PARIS CLUB HOLDS INFO SESSION ON IRAQ DEBT

UNCLAS SECTION 01 OF 03 PARIS 000457

SIPDIS

SENSITIVE

STATE FOR EB/IFD
TREASURY FOR DO/IDD AND OUSED/IMF
SECDEF FOR USDP/DSAA
PASS EXIM FOR CLAIMS -- EDELARIVA
PASS USDA FOR CCC -- ALEUNG/DERICKSON/KCHADWICK
PASS USAID FOR CLAIMS
PASS DOD FOR DSCS -- PBERG

E.O. 12958: N/A
TAGS: EFIN ECON EAID XM XA XH XB XF FR
SUBJECT: PARIS CLUB HOLDS INFO SESSION ON IRAQ DEBT

SENSITIVE BUT UNCLASSIFIED. NOT FOR INTERNET
DISTRIBUTION

REF: 04 Paris 8416

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SUMMARY
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1. (SBU) Following up on the November 21 restructuring of
Iraqi debt, the Paris Club hosted an informational
meeting for non-Paris Club creditors on January 13,
explaining how the agreement achieves an 80 percent
reduction of debt in three stages as well as the Iraqi
obligation to seek comparable treatment from those
creditors. Creditor countries reported on the mostly
limited contacts from the IIG to reconcile debt figures,
and some provided data about debt totals. End Summary.


2. (U) NOTE: INDIVIDUAL CREDITOR POSITIONS REPORTED IN
THIS MESSAGE SHOULD BE TREATED AS "PARIS CLUB
CONFIDENTIAL" AND NOT/NOT DISCUSSED WITH DEBTOR COUNTRY

SIPDIS
REPRESENTATIVES, NOR WITH NON-PARIS CLUB PARTICIPANTS.


3. (U) The Secretariat of the Paris Club invited certain
non-Paris Club creditors to an informational session in
Paris on January 13, on the margins of the regular Paris
Club January session, to explain the agreement struck to
provide debt relief to Iraq (reftel). In attendance were
representatives from the Embassies of Bulgaria, Cyprus,
Czech Republic, Hungary, Poland, Romania, Slovakia,
Slovenia, and Turkey, in addition to delegations from the
Paris Club member countries.


4. (SBU) The Secretariat made an extensive presentation
on the Iraq debt relief agreement, highlighting the
obligation imposed on Iraq to seek comparable debt relief
from all its other creditors. The Secretariat asked
whether the IIG has contacted non-Paris Club members to
discuss comparability of treatment (CoT). Turkey stated
it had nothing concrete to report, but the IIG has made
some preliminary contacts. Slovakia said nothing has yet
been taken up nor done by the IIG. Romania reported IIG
officials had paid a visit to Bucharest in December, who
had indicated that after the elections in Iraq, perhaps
in February, they would arrange meetings to reconcile
total debt amount. Poland said no talks have been held,
formal or technical. Some political level discussions
have been held, but not on debt issues. Hungary said it
had had no contacts yet from the IIG. The Hungarians had
requested confirmation of their debt claims but had not
received an answer. Hungary asked the Secretariat about
the reactions of other creditors, particularly the Gulf
States.


5. (SBU) The Secretariat reported that Kuwait has
indicated its agreement to comparability of treatment
(e.g., 80 percent debt cancellation) on debt totaling
around USD 10 billion. Bahrain has also indicated its
intention to go along with CoT, but there is nothing
concrete yet. The Saudis have made contact with the IIG,
but have differences regarding the reconciliation of
certain types of debt and so there is nothing more
concrete yet. Within the Paris Club, creditor countries
agreed to a six-month time frame to sign bilateral
agreements implementing the debt deal. The USG signed
its bilateral in December, which is the only one done
yet. The Italian representative reported that it also is
in the process of finalizing its bilateral agreement. It
has prepared a draft, which is awaiting Iraqi signature
after the election. The Italy rep added that Italy had
heard from Jordan that Poland had agreed to reduce the
portion of its debt owed to Iraq. The Polish rep denied
bilateral talks on debt reduction had begun, and denied
any knowledge of any such statement. Italy inquired the
Secretariat about China, and the Secretariat stated it

SIPDIS
had proposed setting up an informational session, but had
not yet gotten a reply.


6. (SBU) Germany, noting that it still has not finished
reconciling its debt with the IIG, asked creditors about
the size of their claims. The Russia delegate observed
that it too has not finished its reconciliation of
claims, which is holding up its bilateral agreement.
Responding to a query from Poland, Russia said the
nominal value of its debt reduction is the same as other
creditors, but due to the terms of its entry into the
Paris Club, it grants an additional upfront reduction
that translates into a larger discount.


7. (SBU) Turkey said its claims total USD 1.3 billion,
of which over 1 billion is owed to the Turkish Central
Bank and the rest (USD 300 million) to its export bank.
Most of the debt is from a dam construction project.
Including late interest and arrears, it has about 400
million owed in private sector debt.

8. (SBU) Romania said its claims as of February 1990
totaled USD 1.7 billion. Including interest since 1993,
as of December 2004 the outstanding claims total USD 2.6
billion, which are all official government claims.


9. (SBU) Poland said total claims are close to USD 780
million (500 in principal, 280 interest and late
interest),which are all from government credit agencies
and which all were reported to the IMF.


10. (SBU) Hungary said its claims total USD 120 million,
of which over 90 percent are guaranteed export credits.


11. (U) Other creditors offered to provide data to the
Secretariat at later dates. In closing the meeting, the

SIPDIS
Secretariat noted it is available to help in reconciling

SIPDIS
claims, and will continue its efforts to educate other
non-Paris Club creditors.

Baghdad minimize considered.
LEACH