressed.

8. (U) In response to FM Saud’s comments, FM Yang said China
called for serious negotiations between Israel and Palestine
that would carry out the peace process and establish the
State of Palestine. “China is ready for cooperation with the
world community to work for stability in the Middle East,” he
added. In regard to Iraq, he said that China extended
assistance by reducing Iraqi debt obligations to China and
forging trade agreements between Iraqi and Chinese companies.
With respect to Iran, FM Yang said the Iranian file should
be solved through “political diplomatic channels which help
stabilize the situation in the region.”


9. (C) Deputy Foreign Minister Dr. Prince Torki told visiting
NEA A/S Feltman on January 26 (ref C) that FM Saud had
pressed the Chinese Foreign Minister hard on the need to be
more active in working with the rest of the international
community and the UN Security Council to counter the threat
of Iran developing a nuclear weapon. FM Saud told FM Yang
that Saudi Arabia was convinced Iran intended to develop a
nuclear weapon, despite its assurances, and that only
concerted international action could stop that. While no
explicit bargain was discussed, Dep FM Torki explained that
Saudi Arabia understood China was concerned about having
access to energy supplies, which could be cut off by Iran,
and wanted to attract more trade and investment. Saudi
Arabia was willing to provide assurances on those scores to
China, but only in exchange for tangible Chinese actions to
restrain Iran,s drive for nuclear weapons.


9. (C) Since King Abdullah’s historic visit to Beijing in
January 2006, the Saudi-Chinese relationship has focused
predominantly on energy and trade. However, the relationship
may be showing signs of political evolution. While the
Chinese would likely prefer to stay away from political
controversy, their economic power and permanent seat on the
UN Security Council has made it more and more difficult for
them to avoid politics altogether.

10. (C) COMMENT CONTINUED: The incentives for the Saudis to

RIYADH 00000123 003.2 OF 003

try and leverage their economic relationship with China for
political gain with respect to sensitive regional issues,
such as Iran and the Israeli-Palestinian conflict, are
significant and growing. After patiently focusing on
building the economic relationsip since 2006, FM Saud,s
public and private prodding of FM Yang indicates the Saudis
are ready to try and cash in some political chips. End


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Saudi Foreign Ministry Pressing China To Stop Iranian Proliferation, Concerned about TSA Regulations

Posted on 28 December 2010 by hashimilion

C O N F I D E N T I A L RIYADH 000118



E.O. 12958: DECL: 01/27/2020

Classified By: Ambassador James B. Smith, reasons 1.4 (b and d).

1. (C) Summary: Saudi Foreign Ministry officials told
visiting NEA A/S Feltman that they are convinced Iran intends
to develop a nuclear weapon, and that the Saudi Foreign
Minister pressed his counterpart hard for greater Chinese
engagement on this threat during the Chinese FM’s visit
earlier in January. While no explicit deal was discussed,
Saudi Arabia made it clear it was willing to address Chinese
concerns on energy security and trade in exchange for
effective Chinese support to prevent Iranian proliferation.
Saudi Arabia is also concerned about Iran’s unhelpful role in
Yemen. While generally very pleased with the state of
bilateral relations, Saudi officials strenuously - and under
instruction - complained about the continued negative effect
of the recent Transportation Safety Administration (TSA)
regulations that call for extra security screening for Saudi
Arabia. The Saudi Foreign Minister will raise these concerns
with the Secretary in London on January 27. They noted that
the Saudi public is increasingly upset by this, and does not
understand why they were put in the same group with Cuba,
which has prompted some Saudis to question how special their
relationship with the United States really is. A/S Feltman
urged Saudi Arabia to associate itself with the Copenhagen
Accord by January 31. The MFA reported that Saudi Arabia
donated $50 million for Haitian relief efforts on January 25.
End Summary.

Iranian Nuclear Ambitions:
- - - - - - - - - - - - -

2. (C) Visiting NEA A/S Feltman discussed a wide range of
issues with Deputy Saudi Foreign Minister Dr. Prince Torki
Al-Saud Al-Kabir on January 26. Prince Torki said Saudi
Arabia is convinced that Iran intends to develop nuclear
weapons, and reported that Saudi Foreign Minister Saud
Al-Faisal pressed the Chinese Foreign Minister on this issue
on his January 17 visit. Saud Al-Faisal told the Chinese
that, for Saudi Arabia, this is a critical security issue.
Iran,s getting nuclear weapons will open the door to the
rest of the Middle East pursuing nuclear weapons. Saudi
Arabia would prefer that the Middle East remain a nuclear
free zone. When the Chinese Foreign Minister replied that
China will not accept Iran’s development of nuclear weapons,
Saud Al-Faisal told him that China will have to work more
closely with the rest of the world and the UN Security
Council to prevent this from happening.

3. (C) Prince Torki agreed that it was not helpful that the
Chinese sent a low-level delegation to the most recent 5 1
talks. He also agreed it was unfortunate the delegation did
not agree it was time now to increase pressure on Iran.
Al-Kabir also noted that time was not in the UN Security
Council’s favor, but in Iran’s. Prince Torki said that Saudi
Arabia was convinced the time was ripe to push China on this
issue. It would be important to demonstrate that the
assurances FM Al-Faisal got were not just from the Foreign
Minister, but represented the thinking of the whole
government. He said that Saudi Arabia repeated these points
to the Chinese Middle East special envoy, who visited a week
later. Saudi Arabia has also raised these concerns with
Russia, “which is closer to the U.S. and Saudi positions,”
and with the Deputy French Foreign Minister three weeks ago.
Prince Torki also agreed to work with Lebanon’s UN Mission,
now on the Security Council, where it is sure to confront the
issue of Iranian proliferation.

4. (C) Prince Torki said that China never directly raised the
issue of its concerns about securing sufficient oil supplies,
particularly in the event of a cutoff of Iranian supplies.
However, Saudi Arabia fully understands China’s concerns, and
in that context, is pleased that the Chinese Foreign Minister
had &successful8 talks with Saudi Aramco and trade
officials about specific commercial and energy issues.
Prince Torki noted that Saudi Arabia has become one of
China’s largest energy suppliers, and has invested billions
of dollars in refineries in China. Trade has grown from $140
million a decade ago to $75 billion now, with prospects for
further increases. Prince Torki concluded by noting that
Saudi Arabia knows what concerns China, and is willing to
take actions to address those concerns, but must have Chinese
cooperation in stopping Iran,s development of nuclear
weapons as a quid pro quo. Saudi Arabia is encouraging other

Gulf countries to meet with China to explore similar
cooperation, although it expects these countries will seek
the same exchange.

- - - -

5. (C) Prince Torki explained that Saudi Arabia also believes
that Iran is playing an unhelpful role in Yemen. Dismissing
the need for specific evidence, he said it was hard to
explain how the Houthis, as a poor tribal group, managed to
get so much money so quickly to obtain the heavy armaments
that they have been using absent the help of some outside
group. It is also hard, he argued, to explain the striking
similarities with techniques that have been used by
pro-Iranian groups in Iraq. Saudi Arabia is convinced that
Iran is providing money for poor tribesmen to fight, as well
as payments to their families, and is facilitating contact
with Somalia and Al Qaeda. Prince Torki said the Saudi
Defense Forces have been impressed how well the Houthis have
fought, displaying advanced training. (Note: in a separate
meeting, Ministry of Interior officials echoed many of these
assessments in greater detail, septel. End Note).

6. (C) Prince Torki was unequivocal in stating that Saudi
Arabia has no intention of becoming part of the current
conflict between the central government and the Houthis.
Saudi Arabia felt it had to respond, however, after Houthi
forces crossed its border. He said that it made little sense
for the Houthis to have attacked Saudi Arabia, especially
since the SAG had warned them previously not to. He
concluded that Iran was trying to test Saudi reactions.
Yemen does not need U.S. troops, but does need equipment,
training and information, as well as assistance to meet its
long-term development challenges. He also said that Saudi
Arabia is very concerned about Al Qaeda’s continued presence
in Yemen, as it will exploit any opportunity to attack Saudi
Arabia and the United States.

Bilateral Relations:
- - - - - - - - - - -

7. (C). Prince Torki agreed that our bilateral relations are
quite strong in general. He singled out counter-terrorism as
an example of the strength of cooperation, noting that Saudi
Arabia enjoys a unique level of cooperation on security with
the United States. Prince Torki confirmed that Saudi Arabia
had contributed $50 million to the Haiti relief effort on
January 25, which is the largest contribution to date of any
Middle Eastern country. He also welcomed greater U.S.
engagement in multilateral and international organizations.

Climate Change:
- - - - - - - -

8.(SBU) A/S Feltman noted the importance that the President
places on Climate Change, and the Copenhagen Accord. Given
that Minister of Petroleum Al-Naimi was involved in crafting
the final agreement, A/S Feltman noted the United States is
counting on Saudi Arabia to associate itself with the accord
by January 31. Prince Torki said that Saudi Arabia was very
pleased the United States was more actively engaged in this
issue, and said that the Ministry of Foreign Affairs supports
trying to address this issue. He noted that the MFA will
have to consult with other involved ministries, such as the
Ministry of Petroleum, and promised to respond before January

Concern over TSA Regulations:
- - - - - - - - - - - - - - - -

9. (SBU) Prince Torki noted he had been instructed to raise
Saudi Arabia’s significant concern about the TSA regulations
which had included Saudi Arabia in a limited group of
countries for additional airport screening. Prince Torki
said that this issue had caused a lot of difficulties and
embarrassment for Saudi Arabia, to the degree that Foreign
Minister Saud Al-Faisal will raise this with the Secretary in
London on January 27. Prince Torki said that Saudi Arabia
was not upset about the regulation itself, as it recognized
the U.S. right and obligation to protect its citizens. The
issue, rather, was inclusion on the list with the likes of
Cuba, which causes Saudi Arabia’s friends and enemies to

question how strong its bilateral relationship with the
United States really is. Prince Torki said it is very hard
to explain to the Saudi public why they are included on this
list, despite not being the origin of the December 25 flight,
while other countries that have had recent terrorist
incidents on planes, like the UK, Egypt and Turkey, are not.
Prince Torki said that Saudi Arabia had been shocked to be
included on the list. He noted that Saudi Arabia had been
told these provisions would only be temporary, and said Saudi
Arabia would like to know how and when they will be amended,
implying that the longer they remained in effect without any
public explanation from the USG, the more it was likely to
prompt the Saudi Government to re-evaluate areas of
cooperation, including counter-terrorism cooperation. A/S
Feltman promised to convey the spirit and strength of the
message, and invited any specific Saudi suggestions to
address the security gap regarding nonmetallic explosives
exploited in the December 25 incident.

Middle East Peace:
- - - - - - - - -

10. (C) In response to a question, A/S Feltman explained that
the United States believes that we need to get the Israelis
and the Palestinians back to the negotiating table, which
will be the best way to compel Israel to follow through on
its public statements and to overcome Palestinian skepticism.
A/S Feltman noted that the United States had referred to the
1967 lines with swaps as a way of helping encourage the
Palestinians to return to the table. Prince Torki welcomed
this overview.

(U) This cable has been cleared by A/S Feltman.


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