VZCZCXRO9859
PP RUEHDE RUEHDIR
DE RUEHMK #0692 2041307
ZNY CCCCC ZZH
P 231307Z JUL 07
FM AMEMBASSY MANAMA
TO RUEHC/SECSTATE WASHDC PRIORITY 7065
INFO RUEHEG/AMEMBASSY CAIRO PRIORITY 0957
RUEHUNV/USMISSION UNVIE VIENNA PRIORITY 0006
RUCNDT/USMISSION USUN NEW YORK PRIORITY 0091
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE PRIORITY

C O N F I D E N T I A L MANAMA 000692 
 
SIPDIS 
 
SIPDIS 
 
ISN, T, NEA/ARP, EEB 
ABU DHABI FOR TREASATT JBEAL 
CAIRO FOR TREASATT CSEVERENS 
 
E.O. 12958: DECL: 07/22/2017 
TAGS: KNNP MNUC ECON PARM IR BA REGION
SUBJECT: DEMARCHE: CONCERN OVER BANKING ISSUES 
 
REF: A. MANAMA 675 
     ¶B. STATE 98419 
 
Classified By: Ambassador William T. Monroe, reasons 1.4(b) and (d). 
 
------------------------- 
IRANIAN BANK DEAL PENDING 
------------------------- 
 
¶1. (C) Central Bank of Bahrain (CBB) Banking Supervision 
Advisor to the Governor Richard Ellis told Econoff July 22 
that Alhi United Bank (AUB) of Bahrain has applied for 
approval to "purchase an Iranian bank".  He said the Iranian 
bank in question is wholly or largely state-owned, though he 
declined to explicitly name the institution.  He said that 
the prospective joint venture to open a "future bank" in the 
Iranian Kish Island Free Zone, described in subject demarche 
(Ref. B), was "very relevant" to matters currently under CBB 
review.  (Note: Future Bank, based in Bahrain, is owned 1/3 
each by AUB, Bank Saderat and Bank Melli.  End Note.) 
 
¶2. (C) Ellis said that Ahli and the Iranian bank had already 
undergone due diligence and that, from a purely financial 
standpoint, the deal could be approved.  However, he said 
that his office had advised CBB Governor Rashid Al Miraj on 
July 17 that the deal called for careful consideration 
because it might foreseeably jeopardize Bahrain's future 
standing as a financial jurisdiction.  There was no way of 
knowing if the Iranian bank would come under UN sanctions in 
the future.  He also recommended that the Governor be mindful 
of "political considerations".  Ellis said Governor Miraj had 
referred the bank purchase to Prime Minister Shaikh Khalifa 
Bin Salman for a decision.  (Note: The PM, as Chairman of the 
CBB, has final authority over all decisions taken by the CBB. 
 End Note.)  Ellis said word of the PM's decision might come 
"an hour from now or a month from now."  In the event that 
the purchase is approved, Ellis said he would still counsel 
AUB officials to regularly reevaluate their relationship with 
Iranian banks and be prepared to divest upon indications that 
the relationship was no longer in their interest. 
 
--------------------------- 
QATARIS BID FOR AHLI UNITED 
--------------------------- 
 
¶3. (C) Ellis pointed out that AUB, itself, may soon be sold. 
The bank's profits have soared in recent months, and Ellis 
said shareholders have expressed an interest in cashing out. 
He added that as the bank's value has increased steeply, so 
have its operating expenses.  Ellis said the International 
Bank of Qatar, one of four interested bidders, could soon 
acquire 75% or more of AUB.  (Note: Local press reports place 
the International Bank of Qatar's offer at $6.1 billion in 
cash and stock for a 55% stake in AUB.  End Note.)  AUB is 
currently held by: United Bank of Kuwait 32%, Strategic 
Partners (group of private GCC investors) 32%, Tamdeen 
(Kuwaiti firm) 13%, and Bahrain Social Security 10%.  The 
remaining 13% of shares are publicly traded. 
 
 
 
********************************************* ******** 
Visit Embassy Manama's Classified Website: 
http://www.state.sgov.gov/p/nea/manama/ 
********************************************* ******** 
MONROE