CHEMICAL WEAPONS CONVENTION (CWC):

UNCLAS SECTION 01 OF 03 THE HAGUE 002367

SIPDIS

SENSITIVE

STATE FOR AC/CB, NP/CBM, VC/CCB, L/ACV, IO/S
SECDEF FOR OSD/ISP
JOINT STAFF FOR DD PMA-A FOR WTC
COMMERCE FOR BIS(GOLDMAN)
NSC FOR CHUPA
WINPAC FOR FOLEY

E.O. 12958: N/A
TAGS: PARM PREL CWC
SUBJECT: CHEMICAL WEAPONS CONVENTION (CWC):
DIRECTOR-GENERAL'S REVISED BUDGET PROPOSAL ON EVE OF EC-34

This is CWC-93-03.


1. (SBU) Summary: On Sept. 19, OPCW Director-General
Pfirter made a strong pitch to delegations for an effective
increase in the 2004 OPCW budget of approximately 7.4%.
Pfirter assured the delegates that he and the leadership of
the Technical Secretariat (TS) would work hard to identify
and implement cost-cutting measures and efficiencies, but
argued that the increase was imperative for the OPCW to be
able to perform its core functions. He also requested
greater flexibility to be able to more effectively allocate
resources. Some of the delegations (including the U.S.) made
strong statements in support of the DG's request, others
noted that there would be difficulties convincing national
governments to concur with a 7.4% budget increase, and others
simply noted they would need instructions. While there
certainly will be substantial discussion of the DG's
proposal, it is doubtful agreement on a specific number for a
budget increase will be achieved during the Sept. 23-26
Executive Council (EC) session. End Summary.


2. (SBU) DG Pfirter participated in the September 19 final
session of informal consultations on the OPCW Program and
Budget before the opening of the thirty-fourth Executive
Council. He was accompanied by the Deputy Director General
and Director for Administration. Pfirter took the lead by
presenting to the 17 participating delegations a new proposal
to cut 1% from his initial request for a 8.34% increase in
the 2004 budget (which totaled 74,291,534 Euros),stating
that any deeper cuts would cut into the OPCW's core
activities. He circulated a note (faxed to AC/CB) further
explaining and justifying this position for review prior to
the opening of EC-34. Pfirter's appeal came after the
facilitator of the budget group (Beerwerth/FRG) announced
that delegations were close to concensus on a 6% budget
increase.


3. (SBU) The DG stated that quick agreement by the EC on a
recommendation to the Conference of State Parties on the 2004
budget was important to maintain a "solid political
atmosphere" and demonstrate that the OPCW was putting its
management back in order and was moving on to address the
many substantive issues before the EC. On the necessity of
the budget increase, he noted that statutory requirements
alone accounted for a 3.06% rise, and that the CSP's decision
on adopting a new tenure policy accounted for a further 2.92%
increase, leaving only 2.36% for new programs endorsed by the
Conference. Moreover, he continued, a further 250,000 euros
would be allocated to International Cooperation and
Assistance programs, requiring an additional 0.4% reduction
in other areas. On top of these constraints, Pfirter cited
the track record of States Parties falling short of their
assessed obligations by 2.5%. All this, he explained, was
tantamount to a 4% budget reduction.


4. (SBU) Pfirter recognized the tight fiscal constraints on
States Parties, and said he had consulted closely with
delegates about possible areas for savings. To the extent
that additional savings could be found during the year, he
undertook to provide more funds, up to the 2003 level of
350,000 euros, for ICA. He appealed for flexibility to
enable the Technical Secretariat to deliver the full program
of core activities within the proposed new budget framework.
Finally, the DG noted that the OPCW's program was in the
hands of the States Parties. If they were not prepared to
fund a 7.4% increase, they would have to agree on what
programs to cut.


5. (SBU) In the following question and answer period,
virtually every delegation endorsed the need to fully
implement the OPCW's core functions of verification and ICA.
In response to questions, Pfirter:

- estimated that his new budget proposal would entail a 7.9%
increase in Member States' assessments (as compared to a 9%
increase in the initial budget proposal);

- explained that ongoing initiatives to cut the costs of
inspections, verification, and inspectors' salaries would
likely bear fruit in future years, but were not ready for
implementation in 2004;

- assured delegates that Action Plans for Universality and
for National Implementation, and the implementation of
Results Based Budgeting, would guide future budget planning
and priorities;

- endorsed the importance of ICA as making an essential
contribution to the OPCW's goals, benefiting "rich and poor,
large and small alike;"

- agreed that further savings might well be found, (citing
death and disability insurance, consultants, accumulated
leave, official travel, and verification practices),but
noted that unforeseen liabilities could also emerge (such as
a challenge inspection or judgments against the OPCW by the
ILO);

- stressed that funding had to be sufficient to retain a
measure of operational flexibility.


6. (SBU) Ambassador Javits thanked the DG for his forceful
and cogent presentation, and for its sensitivity to the
constraints faced by Member States. He suggested that other
delegates make clear to capitals that of the increase, some
6% was attributed to unavoidable, statutory requirements, and
that some further increase was essential to further the
common goals of all Member States. In particular, the
Ambassador defended the need to fund ICA as an "indispensable
training tool" for those nations that did not fully
understand or subscribe to the goals of the Organization. He
recognized the need to provide adequate funding to maintain
the positive momentum generated by the Review Conference and
urged other delegates to find an early consensus on a budget
figure.


7. (SBU) The U.K. supported the DG and U.S. statements,
stating that full program delivery "is close to our hearts,"
but also echoed other delegations in recommending that
further savings and efficiencies were highly desirable.
However, the tenor of most delegates' comments reflected
extremely tight fiscal constraints.

-- Italy flatly stated that it could not support the DG's
proposed budget increase.

-- Japan, which had consistently cited its Zero Nominal
Growth policy for funding international organizations, said
it would seek new instructions on the basis of the DG's
presentation.

-- Germany and France also said that they would need to
request instructions. Both had indicated in informal
discussions that they could accept a budget increase of only
5.5%.

-- Russia also had a zero-growth policy as its starting
point, and observed that the informal consultations had
identified many areas for potential cuts.

-- Australia reminded the group that its government was
required to reduce its budget by 1% in real terms every year.


-- Canada, which was prepared to fund a 7.5% increase in
assessments, complained that this was a large bill to pay on
top of last year's 10% budget increase, the steep
appreciation of the euro, and late payments by some member
states.


8. (SBU) On spending priorities, France and other western
representatives urged that ICA funding be targeted at
National Implementation as a priority for developing nations.
Spain focused on the need to ensure that the goal of
Universality be adequately supported (voicing special concern
about the Mediterranean area) in the DG's revised budget.
India took the lead for developing countries, reacting
defensively to mentions of possible changes in ICA funding
and calling for full implementation of the OPCW's core
functions. Iran and others seconded that intervention.



9. (SBU) In his concluding remarks, Pfirter repeated that the
TS would continue to search for savings but that sufficient

SIPDIS
flexibility, as well as funding, was required to efficient
manage the organization's finances. He candidly acknowledged
that "the budget will always be higher than it is today" due
to the CSP's decision on tenure policy and increase
verification activities, but promised to faithfully carry out
core activities within his proposed budget.


10. (SBU) Following the formal session, several western
representatives noted that Pfirter's proposal still seemed to
contain some fat that could be reduced. One described the
DG's approach as "risky," and "overselling his hand." The
U.K. rep described some of the numbers in the DG's note as
"dodgy," and others agreed. The general sense among those
delegates was that further reductions would be necessary to
find room for consensus.


11. (SBU) Comment: We believe the DG has a good case for
his proposed budget numbers, and particularly for his request
to have more flexibility to achieve efficiencies and savings.
However, it is clear there is no consensus at this time in
support of the DG's proposed 7.4% budget increase. As a
result, there is little likelihood that agreement will be
reached at EC-34 on the budget, and budget discussions likely
will be needed in the run-up to the October CSP.


12. (U) Javits sends.
SOBEL