Mugabe linked to powerful Oman business family

President Robert Mugabe was linked to one of the most powerful business families from Oman- the Shanfari family which owns the Shanfari Group.

Thamer Shanfari, son of Saeed al-Shanfari, was put on the United States sanctions list because of his questionable business dealings in the Democratic Republic of Congo that reportedly benefitted Mugabe.

The Shanfari Group of Companies is involved in the construction, transport and logistics, manufacturing, and tourism sectors as well as military sales.

It serves as one of the representatives of the Jeep and Harley Davidson brands in Oman and had the exclusive rights to Jeep until 2005.

Full cable:

Viewing cable 09MUSCAT851, OMAN, INC.: BUSINESS OLIGARCHS AND GOVERNMENT IN OMAN’S

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VZCZCXRO3627

RR RUEHDE

DE RUEHMS #0851 2281138

ZNY CCCCC ZZH

R 161137Z AUG 09

FM AMEMBASSY MUSCAT

TO RUEHC/SECSTATE WASHDC

INFO GULF COOPERATION COUNCIL COLLECTIVE

RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

RUEHMS/AMEMBASSY MUSCAT

C O N F I D E N T I A L MUSCAT 000851

SIPDIS

STATE FOR NEA/ARP, EEB/CBA

COMMERCE FOR ITA THOFFMAN

E.O. 12958: DECL: 2019/08/16

TAGS: ECON PGOV ENRG ETRD PINR MU

SUBJECT: OMAN, INC.: BUSINESS OLIGARCHS AND GOVERNMENT IN OMAN’S

ECONOMY

REF: A. 09 MUSCAT 845; B. 08 MUSCAT 540; C. 08 MUSCAT 501

¶D. 08 MUSCAT 430; E. 08 MUSCAT 384; F. 08 MUSCAT 256

¶G. 08 MUSCAT 188

CLASSIFIED BY: L Victor Hurtado, CDA, State, Exec; REASON: 1.4(B),

(D)

Summary:

¶1. (C) Oman’s business landscape remains dominated by a handful of

local families who work either in tandem with, or in the shadow of,

government-run enterprises. As the Sultanate’s economy diversifies

away from petroleum into fields such as industrial production and

tourism, these families have parlayed their privileged positions

and government ties into developing new business opportunities.

While the government publicly has called for an increase in the

number and participation of small and medium-sized enterprises

(SMEs), the major role of the state and omnipresence of the large

trading houses will ensure these families’ continued dominance as

Oman’s economy continues to expand. End Summary.

An Oligarchy Takes Hold

¶2. (C) Oman’s private sector is best described as an oligopoly.

After Sultan Qaboos assumed power from his father in 1970, a

handful of families came to dominate the private sector. These

families are similar in many respects: many come from humble

beginnings, most are not directly related to the al-Said ruling

family, but almost all owe their fortunes in part to ties to the

Sultan or members of his government. As Oman’s economy developed

and evolved, these families extended their business reach to meet

the growing needs of the government, Omani consumers, and, more

lately, the tourism industry. As a result, they control

conglomerates that operate in a wide array of sectors, from

construction to cars, and from manufacturing to hotels.

¶3. (SBU) In recent years, Oman’s government has encouraged the

development of industrial areas, most notably the northern port

city of Sohar, as well as large real estate projects. These

initiatives are part of a long-term effort to diversify the economy

and reduce the country’s dependence on hydrocarbons, which

currently account for 79% of state revenues. The government’s new

economic priorities – industrial ventures and real estate

development – have provided new opportunities for Oman’s oligarchy.

¶4. (C) Given the state’s substantial role in economic planning, it

is not surprising that the family with the closest relationship to

the Sultan – the Zawawis – is one of the country’s richest. While

the Zawawi fortune remains large, it also has remained relatively

unchanged over time, according to post contacts. By contrast,

other private sector leaders – the Zubair and Bahwan families and

the Sultan’s cousin, Sayyid Haitham bin Tariq al-Said – have become

more involved in new and growing sectors, raising their rank within

the business community’s hierarchy.

The Zawawi Family – OMZEST Group

¶5. (C) The Zawawis, a merchant family with origins in Saudi

Arabia, have had a close relationship with the ruling al-Said

family for over a century. The relationship blossomed under Sultan

Qaboos as Oman’s economy rapidly expanded. Omar Zawawi, who

attended Harvard in the 1960s and was trained as a physician and

holds an MD, is currently the head of the family and possibly the

richest man in Oman. He is also a member of the Sultan’s “kitchen

cabinet,” a handful of individuals who are not government cabinet

members, but have regular access to the Sultan and advise him on

key matters. Zawawi’s brother Qais had a more visible role in the

government as Deputy Prime Minister until his death in 1995. Omar

Zawawi’s official title, Senior Advisor for External Affairs, is

somewhat misleading, as he plays a highly influential role in

domestic economic policy making in addition to foreign policy

matters. He has an unmatched combination of acuity regarding

international affairs and direct access to the Sultan; his hand may

be detected in Oman’s recent and surprisingly quick decision to

permit the transit of anti-piracy security teams (ref A.).

¶6. (SBU) Zawawi’s company, OMZEST Group, is the umbrella for 75

wholly owned and associated companies with an estimated 4,000

employees. The group’s activities include agriculture, banking,

contracting, manufacturing, and travel and tourism, among others.

OMZEST’s key business, however, is manufacturing, from which it

derives approximately 43 percent of its revenue. (Note: OMZEST’s

exact revenue and profits are not known.   End Note.) OMZEST is

heavily involved in new manufacturing ventures at the burgeoning

Sohar port, which the government has targeted for development as

part of its drive to diversify the Omani economy. OMZEST, for

example, controls a 30 percent stake in Oman Methanol Company, a

joint venture that has built a $450 million methanol plant with a

production capacity of one million tons per annum (tpa). Oman

Methanol is in the midst of constructing a second plant, also

capable of producing one million tpa. OMZEST also holds a 10

percent stake in Alsig, a joint venture that owns an industrial gas

production facility in the Sohar port area with an initial

production capacity of 200 tons per day of nitrogen. The plant may

be upgraded over time to produce oxygen and other gases, depending

on demand from industries in the Sohar Port complex.

¶7. (C) OMZEST is a player in the banking arena, with a controlling

interest in Oman’s third largest bank, Oman International Bank.

While it benefited, as did all Omani banks, from the liquidity

generated from high oil prices, as well as several government and

Royal Diwan accounts under its purview, the bank appears not to be

particularly well-run and therefore by local standards vulnerable

in the face of regional and international economic difficulties.

One banking contact noted that he would “never work for Oman

International Bank,” while another complained about the

difficulties in working under the bank’s micro-managing chairwoman

– Reem Zawawi, Omar’s daughter.

The Bahwan Family – Suhail and Saud Bahwan Group

¶8. (C) The Bahwans, members of the Mukhaini tribe from the coastal

city of Sur, got their start as the exclusive agents for Toyota in

Oman, a right they received thanks to Sultan Qaboos’ direct

intervention. Until 2002, brothers Suhail and Saud Bahwan jointly

operated the Bahwan group, most likely the second largest

conglomerate in Oman in terms of profits. While the brothers have

split the firm, the two new companies remain leaders in the

economy. Much has been made about the alleged bad blood in the

separation, but post contacts believe that it is overplayed, and

that the two companies remain somewhat aligned. One company

official noted to Econoff that while the brothers are fiercely

competitive, even with each other, they remain “family.”

¶9. (SBU) The Suhail Bahwan Group appears to be the larger and more

diversified of the two. It employs approximately 10,000 people and

includes interests in engineering and construction, automobile

sales, telecommunications, software design, structural steel, and

chemicals and fertilizer products, among others. While the group

retains some ties to the original family automobile business as the

exclusive agent in Oman for BMW, Nissan and Renault, like OMZEST,

Suhail Bahwan has invested heavily in industrial projects,

including recent projects near the ports at Sohar and Salalah, as

well as in the National Bank of Oman, the country’s second-largest

financial institution. The group is expanding its profile in

vocational training and education; partnered with Virginia Tech, it

is currently waiting for Ministry of Higher Education permission to

found Oman’s fourth private university.

¶10. (SBU) Bahwan Engineering is a heavyweight in the local

economy, and has grown its business beyond Oman’s borders by

establishing offices in Dubai and Abu Dhabi. It has participated

in the construction of a number of high-profile projects in Oman,

including LNG facilities (Oman LNG, Qalhat LNG), power stations

(Sohar, Barka, Ghubra), hospitals (Ibra), industrial plants (Sohar

Aluminum), banks (Central Bank, Bank Dhofar, Oman International

Bank), shopping malls (Msucat’s two City Centre malls, along with

th city’s thid largest mall, the Markaz al-Bahja), and hotels

(Muscat Intercontinental, Muscat Crowne Plaza).

¶11. (U) The company’s industrial ventures include Suhail Chemical

Industries, which manufactures sulfuric acid in the Sohar

Industrial Area, and the Sohar Fertilizer Project, a $638 million

complex that includes an ammonia plant with a production capacity

of 2,000 metric tons per day (mtd) and two granular urea plants

with a combined production capacity of 3,500 mtd. The group also

plans to add 30,000 tons per year of structural steel component

manufacturing capacity at Sohar. Finally, Suhail Bahwan is an

investor in Octal Petrochemical, a U.S.-based firm which controls a

plant in the Salalah free zone that produces 30,000 tons per year

of polyethylene plastics and has plans for major expansion (ref D).

¶12. (C) The Saud Bahwan Group has approximately 9,400 employees

and annual sales of more than $3 billion. Growing in recent years

from a base of 3,000 employees, the company’s primary business is

automotive and heavy equipment sales, as well as sales of

automotive parts and accessories. The group represents Toyota,

Ford and MAN commercial trucks, as well as Komatsu construction

equipment in Oman. In addition, the group acts as the exclusive

agent for Hertz Rent-a-Car. Patriarch Saud Bahwan died in late

2008, but as he had in recent years passed most executive authority

to his children, the company’s direction has been relatively

unaffected. Sheikh Saud was long Oman’s highest profile

(non-royal) philanthropist, one whose gifts included a generous

(anonymously given ) sums to The American International School of

Muscat (TAISM).

The Zubair Family – Zubair Corporation

¶13. (C) The Zubairs are ethnically Baluchi from the Huti tribe, a

group traditionally with a humble social status. However, the

family’s long-standing personal relationship with Sultan Qaboos has

brought them tremendous wealth. The founder of Zubair Corporation,

Mohammed Zubair, is believed to have been a childhood companion of

the Sultan, as their mothers were close friends. Zubair became

Minister of Commerce in 1974, four years after Sultan Qaboos took

power, and remained in that position until 1983, after which he

became the Sultan’s advisor for economic planning affairs. (Note:

While like Zawawi a “special advisor” to the Sultan, he is not as

close to Oman’s ruler. And, unlike Zawawi, Zubair has generally

steered clear of politics, domestic or international, to focus on

his business interests. End Note.) While Mohammed Zubair remains

associated with Zubair Corporation, his son Hani al-Zubair now

serves as its chairman. The Zubairs have long been considered

locally the Sultanate’s most cultured family; the family’s private

collection of Omani arts and crafts are now housed in Oman’s only

truly world-class museum, the Bait al-Zubair.

¶14. (SBU) Zubair Corporation has an estimated 2,400 employees and

is the parent company of 60 firms, subsidiaries, and associated

ventures. The company’s divisions include automotive sales, art

and heritage, hospitality, telecom and IT, construction, retail

manufacturing, and advertising and publishing. Zubair represents

Volkswagen, Chrysler, Jeep, Mitsubishi, Peugeot, and Yamaha, among

other companies.

¶15. (SBU) One of the Zubairs’ most prominent and successful

ventures to date is the Shangri La Barr Al Jissah hotel complex,

which opened outside Muscat in 2006. The Zubairs, in partnership

with the government, invested $180 million in the site, which

covers 124 acres and contains three hotels with a total of 640

rooms. Further development on the project has added luxurious

private residences, including apartments and villas. The success

of the Barr Al Jissah complex has encouraged more large-scale real

estate development construction in Oman, including projects under

construction at Sifah, Yenkit, and Blue City.

¶16. (SBU) The Zubair Corporation is dabbling in the Sohar port

industrial area as well. It holds a 10% stake in the Sohar Power

Company, the owner of the $550 million Sohar Power and

Desalinization Plant, which has a power generation capacity of 585

megawatts (MW) and desalinization capacity of 33 million gallons

per day. Recently, the Zubairs entered into a $30 million joint

venture with an Indian engineering and construction company, Larsen

and Toubro, to build a plant in Sohar that will manufacture

products for the offshore oil and gas sector.

¶17. (C) Post contacts report that the Zubair Corporation is

undergoing a shake-up in personnel to inject new blood into the

company. In 2008, Zubair appointed Giles Cunningham as the

company’s new Chief Executive Officer. In a conversation with

Econoff, Cunningham viewed the company as a leading economic

powerhouse in Oman, but commented that it needed to gain focus in

determining which new opportunities to pursue. A former banker in

the region, Cunningham stated that the company’s potential for

growth and the Zubairs’ keen sense of business attracted him to

Oman.

The Sultan Family – W.J. Towell

¶18. (SBU) The Sultan family is an established Lawatiya Shi’a clan

(Ref B) that in 1866 founded W.J. Towell in partnership with the

company’s namesake William Jack Towell. Towell, who is believed to

have been an American citizen, later, sold his share in the firm to

the Sultans in the 1890s. After Sultan Qaboos came to power in

1970, W.J. Towell managed some of the country’s first major

infrastructure projects.

¶19. (C) The family’s head is Kamal Sultan, who is now

incapacitated and serves as Honorary Chairman of the firm. His

son, Jawad Hussein Sultan, is Chairman. The company’s main market

advantage is family member Maqbool bin Ali Sultan, who was a

director of the firm before he became Minister of Commerce and

Industry in 1991. Maqbool is well-connected in Oman’s business

landscape, as he also serves as the Chairman of Oman Oil Company, a

primary investment arm of the government, and Chairman of the Sohar

Industrial Port Corporation, the landlord of the Port of Sohar. He

also is a close colleague of Ahmed bin Abdul Nabi Macki, who is the

Sultanate’s powerful National Economy Minister, as well as the

Deputy Chairman of the National Resources Council, Chairman of Oman

Shipping Company, and Chairman of Oman Air.

¶20. (SBU) W.J. Towell currently has an estimated 1,000 direct-hire

employees and is involved in healthcare products, furniture sales,

automobile sales, cleaning services, construction services, real

estate, and grocery retailing and distribution, among other areas.

The firm also represents a variety of foreign companies in Oman,

including Mazda, Mars, and Chicago Pneumatic. Given the family

connection to Sohar, W.J. Towell has become involved in

industrialization efforts in the port city. The company drafted

the port’s master plan, holds a 10% stake in Sohar Power Company,

and for years been the chief advocate for constructing a

multi-billion aluminum smelter near Sohar, a project that is now

being implemented as a joint venture of Abu Dhabi Water and

Electricity Authority, Oman Oil Company and Alcan. Towell is a

major property developer in Oman, with signature projects in the

expat-heavy neighborhoods of Madinat al-Sultan Qaboos and Shatti

al-Qurm, developments whose success has cushioned the cancellation

or postponement of additional residential and resort properties.

Al Sa’id Family – A Growing Force in Business?

¶21. (C) The royal Al Sa’id family has long had a notable, if low

profile, role in the private sector, but in recent years some

members have expanded their commercial activities. The more

traditional (less commercially minded) branch of the family is led

by the Sultan’s paternal uncle, Sayyid Shabib bin Taimur Al Sa’id.

In 1982, Sayyid Shabib established the Tawoos Group, a diversified

firm with interests in telecommunications, agriculture, and oil

field supplies. Tawoos Group is now run by Sayyid Shabib’s

half-brother, Samir Fancy, and has not significantly changed its

business in recent years. Tawoos’ main division, Renaissance

Services, was one of the first family-owned companies to become

publicly traded on the Muscat Securities Market. Renaissance

focuses primarily on services, including facilities management,

cleaning and catering, IT services, and education and training.

Tawoos is interested in further expanding its overseas presence,

evidenced by the company’s participation in an official Omani

commercial delegation to Baghdad in 2008 (ref C).

¶22. (C) The business interests controlled by Sultan Qaboos’

cousin, Sayyid Haitham bin Tariq Al Sa’id, the Minister of Heritage

and Culture and one of the possible successors to the Sultan, and

his brother, Sayyid Talal, appear far more dynamic than those

controlled by Sayyid Shabib. The brothers have interests in two

major firms – National Trading Company and Oman Holdings

International (OHI) – which are active in advertising and media,

telecommunications, tourism, energy services and construction,

among other sectors. National Training Company’s financial results

are not available publicly.

¶23. (SBU) National Trading Company is the quieter of the two

firms. Established in 1982, the company – like the Zubair

Corporation and W.J. Towell – holds a 10% stake in the Sohar Power

and Desalinization Plant. It also has a 6.4% stake in Oman

Chlorine, a publicly traded firm that controls a chemical plant in

Sohar. It created “National Trading and Projects Company” in 2005,

which works closely with OHI in the fields of oil and gas, water,

power, and telecommunications.

¶24. (C) Sayyid Haitham and another brother, Sayyid Qais, are the

primary investors in the Muscat Hills Golf and Country Club, a

swank development near Muscat International Airport. The $110

million venture includes an 18-hole championship golf course

surrounded by a planned community. Phase 1 of the community is

expected to be complete by late 2009 and consists of 80 deluxe

villas around Muscat’s first green golf course. The course itself

opened only after Sayyid Haitham shook up the project management

staff and reportedly brokered a deal with Muscat Municipality

Chairman Abdullah bin Abbas for use of the municipality’s recycled

water.

¶25. (C) Sayyid Haitham’s most important and visible project,

however, is the mega-real estate venture Blue City, in which he

shares a 30% stake with another investor. Blue City (Al Medina Al

Zarqa in Arabic), was announced as by far Oman’s most ambitious

development, with a total expected cost of $20 billion. Its

original plans called for the construction of an entirely new urban

area, with residences, schools, health facilities and hotels for

200,000 people. The development was the subject of a legal battle

in which Sayyid Haitham’s company “Cyclone” unsuccessfully tried to

acquire full ownership of the project from Bahrain-based AAJ

Holdings, which controls 70% of Blue City (Ref F). Its prospects

have been the subject of significant local gossip over the past

year, as ambitious plans for an urban center that would have

challenged Sohar and even Muscat have been gradually scaled back to

a more realistic (if still highly ambitious)

residential/resort/commercial complex. The project’s difficulties

have, to an extent, tarnished Sayyid Haitham’s reputation, if not

his prospects in the succession.

Ma’shani Family – Muscat Overseas Group

¶26. (C) The Ma’shanis are another family with close ties to Sultan

Qaboos, in this case through his late and much-loved mother; the

clan elder, Sheikh Mustahail bin Ahman al-Ma’shani, is the Sultan’s

maternal uncle. He previously served as Minister of Social Affairs

and Labor and is now a State Advisor, as well as chairman of the

family company he started in 1974, Muscat Overseas Group. One of

his sons, Salim bin Mustahail, is an advisor at the Diwan of Royal

Court (a position that carries ministerial rank), as well as

vice-chairman of the family business. In July 2008, Salim was

appointed chairman of Nawras Telecommunications, the second largest

provider of cellular phone service in Oman. (Note: Qatar Telecom

is the majority shareholder in Nawras. End Note.)

¶27. (SBU) Reflecting the family’s power base in the southern

Dhofar region, Muscat Overseas Group is the most powerful business

group in Salalah, Dhofar’s capital. Its business operations

include trading, contracting, oil field supplies and drilling,

tourism, agriculture and real estate. It also is a 4% stakeholder

in Bank Muscat, Oman’s largest bank.

¶28. (SBU) The firm’s investments are channeled, in part, through

the Dhofar International Development and Investment Holding Company

(DIDIHC), where Sheikh Mustahail’s son Khalid was appointed

chairman in 2008. (Note: The Shanfari family from Dhofar is also

a player in DIDIHC, with the family patron, Saeed bin Ahmen Al

Shanfari, previously serving as the chairman. End Note.) DIDIHC

holds a 30% stake in Bank Dhofar, 25% in Dhofar Insurance, 25% in

Salalah Medical Supplies Manufacturing Company, 16% in Dhofar

University, 14% in Dhofar Tourism Company, 10% in Salalah Port

Services Company, 5% in Oman Oil Company, 4% in Dhofar Power, and

an unknown stake in Octal Petrochemicals.

Shanfari Family – Shanfari Group

¶29. (C) The Shanfari represent the other prominent Dhofari family.

Shanfari Group Chairman Saeed al-Shanfari was a close contact of

Sultan Qaboos before his ascent to power. In 1974, Shanfari was

rewarded for his loyalty by being named Minister of Oil and Gas, a

position he held until 1997, when he was “retired” by the Sultan.

Post contacts report that his personal connection to the Sultan has

all but disappeared.

¶30. (C) Nevertheless, the Shanfari Group of Companies, established

by Saeed in 1970, remains a well-known trading house in Oman.   In

addition to military sales, the group is involved in the

construction, transport and logistics, manufacturing, and tourism

sectors. It serves as one of the representatives of the Jeep and

Harley Davidson brands in Oman. (Note: the Shanfari Group had

exclusive rights to Jeep until 2005, when it reluctantly agreed to

share the brand with the Zubair Corporation after the U.S.-based

vehicle manufacturer complained of poor marketing efforts.

However, in 2008, Chrysler awarded Shanfari the right to market

Dodge, a brand previously reserved for Zubair. End Note.) The

Shanfari Group also holds the exclusive rights to a string of

luxury brands, such as Ferrari, Lamborghini, Maserati, and also

Saab, though one company official admitted to Econoff that those

are “just for show,” since they generate negligible business in

terms of volume. Saeed Shanfari further retains significant stakes

in Dhofar-based projects through his stake in DIDIHC.

¶31. (C) Saeed’s son Adil serves as the Shanfari Group’s chairman

and CEO and is fond of the U.S., with several of his children

studying at a military school in Kansas. Another of Saeed’s son,

Thamer, a U.S. university graduate and former participant in a

State Department International Visitor Program, was in 2008

designated for sanctions by the U.S. Treasury Department for his

questionable business dealings – which did not involve other family

members – in the Democratic Republic of the Congo benefiting

Zimbabwean President Robert Mugabe.

Darwish Family – Mohsin Haider Darwish (MHD LLC)

¶32. (C) The Darwish family is part of Oman’s Baharna Shi’s

community (Ref B), a group that is believed to have its roots in

Bahrain. The Darwishes have been notable merchants in the Gulf

since the late nineteenth century. Mohsin Haider Darwish is the

family’s patriarch and managing director of the family company, MHD

LLC, while his two daughters, Lujaina Mohsin Darwish and Areej

Mohsin Darwish, serve as deputy managing directors (as such, they

are among the Sultanate’s leading businesswomen). MHD, which has

an estimated 750 employees, remains an important player in the

local economy, but observers do not see it as being as dynamic as

top-tier firms such as OMZEST, Bahwan, and Zubair. MHD’s divisions

include automotive sales, electrical goods and electronics

merchandising, chemicals, medical equipment and building materials.

In the automotive sector, MHD represents Jaguar, Land Rover and

Volvo. MHD retains a 10% stake in the industrial gas venture

“Alsig,” in which OMZEST also has a 10% share.

Khimji family: Khimji Ramdas and Ajit Khimji

¶33. (C) the Khimjis are of Indian origin with commercial ties to

Oman that go back more than a century. The family lent money to

Sultan Qaboos’ father, Sultan Sa’id; Sultan Qaboos granted Omani

citizenship to the Khimjis after he came to power. Notably, as

Hindus, the family traditionally has not intermarried with

non-Indians, but one member of the family, Rishi Khimji, is now

married to Sayyida Tania al-Sa’id, the daughter of Sayyid Shabib

al-Sa’id, the founder of Tawoos Group; Sayyida Tania is an

increasingly visible environmental activist and among the most

publicly active female al-Saids.

¶34. (SBU) Established in 1870, the family’s operations are now

split into two – Khimji Ramdas and Ajit Khimji. Khimji Ramdas is

divided into four sectors: consumer products, lifestyle,

infrastructure, and projects and logistics. Much of its business

revolves around the retaining sector; it represents such prominent

brands as Proctor & Gamble, Ralph Lauren, and Samsonite. In

addition, the company acts as the exclusive agent for Pizza Hut,

and runs its own “Khimji Mart” consumer goods stores. The projects

and logistics division supplies military and firefighting equipment

to the government, while in the defense sector the company

represents Humvee.

¶35. (SBU) Ajit Khimji’s business line takes a smaller, though

parallel, focus on consumer products, dining, and retailing. It

runs a number of well-known and highly regarded restaurants (among

the handful of non-hotel-based restaurants to hold liquor

licenses), , holds the franchise for Europcar, and serves as the

general services agent for Swiss (the national carrier) through its

travel agency. In addition, it owns an insurance company, several

coffee shops, bookstores, and dry-cleaning outlets.

State Reigns Supreme

¶36. (SBU) The strong position of Oman’s leading families will

continue to benefit from the government’s pre-eminent role in the

economy. At the forefront of the government’s significant holdings

is Petroleum Development Oman (PDO), which s the country’s primary

oil producer. Established in 1951, PDO is 60%-owned by the Omani

government and 34%-owned by Royal Dutch Shell, with the remaining

shares held by French-based Total and Portuguese-based Partax. PDO

controls 90% of Oman’s reserves, 109 of the 130 fields, and the

lion’s share of total production. In 2004, the government renewed

PDO’s concession for another 40 years, though there was some

grumbling about the generosity of the extension, given falling

production rates and Shell’s fudging of its Omani reserves

estimates, which greatly embarrassed the Omani government.

Nevertheless, the government has committed itself to making

significant investments in enhanced oil recovery techniques on

behalf of PDO during the course of the current five-year economic

plan (2006-2011), with an estimated investment in 2008 of $1.74

billion in petroleum production.

¶37. (SBU) In spite of the significant investment figures in PDO,

the government has moved to allow greater foreign competition in

the development of its petroleum fields. It is careful, however,

to retain a sizable equity stake in new oil-related ventures. For

example, complementing PDO’s production is U.S.-based Occidental

Petroleum, which is investing over $3 billion in its Mukhaizna

field concession. In transferring the concession to Oxy from PDO,

the government acquired a 20% stake in “Occidental Mukhaizna”

through its Oman Oil operations. (Note: Occidental retains a 45%

stake, while Shell Oman has 17% and UAE-based Liwa Energy has a 15%

share. End Note.)

¶38. (SBU) In addition to its efforts in the petroleum sector, the

Omani government has substantially invested in the liquefied

natural gas (LNG) industry. In 1994, the government established

Oman LNG, which began operations in April 2000 with two 3.3 metric

ton pr annum (MTPA) LNG production trains. Heading the consortium

is the government, with a 51% stake, followed by Royal Dutch Shell

(30%), Total (5.5%), and Portuguese and Japanese equity holders.

In 2003, the Omani government formed Qalhat LNG to operate a third

train along side those managed by Oman LNG. Qalhat’s primary

stakeholder is the government (47%), followed by Oman LNG (36.8%),

Union Fenosa (7%), and a collection of Japanese equity partners.

LNG shipped from Oman to points in Asia and Europe is carried by

seven tankers owned by the Oman Shipping Company, which is 80%

owned by the Ministry of Finance and 20% owned by the Oman Oil

Company. Domestic distribution of gas is handled by the Oman Gas

Company, which is 80% owned by the Ministry of Oil and Gas, and 20%

owned by the Oman Oil Company.

Investing through Oman Oil

¶39. (U) The Oman Oil Company plays a key role in the private

sector. In 1992, the government established Oman Oil to invest

surplus oil revenues both domestically and internationally. The

company is chaired by the Minister of Commerce and Industry, with

the Minister of Oil and Gas serving as the Vice chairman. Other

government officials, including the Secretary General of the

Ministry of National Economy and a Board Member of the Central

bank, round out the board. On the domestic front, in addition to

its stakes in Oman gas Company and Oman Shipping Company, Oman Oil

is involved in the Dolphin Energy Project (cross-border gas sales

to the UAE) and the Oman Oil Marketing Company (retail distributor

of gasoline).

¶40. (U) In 2002, the government entered into a 50-50 joint venture

with the Port of Rotterdam to create the sohar Industrial Port

Corporation (SIPC), which serves as the landlord for the industrial

complex. (Note: The Minister of Commerce and Industry serves as

the Chairman of SIPC. End Note.) Since SIPC’s establishment, Oman

Oil has attracted a number of foreign participants into joint

ventures, including a polypropylene and aromatics plant with

Korea-based LG and an aluminum smelter with Canada-based Alcan.

Oman Oil is also a 20% owner in the Sohar Refinery Company, with

the Ministry of Finance holding an 80% stake.

HURTADO

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