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DE RUEHKU #0095/01 0331402
ZNY CCCCC ZZH
P 021402Z FEB 10
FM AMEMBASSY KUWAIT
TO RUEHC/SECSTATE WASHDC PRIORITY 4519
INFO RUCNIRA/IRAN COLLECTIVE PRIORITY
RHEHNSC/NSC WASHDC PRIORITY

C O N F I D E N T I A L KUWAIT 000095 
 
SIPDIS 
 
NEA/ARP, NEA/RA 
 
E.O. 12958: DECL: 01/31/2020 
TAGS: PREL ECON EPET ENRG IR KU
SUBJECT: KUWAIT TRIES TO DOWNPLAY IMPORTANCE OF VISITS BY 
IRANIAN SPEAKER LARIJANI; IRANIAN ECONOMIC TEAM 
ACCOMPLISHES LITTLE 
 
REF: KUWAIT 61 
 
Classified By: Political Counselor Pete O'Donohue for reasons 1.4 b and 
 d 
 
¶1. (C) Summary:  Kuwaiti officials took pains to downplay the 
importance of a January 26 - 27 visit by Iranian Parliament 
Speaker Ali Larijani and the preceding week's visit by an 
Iranian economic team.  Officials insisted that the Larijani 
visit had come at the invitation of Kuwait's Parliament 
Speaker Jassem Al-Khorafi and that his meetings with the Amir 
and Prime Minister had been largely "protocollary."  GOK 
officials stressed that Larijani's Kuwaiti interlocutors' 
including members of Parliament's Foreign Affairs Committee 
(FAC) had all used their face time with Larijani to state 
their concerns about Iran's nuclear program, while 
reiterating their appeal for peaceful dialogue to resolve the 
issue.  An Iranian economic delegation that hit the ground 
ahead of Larijani's visit also accomplished relatively 
little, according to Kuwaiti participants, and discussions on 
the shared Dora field and potential Kuwaiti purchases of 
Iranian natural gas made no headway.  Notwithstanding Kuwaiti 
protestations that the visits were non-events, the GOK 
nonetheless effectively provided Larijani a bully pulpit from 
which to criticize publicly the U.S. and to warn Gulf states 
not to allow U.S. military bases to be used for attacks 
against Iran.  Cowed by its larger neighbor, the GOK is 
trying to walk a delicate tightrope -- quietly siding with 
the international community on the Iran nuclear issue, while 
participating in reciprocal senior visits in an effort to 
deflect Iranian ire, and -- Kuwait being Kuwait -- pursuing 
parochial economic interests justified as creating strategic 
buffers.  End Summary. 
 
 
Kuwait Used Visit to Reiterate (Quietly) Nuclear Concerns 
--------------------------------------------- ------------- 
 
¶2. (C)  MFA Asia Department Counselor Rashid Al-Hajri 
insisted to Polcouns on January 31 that the January 26 - 27 
visit of Iran's parliament Speaker Ali Larijani had been 
largely a ceremonial affair and that not much of consequence 
had emerged from the latter's meetings with the Amir, Prime 
Minister Shaykh Nasser Al Sabah and Speaker of the Kuwaiti 
parliament Jassem Al-Khorafi.  Stressing that Larijani had 
visited Kuwait at Speaker Al-Khorafi's invitation, Al-Hajri 
argued that the visit's agenda was more parliamentary than 
inter-governmental; Larijani's meeting with the Amir and 
Prime Minister, Al-Hajri said, had been largely 
"protocollary."  Al-Hajri claimed, however, that Kuwaiti 
officials in both sets of meetings had taken pains to 
reiterate their concerns about Iran's nuclear program as well 
as the GOK's "clear and unchanging" positions that Iran must 
abide by IAEA safeguards and that all actors must avoid 
military options for dealing with problems in the Gulf. 
"Iran knows very well Kuwait's position on its nuclear 
program," Al-Hajri added.  (Note: If the GOK, did, in fact, 
take Larijani to task on the nuclear file, it did so in a 
quiet voice.  None of these points were publicly discussed or 
communicated to the press.  End Note.) 
 
 
¶3. (C) Al-Hajri acknowledged that the Amir is contemplating 
accepting a long-standing invitation from Iranian President 
Ahmadinejad by way of maintaining a dialogue between the two 
neighbors, but that "nothing has been scheduled."  The GOK 
views dialogue with its larger neighbor as essential, 
Al-Hajri noted, notwithstanding its concerns about Iranian 
nuclear developments.  Al-Hajri downplayed the importance of 
bilateral commercial exchanges that had taken place during 
the visit, characterizing these as mere "follow-up" to 
earlier discussions, but noted that "technical committees" 
from both governments will meet at an unspecified time to 
discuss pending issues regarding the two countries' maritime 
border and other commercial matters. 
 
 
Larijani Tells MPs that Nuclear Program is "Peaceful" 
--------------------------------------------- -------- 
 
¶4. (C) Kuwaiti MP Ali Al-Rashed, rapporteur of parliament's 
Foreign Affairs Committee (FAC), told Poloff on January 31 
that the FAC had used its January 27 meeting with Larijani 
(Speaker Al-Khorafi met with Larijani separately on January 
26) to convey concerns over Iran's "nuclear file" and to urge 
Iran to comply with its UN obligations in a transparent 
manner; the Iranians responded with assurances that Iran's 
nuclear intentions are peaceful and complained about a 
 
 
perceived U.S. double standard given the U.S. position on 
Israel's nuclear arsenal.  Al-Rashed said the two sides also 
discussed the issue of drug smuggling (without providing any 
details) and agreed that all statements emanating from either 
country should contribute to improving bilateral relations. 
The FAC "warmly" accepted an invitation from Larijani to 
visit Tehran at a time yet to be determined.  (Note: 
Al-Rashed expressed to Poloff a concern that the real nature 
of Iran's nuclear program might be "blown out of proportion 
by Zionist media pressures" in the U.S.  Al-Rashed said he 
viewed frictions arising from the June 2009 elections in Iran 
as a positive development, but worried that U.S. 
saber-rattling could unify Iranians in support of the 
regime.  The Iranians also complained about scrutiny of their 
investment accounts in Kuwait.  End Note.) 
 
 
¶5. (C) In a January 27 conversation, Kuwaiti Iran-watcher Dr. 
Sami Al-Faraj told Poloff he believed the Larijani visit 
signaled the Iranian regime's "desperation" and growing 
political isolation.  Iran's "nearly overt" backing of the 
Houthis in Yemen, he suggested, has cost Tehran any remaining 
credibility with its neighbors and left Iran seeking to 
improve relationships with countries like Kuwait in order to 
balance its damaged relations with KSA and other Gulf 
countries. 
 
 
Economic Team Accomplishes Little 
---------------------------------- 
 
¶6. (C) Kuwait Petroleum Corporation General Counsel Shaykh 
Nawaf Al-Sabah told Econcouns on January 31 that the Iranians 
had sent an economic delegation to Kuwait in advance of the 
Larijani's visit.  According to Nawaf, the Kuwaiti 
coordinator for the visit was Prime Ministerial Advisor 
Ismail Shatti, who claimed to be tasked with coordinating 
"all of the bilateral economic issues."  Shaykh Nawaf said he 
participated in two different meetings, one with the general 
economic team and a second follow-up meeting with 
representatives from the Iranian "gas people" on the 
continuing discussions about Kuwait possibly buying natural 
gas from Iran.  He described the meetings as unproductive. 
As an aside, he noted that he had mentioned to MFA U/S Khalid 
Al-Jarallah that he would be meeting Econcouns to discuss the 
Iranian visit and Jarallah's response was "tell him he's 
wasting his time," the implication being that nothing 
important had come out of the discussions. 
 
 
¶7. (C)  That said, Kuwait is awash in rumors that Larijani 
had proposed establishing a joint airline company, with 
shares divided between the governments of Kuwait and Iran (30 
percent each) and 40 percent for the public in order to help 
Iran evade any more stringent sanctions that might be 
implemented.  In February 2 discussions with Ambassador, 
Kuwaiti Chamber of Commerce and Industry President Ali 
Al-Ghanim noted that Iran was a big economy and that closer 
Kuwait-Iran business ties made sense.  He added, somewhat 
wryly, that Iran viewed Kuwait as a potential base of 
operations for bypassing U.S. sanctions.  He cautioned, 
however, that the Iranian government was "not trustworthy" 
with regard to making deals, citing the case of a Kuwaiti 
investor who lost millions on a real estate investment on an 
island where the Iranians subsequently discovered natural 
gas.  Although the Iranians told him to seek compensation, 
years later "he was still waiting."  (Note: Although Kuwaits 
being Kuwaitis will seek economic advantage wherever they 
can, the general distrust of the Iranian government as a 
business partner seems to be strong here.  End Note.) 
 
 
Continental Shelf Discussions Go Nowhere 
---------------------------------------- 
 
¶8. (C) Shaykh Nawaf said the Iranians and KPC discussed the 
issue of the shared (Kuwait, Iran, Saudi Arabia) Dora field, 
with the Iranians probing for information on Kuwaiti 
development plans.  According to Shaykh Nawaf, KPC's position 
was that Kuwait could develop the clearly undisputed part of 
the field and that such activity should not be of concern to 
Iran.  He added that the Iranians had tried to argue that the 
issue could be solved bilaterally without involving the 
Saudis, to which the response was that the Kuwaitis and 
Saudis were negotiating as a bloc.  Nawaf went on to explain 
that under the terms of the 
agreement with Saudi Arabia, the field was part of the joint 
operations zone (i.e., neutral zone) and production would be 
E 
 
 
split 50-50.  In response to Econcouns' question, Shaykh 
Nawaf confirmed that KPC would be interested in developing 
the field as it contained considerable reserves of natural 
gas.  With regard to the broader question of Iranian-Kuwaiti 
continental shelf discussions, the Iranians were told to 
raise it with the MFA.  According to Shaykh Nawaf, the 
Iranians subsequently met with MFA U/S Al-Jarallah, but that 
Jarallah raised the issue, not the Iranians.  "They were 
there for the tea," he noted sardonically.  (Note:  Shaykh 
Nawaf confirmed that the dispute over the continental shelf 
essentially is a dispute over ownership of offshore fields, 
primarily the Dora field.  End Note.) 
 
 
Natural Gas Sales a Pipeline too Far 
------------------------------------ 
 
¶9. (C) Shaykh Nawaf stressed that no progress had been made 
in the long-running negotiations with Iran on potential 
Kuwaiti purchases of Iranian natural gas.  He said that 
Shatti had asked him to brief the Iranian economic delegation 
on the natural gas negotiations, but that it quickly became 
clear that the delegation had no knowledge on the history or 
details of the negotiations.  He explained that an oil sector 
team had arrived the next day to continue the discussion. 
Shaykh Nawaf said that the biggest  problem was the Iranians' 
unwillingness to accept the price that had already been 
agreed on in 2005, because it did not "meet their economic 
development agenda."  Nawaf pointed out that the price, 
agreed on when oil was approximately $20 per barrel, had an 
escalation clause, tied to the price of oil.  The current 
natural gas price (at $80 per barrel for oil) would be about 
4-times the 2005 price.  He said, at this price, the pipeline 
gas would be approximately as expensive as LNG.  That said, 
Kuwait would still be happy to purchase gas at the agreed on 
price.  The Iranians, however, were pushing for a price about 
two and half times the current price, far more expensive than 
LNG.  The Iranians were not willing to come down on the price 
and the Kuwaitis were not willing to raise their offer. 
 
 
¶10. (C) In addition, Nawaf noted, the Iranians were pushing 
the Kuwaitis to take some ownership over any 
Iranian-Kuwaiti pipeline.  The Kuwaiti position was that the 
Iranians should own the pipeline and Kuwait would purchase 
the gas.  According to Shaykh Nawaf, the Kuwaitis were 
willing to take a 10-15 percent ownership stake in the 
pipeline if it would help the deal go forward, but the 
Iranians were pushing for a 20 percent or greater Kuwaiti 
ownership share.  When Econcouns raised long-standing USG 
policy and legal concerns about investment in the Iranian 
hydrocarbon sector, Shaykh Nawaf stressed that any Kuwaiti 
pipeline ownership would be clearly within Kuwaiti territory. 
 He reiterated, however, that the negotiations had gone 
nowhere.  In fact, he added, he had left before the meetings 
had concluded "to get some work done". 
 
 
¶11. (C) Comment:  Kuwait's small size and proximity to Iran 
militate in favor of allowing others to do the heavy lifting 
on this contentious issue.  The GoK largely contents itself 
with trying to be seen as diplomatically helpful in providing 
a conduit for expression of GCC (particularly Saudi) concern 
- and perhaps carrying occasional water for the international 
community in quietly urging Iran to limit its nuclear program 
to purely civilian uses.  But Kuwait nonetheless uses its 
contacts with Iran to assure Tehran of its continued 
friendship and to pursue parochial economic interests, to 
include off-shore oil field development and access to gas. 
Iran also stands to benefit from Kuwaiti engagement by using 
high-level visits to portray itself as not isolated 
regionally - and as the larger and more powerful player is 
certainly much more in the driver's seat than Kuwait, a fact 
borne out by Larijani's decision to embarrass the GoK and 
abuse Kuwaiti hospitality by using his visit here to lash out 
publicly at the U.S. and its Gulf allies. 
 
 
¶12. (C) Comment continued:  Shaykh Nawaf's read-out of the 
Iranian oil and gas negotiations track with both his previous 
remarks and the comments of other oil sector officials 
involved in negotiations with the Iranians over natural gas. 
Given the geographical proximity and the very real Kuwaiti 
need for gas, their interest in negotiating with Iran (and 
their other gas rich neighbors) makes sense, but Kuwaitis are 
not inclined to overpay for gas they can get elsewhere.  The 
apparently consistent Iranian tactic of 
reopening an already agreed upon point also fills Kuwaiti 
 
 
negotiators with skepticism that any deal wQl be reached. 
End Comment. 
 
 
 
********************************************* ********* 
For more reporting from Embassy Kuwait, visit: 
visit Kuwait's Classified Website at: 
 
http://www.intelink.sgov.gov/wiki/Portal:Kuwa it 
********************************************* ********* 
JONES