VZCZCXRO9027
RR RUEHDE RUEHDH RUEHDIR
DE RUEHRH #1407/01 2971228
ZNY CCCCC ZZH
R 241228Z OCT 09
FM AMEMBASSY RIYADH
TO RUEHC/SECSTATE WASHDC 1764
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

C O N F I D E N T I A L SECTION 01 OF 03 RIYADH 001407 
 
SIPDIS 
 
DEPARTMENT FOR NEA/ARP, EB/ESC, S/CIEA 
PASS TO USTR FOR CHRIS WILSON AND JASON BUNTIN 
 
E.O. 12958: DECL: 10/21/2019 
TAGS: EFIN ECON ENGR ETRD PREL SA
SUBJECT: SAUDI FINANCE MINISTER CALLS FOR SPECIFIC STEPS TO 
IMPROVE TIES WITH U.S. 
 
REF: (A) STATE 108183 (B) RIYADH 1365 
 
Classified By: Ambassador James B. Smith, reasons 1.4 (b and d). 
 
¶1. (C) Summary:  Saudi Finance Minister Ibrahim Al-Assaf 
believes the Saudi economy is generally on track to meet its 
2009 targets.  Saudi Arabia will maintain its domestic 
investment program as part of international efforts to ensure 
that stimulus packages continue until the world economy 
recovers.  Al-Assaf lauded U.S. leadership at the Pittsburgh 
G20 summit.  While Saudi Arabia was generally pleased with 
the outcomes of the summit, it will look for U.S. support not 
to lose any of its IMF quota share.  Al-Assaf underscored the 
importance the Saudi Government places on a strong bilateral 
relationship with the U.S.  He called specifically for the 
conclusion of a double-taxation agreement, and urged the U.S. 
to consider negotiating a Free Trade Agreement with the GCC. 
He also stressed Saudi Arabia's commitment to continue a 
generous foreign assistance program, including to Pakistan, 
which he noted is not adequately reflected in current 
discussions of rebalancing IMF (and World Bank) quotas.  End 
Summary. 
 
All Quiet on the Domestic Economic Front: 
- - - - - - - - - - - - - - - - - - - - - 
 
¶2. (C) On October 21, Saudi Finance Minister Ibrahim Al-Assaf 
told the Ambassador that he is not worried about any specific 
issues regarding the domestic economy.  His biggest challenge 
is maintaining the pace of the Kingdom's $400 billion 
domestic investment program, which he characterized as Saudi 
Arabia's contribution to the international fiscal stimulus. 
Al-Assaf said that he was pleased the Saudi Government (SAG) 
was able to stick to its budget and resist pressures last 
year to spend the windfall from higher oil prices.  The last 
few years' savings provided Finance with the buffer it needed 
to continue the investment program when oil prices fell to 
$30/barrel this spring.  Al-Assaf underscored the importance 
of continuing to closely follow Saudi Arabia's established 
budget targets. 
 
Admiration for U.S. Leadership in the G20: 
- - - - - - - - - - - - - - - - - - - - - - 
 
¶3. (C) Al-Assaf was very complimentary of President Obama's 
leadership and that of senior USG officials, which he 
credited with achieving consensus at the Pittsburgh Summit on 
a number of difficult issues.  He stressed the importance of 
continuing efforts to reform the international financial 
system, and to continue stimulus programs until the world 
economy gets "out of the woods."  Al-Assaf is proud of the 
role Saudi Arabia is playing as the G20 representative of oil 
producers and Arab countries.  Al-Assaf said this is an 
extension of the leadership role that Saudi Arabia plays in 
the Islamic world, and fits in with Saudi Arabia's 
international activism.  He noted that Saudi Arabia's 
assistance policies are a good example of this activism, as 
Saudi Arabia gives significantly more than the international 
standard of 0.7 percent of its GDP.  Al-Assaf also noted that 
Saudi Arabia will look to continue to play a "responsible 
role" in the IMF, World Bank, and regional development banks. 
 
¶4. (C) Al-Assaf supported the decision to shift IMF quotas 
from developed countries to emerging countries.  He stressed, 
however, that this shift should not come from Saudi Arabia's 
share.  Instead, it should be from European countries. 
Al-Assaf argued that Saudi Arabia's importance is much 
greater than its percentage of world GDP.  He noted that 
Saudi Arabia has always been a significant supporter of the 
IMF, providing it with funds year in and year out for crises. 
 Its role as the world's largest oil exporter is also not 
fully captured in the GDP share.  Al-Assaf said that Saudi 
Arabia will count on support from the United States on this 
issue. 
 
U.S. Relations: 
- - - - - - - - 
 
¶5. (C) Al-Assaf said Saudi Arabia deeply values its 
relationship with the United States, which has lasted many 
decades.  Al-Assaf was pleased that relations seem to be back 
on track, recovering from their "detour" after 9/11.  He said 
that close contact with U.S. officials at the Federal Reserve 
and in Washington was very much appreciated during last 
year's financial crisis, including coordinating positions 
within the International Financial Institutions.  Al-Assaf 
 
RIYADH 00001407  002 OF 003 
 
 
noted that U.S. companies have always enjoyed a preeminent 
position in trade and investment, although this is 
increasingly challenged by other countries.  Al-Assaf said it 
was important for Saudi Arabia that our investment and trade 
relationship remain strong and vibrant. 
 
¶6. (C) In that regard, Al-Assaf pushed for concluding two 
agreements that he thought would strengthen our relations. 
The first is an agreement on the avoidance of double 
taxation, which he would like to conclude soon.  The second 
would be to reopen discussions between the U.S. and the GCC 
on a Free Trade Agreement (FTA).  Al-Assaf noted that the 
United States has already signed FTAs with two GCC members, 
Oman and Bahrain.  Al-Assaf noted this caused significant 
heartache within the GCC, as the GCC had always intended to 
proceed with these kinds of trade agreements as a group. 
This is now causing headaches for Saudi Customs, for 
instance, as it has to apply different tariffs on goods, 
despite the GCC customs union.  Al-Assaf understood the U.S. 
position is that it would prefer to sign agreements with 
individual countries, although he was aware we had recently 
signed an agreement with a Caribbean group.  Al-Assaf 
concluded by expressing the hope that the U.S. could conclude 
an FTA with the GCC before the EU. He said the GCC is "fed 
up" with the EU because it continues to place new conditions 
on the negotiations.  As a result, they have officially 
suspended EU negotiations (in December 2008).  (Note: GCC 
officials made the same pitch for a GCC-U.S. FTA to visiting 
AUSTR Chris Wilson on October 20.  End Note) 
 
Energy: 
- - - - 
 
¶7. (C) Al-Assaf expressed satisfaction with the price of oil 
over $70/barrel.  He attributed much of last year's run up in 
price to speculation.  Saudi Arabia believes it makes sense 
to bring the market mechanisms used for last year's 
speculation under greater supervision to allow them to 
continue to be useful for markets without fueling 
speculation.  Al-Assaf said it is impossible for producers 
and consumers to pursue a policy of independence from each 
other.  Instead, they need to pursue cooperation.  Al-Assaf 
said this is why Saudi Arabia sponsored the International 
Energy Forum (IEF) in Riyadh, which demonstrates Saudi 
Arabia's commitment to cooperation and dialogue between 
producers and consumers.  Al-Assaf stressed that security of 
demand is just as important for Saudi Arabia as security of 
supply is for consumers.  He noted that Saudi Arabia has seen 
calls before (e.g., the late 1970's) to increase production 
at a time of high prices, only to invest billions in spare 
production which never reaches the market.  Al-Assaf said 
Saudi Arabia had made a major commitment to the world's 
future stability and growth by investing to increase capacity 
to 12.5 million barrels a day, which he expected would all be 
used eventually.  Despite the financial crisis, he said the 
MOF made sure these investments stayed on track in 2008, 
which demonstrates Saudi's commitment to the health of the 
world economy. 
 
¶8. (C)  Particularly against that backdrop, it is very 
important, Al-Assaf said, that Saudi Arabia not feel targeted 
in international discussions on energy or environmental 
issues.  While Saudi Arabia supports greater energy 
efficiency, and is looking into other sources of energy such 
as nuclear and solar, it is important to avoid international 
moves to impose heavy taxes on oil to subsidize other forms 
of energy.  Saudi Arabia gets particularly concerned when 
fuels like coal, which pollutes more than oil, receive 
subsidies while oil is taxed. 
 
Foreign Assistance: 
- - - - - - - - - - 
 
¶9. (C) The Ambassador thanked Al-Assaf for Saudi Arabia's 
continued assistance for Pakistan, and hoped the Kingdom 
would remain closely engaged (ref A).  Al-Assaf said the head 
of the Saudi Fund for Development would travel "in a few 
days" to Pakistan for a signing ceremony to deposit part of 
the pledge Saudi Arabia made in Tokyo (ref B), and implement 
part of the export facility.  Al-Assaf also said that Saudi 
Arabia has told the UN secretariat that it will contribute 
$100 million for Pakistani refugees (SFD officials have 
indicated this will be divided between a number of UN 
agencies per an agreement between the SFD and the UN's 
country committee for Pakistan).  He promised that Saudi 
Arabia will continue to work with Pakistan, and hoped also to 
 
RIYADH 00001407  003 OF 003 
 
 
continue to support Afghanistan. 
SMITH