Identifier
Created
Classification
Origin
04THEHAGUE101
2004-01-16 10:17:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy The Hague
Cable title:  

CHEMICAL WEAPONS CONVENTION (CWC): EXPANSION OF

Tags:  PARM PREL CWC 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 02 THE HAGUE 000101 

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 LIEPMAN

E.O. 12958: N/A
TAGS: PARM PREL CWC
SUBJECT: CHEMICAL WEAPONS CONVENTION (CWC): EXPANSION OF
WORKING CAPITAL FUND

REF: A. (A) 03 THE HAGUE 2979

B. (B) 03 THE HAGUE 2944

C. (C) CWDEL-AC/CB E-MAILS

This is CWC-5-04.

UNCLAS SECTION 01 OF 02 THE HAGUE 000101

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 LIEPMAN

E.O. 12958: N/A
TAGS: PARM PREL CWC
SUBJECT: CHEMICAL WEAPONS CONVENTION (CWC): EXPANSION OF
WORKING CAPITAL FUND

REF: A. (A) 03 THE HAGUE 2979

B. (B) 03 THE HAGUE 2944

C. (C) CWDEL-AC/CB E-MAILS

This is CWC-5-04.


1. (U) Summary and Request for Guidance: January 27
consultations at the OPCW will focus on a proposal to expand
the Working Capital Fund (WCF) and extend the period for
replenishment of the fund. Delegation believes the
initiative can be the basis for resolution of the cash flow
aspect of the difficulties regarding Article IV and V
payments. We request authorization to support the proposal
"in principle," while making clear that final U.S. support
requires extensive work on a number of important details
regarding the proposed changes to the WCF. End Summary and
Request for Guidance.


2. (U) On January 27, informal consultations will be held at
the OPCW on the issue of Article IV and V payments. The
focus will be on the recommendations of the Advisory Body on
Administrative and Financial Matters (ABAF) to resolve this
issue. This proposal, strongly supported by the Technical
Secretariat (TS),calls for expanding the Working Capital

SIPDIS
Fund (WCF) to finance Article IV and V inspections, extending
the repayment period for the WCF, and using future payments
by possessor states to replenish the WCF. The initial
increase in the WCF would be drawn from previous years' cash
surpluses (REFs).


3. (U) The Geneva Group (representing the principal
financial contributors to the OPCW) met on December 16 to
plan the group's agenda for 2004 and review financial and
administrative issues facing the Organization. The
participants agreed that finding a structural solution for
Article IV and V payments was the group's top priority.
Johan Verboom (Netherlands),facilitator for the Article IV/V
funding issue, acknowledged that the ABAF recommendation does
not finally resolve the Article IV/V issue, since it does not
address the problem of "fictitious income" (anticipated
payments from possessor states that are not received because
inspection activities are below projections).


4. (U) However, emphasized Verboom, the ABAF proposal would
solve the cash flow problem, which was a "very important"

element of the Article IV/V issue. Verboom personally
favored the proposal for the further practical reasons that
it did not require the creation of a new funding mechanism
within the Organization and because the ABAF recommendation
already enjoyed a near consensus among States Parties and
within the TS. He hoped this "very good" solution would not
be jeopardized in hopes of securing a "perfect solution,
which does not exist."


5. (U) Geneva Group co-Chairman Peter Beerwerth (Germany)
addressed the point that the USG and other States Parties, as
a matter of policy, favored returning surplus funds to member
states. He pointed out that the Conference of States Parties
had already agreed that the cash surplus from previous years
(most of this the result of late Article IV/V payments by
possessor states) should be used to "ensure the
implementation of the approved 2004 program of work... in the
event of disruptions in Articles IV and V income..."
Beerwerth added that under the ABAF proposal, repayments by
possessor states for Article IV/V inspections would not enter
the WCF as a "surplus," but would, instead, be used for their
intended purpose -- funding Article IV and V inspections. It
was not a question of whether or not surplus funds would be
returned to States Parties.


6. (U) Verboom summarized three aspects of the Article IV/V
problem:

- when fewer inspections took place than anticipated,
inspectors' salaries are not covered by possessor states;

- when more than expected inspections took place,
unanticipated costs are incurred;

- repayment by possessor states lags actual inspection
activity by months or years.

A larger WCF, with a longer repayment period, he said, would
help address the important cash flow component of the issues
noted above. Particularly in view of the key procedural
advantage of using an already established fund, and the
momentum that had developed behind the ABAF proposal, Verboom
said he "hoped all will agree" to consultations on the basis
of this proposal.


7. (SBU) Del strongly believes the ABAF proposal can be the
basis for a resolution of the cash flow problem involved with
Article IV and V. While it will not eliminate all of the
Article IV/V difficulties, it can remove a key problem and
improve the ability of the OPCW to pursue prudent financial
planning. All delegations are aware of the fact that the
ABAF proposal is an exception to the general rule of
returning cash surpluses to member states, and of the general
requirements in the UN system for funds to cushion against
unforeseen costs or events. However, the overwhelming
sentiment is that the vagaries of the Article IV/V problem
clearly warrant an exceptional measure for the OPCW.


8. (SBU) We recognize that there remains a substantial
amount of work that needs to be done on the details regarding
the ABAF proposal. However, we strongly believe the proposal
is worthy of support, and therefore request authorization to
agree "in principle" to the ABAF recommendation at the
January 27 consultations. While making that statement, we
would emphasize that final U.S. support is conditioned on
resolution of the details of the changes to WCF operations,
including, but not limited to, the following issues:

-- the specific amount of WCF expansion;
-- the period of repayment of funds drawn from the WCF;
-- conditions on use of funds taken from the WCF;
-- controls over the spending of the funds in the WCF;
-- the period of time member states will have to pay invoices.


9. (U) Javits sends.

SOBEL