DEPUTY SECRETARY ZOELLICK'S MEETING WITH IRAQI

S E C R E T SECTION 01 OF 04 BAGHDAD 002991

SIPDIS

NOFORN

E.O. 12958: DECL: 1.6X6
TAGS: PREL PGOV EFIN MOPS KISL SY JO IZ IR
SUBJECT: DEPUTY SECRETARY ZOELLICK'S MEETING WITH IRAQI
PRIME MINISTE JAFARI

REF: BAGHDAD 2933

Classified By: Charge d' Affaires David M. Satterfield for reasons 1.4
(b) and (d)


1. (S/NF) Summary: Prime Minister Jafari reiterated to the
Deputy Secretary that security conditions on the ground, and
not terrorist demands, should determine the manner of
withdrawal of Coalition forces. The Deputy Secretary agreed
and noted approvingly the Prime Minister's naming of an Iraqi
official with whom the U.S. could begin elaborating these
conditions. He also urged the Prime Minister to help enable
an independent Iraqi judiciary to take over and review the
cases of detainees now under Coalition control. Jafari
sought American help with neighboring Sunni Arab states that
support terrorism in Iraq. He said he was getting messages
from Syria that the Syrians would change their policy on Iraq
and they wanted the Prime Minister to visit. However, Jafari
would not visit Damascus until he sees concrete measures from
the Syrians in terms of halting media incitement against
Iraq, controlling the borders and cracking down on former
Iraqi regime elements in Syria. Jafari also sought help in
arranging visits to Egypt and Saudi Arabia.



2. (S/NF) Summary Continued. The Deputy Secretary cautioned
that the Syrians excel at offering minimal concessions, and
he urged the Prime Minister to hold out for the best deal
possible. He also cautioned the Prime Minister to ensure
that agreements signed with the Iranians be clearly in the
favor of Iraq to ensure the Iraqi Government's own
credibility. On the constitution, Jafari opined that the
Iraqis would come to a deal, including most of the Sunni
Arabs on the committee. The Deputy Secretary noted the
importance of sticking to the timeline in the transition law,
as the issues would not get easier with a delay. On the
economy, Jafari said he anticipated the Iraqi government
budget deficit would grow. The Deputy Secretary cautioned
against fiscal slippage as the year goes forward and said the
IMF and World Bank were ready to help Iraq if Baghdad could
develop a good plan on the use of oil revenues. End Summary.

3.(SBU) Participants
U.S.
Deputy Secretary Robert Zoellick
Charge d'Affaires David Satterfield
NSC Senior Director Meghan O'Sullivan
D Executive Assistant Ambassador Ross Wilson
S/I Deputy Director Robert Deutsch
Adam Ereli, PA
Political Counselor Robert Ford (notetaker)

Iraq:
Prime Minister Jafari
Prime Minister Chief of Staff Mohammed Tamimi
Prime Minister advisor Felah Feyadh
Prime Minister advisor Beshar Nahar
Prime Minister spokesman Laith Kubba


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COALITION FORCES STAY UNTIL IRAQIS READY
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4. (C/NF) Jafari said Iraqi forces are growing stronger on
the ground. He sensed that the terrorists are changing from
car bomb attacks to attacks on infrastructure and now attacks
on foreign ambassadors. More importantly, he said, help to
Iraq on security issues now benefits not only Iraq. Rather,
Iraq is on the front line of the larger war on terror; those
who struck London were the same as those responsible for the
murder of the Egyptian Ambassador in Baghdad and other
terrorism in Iraq. Jafari mentioned in passing that he was
facing questions from the National Assembly about his
relations with the Coalition Forces and also the intelligence
services. He said he would want to discuss these issues when
Ambassador Khalilzad returns to Baghdad. (Comment: Later on
July 12, Jafari addressed the National Assembly about his
decision to ask the U.N. at the end of May to maintain the
Coalition forces in Iraq. End Comment.)


5. (C/NF) Jafari said while there were some in Iraq calling
for Coalition Forces to withdraw, the timing should in fact
be dictated by security conditions. He underlined the
importance of coordination between the U.S. and the Iraqi
Government on the issue of withdrawal. He also noted that
the Prime Minister is the ultimate source of decision-making
on security issues.


6. (C/NF) The Deputy Secretary assured the Prime Minister
that the U.S. would not withdraw before the mission is
completed, as the President had said. Decisions on the
future of Coalition Forces would depend on circumstances on
the ground. The U.S. would work with the Iraqi national
security team to establish those conditions. The Deputy
Secretary thanked the Prime Minister for appointing a lead

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Iraqi official for us to work with on that task. The Deputy
Secretary also urged the Prime Minister to reach out to other

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Coalition countries and underline the value of their
contributions. The Deputy Secretary also urged the Prime
Minister to foster standing up the Iraqi forces by promoting
officers on the basis of performance while also ensuring that
Iraqi security forces remain under ultimate civilian control.


7. (C/NF) The Deputy Secretary recalled how the judicial
system under the Saddam regime had been cruel and unjust. He
encouraged the Prime Minister to work to build an
independent, fair judicial system. He reminded the Prime
Minister that this would also require building facilities.
The Iraqi Government would gain in credibility if the Iraqi
judiciary starts to review the cases of detainees now under
Coalition control.

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SYRIA: JAFARI AWAITS CONCRETE STEPS
--------------


8. (C/NF) The Prime Minister said there were fewer
infiltrations of Saudi nationals over the Syrian borders, but
the infiltrations were still a problem. He said he wanted to
see the Syrian Government take practical steps to control the
borders, crack down on former regime elements operating in
Syria and return Iraqi assets. Jafari referred to meetings
in June with Syrian Foreign Minister Shara in Brussels and
the Syrian Ambassador in London and said the Syrians are
saying they will meet Iraqi demands. Jafari said the Syrians
want him to go to Damascus, and there are "serious efforts"
underway to see if such a visit can happen. The Deputy
Secretary cautioned the Prime Minister that the Syrians excel

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at making minimum concessions. The Syrian Government can
control infiltration across the borders if it chooses. He
urged the Prime Minister to maintain pressure and secure the
maximum possible from the Syrians before any visit

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USE CARE WITH IRAN
--------------


9. (C/NF) The Deputy Secretary commented as well that the
U.S. understands that Iraq needs good relations with Iran.
The U.S. by contrast has a difficult relationship with Iran.
He urged the Prime Minister to move forward with care,
ensuring that he can justify agreements as positively
benefiting Iraq each time. This is important to sustain
Iraq's credibility, he observed. The Deputy Secretary
contrasted a potential deal enabling Iraq to buy badly needed
electricity from Iran with an oil deal in southern Iraq whose
benefits for Iraq were less obvious.


10. (S/NF) In a session following the larger meeting,
attended only by the Deputy Secretary and Charge, the PM said
that the Iranians had offered to arrange a meeting in Teheran
with Syrian President Bashar al-Asad. Jafari said that he
believed such a meeting would be useful as a means of
beginning to improve Syrian-Iraqi relations, and would be
better done outside Syria than in Damascus. Bashar, Jafari
asserted, was different from the rest of the Syrian regime;
but he is surrounded by bad elements like VP Khaddam and
(former) Baath Party head al-Ahmar. Having approached
Charge on the same issue the previous day through aide Laith
Kubba and aware of strong USG reservations, Jafari was at
pains to tell the Deputy Secretary that he would not want to
do anything that would upset or anger the U.S.


11. (S/NF) The Deputy Secretary told Jafari that we
understood Iraqi interest in improved relations with all its
neighbors, including Iran and Syria. But especially in the
case of Syria, it was important for Iraq to demand and
receive concrete steps from Damascus - on action against
insurgent elements and on Iraqi assets - before taking steps
that would then be used by Syria to ease the pressure which
the Deputy Secretary told Jafari the U.S. was continuing to
apply. A meeting with Bashar al-Asad in Iran would be viewed
very negatively by the U.S., he made clear.

12. (S/NF) Jafari said he understood our message clearly.
On Iran, he noted Defense Minister Dulaimi's recent visit
(ref) and said that only limited, "very practical" steps on
the security side were under discussion. The PM's own trip
to Teheran, planned for July 16, would focus on
commercial/economic issues. The Deputy Secretary said that
we understood that there may be value in obtaining
electricity from Iran, but we had concerns about the true
economic value of some proposals being discussed regarding
(possible barter) oil trade.

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AND FROM JORDAN
--------------


13. (C/NF) The Prime Minister said he thought the Jordanian
position on Iraq was improving. He contrasted King
Abdallah's press remarks earlier this year about a Shia
threat to the region with his remarks at a recent conference
in Amman about Islam in which the King condemned terrorism
and sectarianism. The Prime Minister hoped to see concrete
steps from Jordan with respect to Iraqi assets and former
regime elements there too. The Deputy Secretary suggested
that King Abdallah wants to be helpful. Highlighting the
King's remarks at the Amman conference on Islam, the Deputy
Secretary urged Jafari to work with Abdallah and the Prime

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Minister of Malaysia, and others, to set a positive example
of positive leadership among Muslim states.

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HELP US WITH SUNNI ARAB STATES
--------------


14. (C/NF) Jafari asserted that the neighboring Sunni Arab
states are basically hostile to the Shia-dominated government
in Baghdad. It would have been better to have a Sunni Arab
as president in Iraq to ease Sunni sensitivities, but history
went another direction. Now Iraq needs American help to
prevent interference from Sunni Arab states. Pointing to
Saudi Arabia and the Gulf states, he said "Sunni" money goes
to terrorists; "Sunni" media supports terrorist acts and
Sunni clerics lend credibility to terrorists.



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CONSTITUTION: A DEAL IS POSSIBLE
--------------


15. (C/NF) The Prime Minister thought the inclusion of more
Sunni Arabs in the constitution committee would help reduce
Sunni Arab support for terrorism as well. Jafari agreed with
the Deputy Secretary that the document should not be too long
and complicated. Jafari said he thought a deal with the
majority of the Sunni Arabs on the committee is possible, but
they were putting tough issues on the table:

-- their insistence on the Arab identity of the Iraqi state
would irk the Kurds. Jafari said he personally agreed with
the Sunni Arabs. Iraq's Foreign Minister is a Kurd and he
sits in the Arab League meetings, Jafari observed. It would
be difficult to say the Foreign Minister was not representing
an Arab state when he does so.

-- their objection to federalism as potentially leading to
the separation of Iraq was misplaced, Jafari opined. The
Prime Minister said he thought the constitution should
establish the principle of federalism but not provide too
much operational detail. Jafari added that Iraq's current
federalism is bad. The Kurds are able to oppress minorities
in the Kurdish region with impunity.

-- their raising the role of Islam and the state was scaring
minorities. Jafari said it would be important to secure
minority rights in the constitution as it was done in the
Transition Administrative Law (TAL).

-- their objection to government officials having dual
nationality was not serious, Jafari opined.

-- their raising the status of the Baath party was more
serious. Jafari said some Baathists were trying to secure
the party's goals by lobbying members of the constitution
committee. The TAL was clear: the Baath party is gone.
Jafari said each individual Baath party member can be dealt
with on the basis of his own history. Jafari opined most
Iraqis would agree with this.


16. (C/NF) The Deputy Secretary congratulated the Prime
Minister for convincing Sunni Arabs to join the constitution
committee. He said the U.S. would urge them, and others, to
stay on the timeline laid out in the TAL; issues would not
get easier with a delay. He also asked the Prime Minister to
keep an eye on the election process itself. For example, if
the committee decides to change the system of electing
members to the National Assembly, it needs to make the
decision in time for the right preparations to be made. The
Deputy Secretary added that the independent election
commission's credibility had been an important ingredient to
the success of January 2005 elections, and he urged the Prime
Minister to facilitate their work while respecting their
independence.

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ECONOMY: FOCUS ON BUDGET
--------------


17. (C/NF) Prime Minister Jafari told the Deputy Secretary
that Iraq faced a difficult budget situation. In 2004, the
government received USD 20 billion in revenues while its
expenditures were USD 24 billion. In 2005, its revenues
again would total around USD 20 billion, but expenditures
would grow to USD 25 billion. The budget deficit therefore
would grow from USD 4 to USD 5 billion. Meanwhile, delivery
of essential services was not improving. Jafari said that he
was anxious to increase private investment, and he had asked
for American help.


18. (C/NF) The Deputy Secretary welcomed the Prime
Minister's focus on the budget, and praised the abilities of
the Iraqi Finance and Planning ministers. He urged Jafari to
empower them. The Deputy Secretary highlighted the chance
for the July 18-19 international conference in Jordan to
mobilize support for Iraq. In September the IMF-World Bank
meetings in Washington would be another opportunity to
highlight Iraqi needs. The Deputy Secretary mentioned that
he had recently met senior officials of the IMF and World
Bank and found that they understood Iraq's special
circumstances. What the organizations need to see is a
coherent policy and plans for step by step reform, including
steps to bring the fiscal picture into balance. The Deputy
Secretary concluded that it would be important for the Iraqi

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Government to stick to its debt reduction agreement and avoid
fiscal slippage.



19. (U) REO HILLAH, REO BASRAH, REO MOSUL, and REO KIRKUK,
minimize considered.
Satterfield