IRAQ RECONSTRUCTION: ITALY'S SPECIAL ENVOY

C O N F I D E N T I A L ROME 004957 SIPDIS E.O. 12958: DECL: 10/30/2013 TAGS: EAID ECIN ECON PREL IZ IT EUN SUBJECT: IRAQ RECONSTRUCTION: ITALY'S SPECIAL ENVOY COMMITTED BUT CONCERNED REF: A. ROME 4438 ¶B. STATE 301383 ¶C. ROME 4904 ¶D. ROME 2148 ¶E. ROME 1678 ¶F. ROME 1660 ¶G. STATE 138587 ¶H. ROME 4764 Classified By: Economic Minister Counselor Scott Kilner for reasons 1.5 b and d. ¶1. (U) This cable contains an action request in paragraph 15. ¶2. (C) SUMMARY: Italy's Special Envoy to Iraq, Ambassador Antonio Armellini, met with EmbOffs on October 27 to discuss the reconstruction process to date and Italy's pledge of Euro 200 million at the Madrid Donors Conference. Armellini characterized the reconstruction effort so far as a "mixed bag:" he acknowledged that the Madrid conference went far better than expected and that the well-being of Iraqis continues to improve. He underscored, however, the critical need to focus on the "psycho-economic" factor: the perception that the lack of security in Iraq is undermining the reconstruction process. ¶3. (C) Armellini noted that while the more than 3,000 Italian personnel represent the third largest civilian and military contingent in Iraq, they are not widely recognized as such. He also detailed how Italy had to overcome a problematic selection process to place nearly 40 Italian experts in CPA and in new Iraqi ministries and provincial authorities. He specifically requested that CPA provide clear security instructions to all Italian personnel working with CPA. Armellini also provided an update of five reconstruction projects in the areas of transportation, health, environment, media and communications. END SUMMARY. MADRID'S MESSAGE MUTED BY SECURITY CONCERNS -------------- ¶4. (SBU) EcMin, EconOff and PolOff met October 27 with Italy's Special Envoy to Iraq, Ambassador Antonio Armellini, and his MFA assistant, Dr. Cajati, to take their pulse on Iraq reconstruction in the aftermath of the Madrid Donors Conference. EcMin expressed strong USG appreciation for Italy's generous pledge of Euro 200 million over three years, recognizing that for the GOI to contribute such an amount in the face of significant budget pressures, represents a major effort (Ref A). EcMin also noted that we look forward to working with Italy in the context of the Paris Club on the crucial matter of Iraqi debt restructuring (Ref B). Armellini reflected that the Madrid conference had gone far better than expected. He noted that the Donors Conference, while always about money, "also sends a signal about re-engaging in Iraq, but unfortunately that signal was muted by (high profile) security problems." Armellini acknowledged that the GOI pledge represents a major effort, but added that "it is consistent with the existing major efforts that Italy has made in Iraq." ¶5. (C) Armellini offered his impression of progress to date in Iraq, with the caveat that his view is the product of six or seven recent trips to the country since his appointment as Special Envoy, rather than from having been based there continuously (Ref C). Following the war, the Iraqi people had benefited from steadily increasing well-being through about July, he said, at which point progress seemed to level off. Things began picking up again about a month ago, Armellini continued, as CPA and Iraq's ministries have begun to manage more effectively the running of the country, and as tribal leaders in the provinces have begun retaking control. But, also recently, there has been an upsurge in the number of attacks, Armellini said. Baghdad, he observed, feels like a schizophrenic city where there are plenty of products in stores and residents enjoy outdoor cafes, but wonder when the next bombing will occur. ¶6. (C) EcMin asked whether sensational events are overwhelming other more positive news in Iraq. Armellini replied that most of Iraq is quiet, apart from Baghdad and the Tikrit triangle, but that the increasingly heavy fortification of buildings conveys the image of a fortress that is, nonetheless, vulnerable, as the Al Rasheed Hotel proved to be over the weekend. One does not know, Armellini said, whether the increased attacks are the final acts of opposition or the reflection of an increasingly potent resistance to the occupation. In any event, the current scenario is not a good one. We need to focus, he admonished, on "what could be called the psycho-economic element" of the situation: failing to convey a more secure and stable image of Iraq could deter participation in the reconstruction process. ITALY: "THE THIRD LARGEST COALITION PRESENCE" -------------- ¶7. (C) Armellini went to some length to describe Italy's civilian and military contingent in Iraq, which he maintained is the third largest in the Coalition (Ref D). Armellini noted that Italy has over 3,000 military personnel in Iraq, including: 300-400 Carabinieri involved in law enforcement, 1,700 infantry, a naval contingent aboard an Italian vessel based in Kuwait, and a helicopter unit (Ref E). Armellini said that the GOI will soon have embedded approximately 40 experts in CPA and with new Iraqi authorities. He described the process, however, as "excruciating," noting that many highly qualified applicants were lost due to delays in the review process, during which Italy "was not always treated initially as a part of the coalition of the willing." ¶8. (SBU) Armellini specified that half of the total number of Italian experts are in Baghdad working on transportation, higher education, culture, health, justice, public finance, irrigation, and military training. He added that there are some 15 experts in Basra, where an Italian is serving as Deputy Governor while others are working in the areas of transportation, health, political affairs, media, water and sanitation. Finally, in Dhi Qar, Armellini noted, a second Italian holds the post of Deputy Governor, while another four experts are working in the areas of media, agriculture, health and transportation. ¶9. (C) Armellini reviewed five bilateral projects that are pending in Iraq. The first he described as a proposal from Telecom Italia to supply fixed-line telephone service to Iraq by way of its Mediterranean/Nautilus link which runs through Israel and Jordan. According to Armellini, this proposal could complement, rather than compete with, a proposed link through Kuwait. While Armellini noted that he had heard some opposition in Iraq to the idea of using telephone links that run through Israel, he suggested that because the lines also run through Jordan, there could be a wide mutual interest in promoting such a venture. He added that he looked forward to USG support for the proposal. ¶10. (SBU) A second Italian project that Armellini described -- a 12-15 month, Euro 1.3 million proposal to develop a national transportation infrastructure plan -- has reportedly already received a green light from CPA and the Iraqi Infrastructure Ministry. Armellini said that, having completed several advance team visits, an initial project team of ten people is en route to Iraq. This group reportedly includes representatives of Italy's Ministry of Infrastructure, national rail company, air traffic controllers, Italy's major energy company (ENI),and the national road builders' association. The project, according to Armellini, is based on the national transportation plan that Italy developed some years ago and which is now a blueprint for the EU transportation plan. The plan will reportedly identify and prioritize transportation infrastructure projects, which will stimulate investment and commerce. Given that the success of the project will depend upon in-depth assessments of intermodal transportation capabilities throughout the country, Armellini stressed the importance of realizing a high-degree of coordination with CPA. ¶11. (SBU) Armellini briefly mentioned three other projects. One is a marshland reclamation project being carried out by the Iraqi Foundation and the Italian and Iraqi Environment Ministries. Another is the transformation of Italy's erstwhile field hospital into a base from which Italian medical professionals work on the structural rehabilitation of the Iraqi health care system (Ref F). As noted, Italians are also assisting with public health in the Basra region. Finally, Armellini mentioned a project in which Italy's state broadcasting network, RAI, would provide content and training support to its Iraqi counterpart. (In a separate, October 29 discussion with EcMin, RAI's newly-appointed President, Lucia Annunciata, said that RAI has already developed some 300 hours of content, including sports and cultural programming, for delivery to the Iraqi broadcasting network. RAI has also lined up journalists and support technicians to help train Iraqi counterparts. EcMin expressed appreciation for RAI's offer to contribute its expertise to Iraq during this critical period. "We must do something," Annunciata stated forcefully, adding, however, that the project is temporarily on hold, pending clarification of whether the security situation permits sending additional personnel to Baghdad.) ITALIAN PRIVATE SECTOR ENGAGEMENT STILL LIMITED -------------- -- ¶12. (SBU) During their meeting, EcMin asked Armellini for his reaction to a recent newspaper article which claimed that there are nearly 200 Italian firms ready to work in Iraq. "There may in fact be a couple hundred Italian companies waiting in the wings," Armellini said, "but the current view is that they will wait to engage in Iraq until basic security and telephone service is available." He noted that, for the time being, Jordanian, Lebanese and Syrian businesses are booming in Iraq, while a number of Italian companies have opted to work out of regional offices in Kuwait and Oman. ¶13. (SBU) Armellini noted that an Italian presence is "completely lacking" among Bechtel subcontractors, despite a great deal of interest on Italian firms' part. EcMin replied that the Embassy was well aware of the problem of reaching Bechtel, besieged by offers at the time of solicitations, and, in reporting it back to Washington, found that the phenomena was not unique to Italy (Ref G). Armellini affirmed, however, that several smaller Italian firms with experience in Iraq that had managed to return to the country. Armellini also mentioned that ENI was already working with the Oil Ministry and was in the process of opening an office in Baghdad. Ansaldo, a diversified power plant and transportation construction company and part of the Finmeccanica Group, is also already active in Iraq, according to Armellini. COMMENT -------------- ¶14. (C) Armellini on several occasions made the point that the GOI is very much looking forward to the reconstruction process beginning in earnest. Through significant post-war military participation, development of multiple reconstruction projects, embedding a sizable complement of experts with CPA and Iraqi authorities, and, most recently, through active participation in and promotion of the Madrid Donors process, Italy, he said, has sought to show itself as a close US ally and as a leader within the EU on Iraq issues. But the GOI, Armellini emphasized, has also sought to position Italy to reap the fruits of these political, military and human capital investments. This was clearly in evidence in the large, multi-sector delegation Italy sent to the Madrid private sector meeting (Ref H). Within the GOI, Armellini is championing an activist approach in Iraq, but he is also making clear that this approach generates significant anticipation, if not expectation. In Armellini's words, the GOI "anticipates -- yes, I would say 'anticipates' rather than 'expects' -- receiving recognition" commensurate with its contributions. ¶15. (C) Action Requested: Apart from his general request for USG support for Telecom Italia's proposal, Armellini specifically requested that CPA provide clear instructions on security to any and all Italian personnel working with CPA. Embassy asks that the Department please provide us with the appropriate points of contact within CPA with whom Armellini can discuss and clarify security procedures. End Action Request. SEMBLER NNNN 2003ROME04957 - Classification: CONFIDENTIAL