AUSTRIAN VIEWS ON AIR SERVICE TO IRAQ, BUSINESS

1. (SBU) Recent discussions with Austrian economic officials and Austrian Airlines (AUA) revealed Austrian interest in intensifying commercial contacts in northern Iraq. AUA recently received rights to provide regularly scheduled flights to Iraq and hopes to initiate service in 2006. Austrian business sees business prospects in northern Iraq, particularly in the construction, sewage, health, energy, and environmental technology sectors. The Austrian Control Bank, which administers export guarantees, told us it has suspended issuing export credit guarantees for Austrian firms in Iraq, because the Trade Bank of Iraq "is not a reliable partner." End Summary.

Austrian Airlines Obtains Rights to Fly to Iraq



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2. (U) Austrian Airlines (AUA) recently obtained air traffic rights to service Iraq. AUA is thus the first Western carrier to receive permission to initiate regularly scheduled flights to Iraq. The agreement authorizes AUA to service any destination in Iraq with a frequency of up to one daily flight. AUA earlier told post (reftel) that AUA hopes to start service in 2006, pending an improvement in the security situation, particularly in Baghdad. AUA is especially interested in beginning service to Arbil and Sulaymanyah in northern Iraq.

Austrian Business Sees Prospects in Kurdistan



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3. (SBU) The Austrian Economic Chamber's Regional Manager for the Middle East, former trade representative in Baghdad, Peter Schroeder, and his successor, Oskar Smrzka, told us in separate meetings that Austrian businesses are interested in principle in resuming commercial activities in Iraq. Both noted that Austrian small- and medium-sized companies could provide valuable experience in the construction, sewage, health, energy, and environmental technology sectors. According to Smrzka, many Austrian firms would be excellent sub-contracting partners to U.S. firms. Smrzka noted that there is a wide disparity in security conditions between Baghdad and the Kurdish region. He characterized the situation in the north as "similar to doing business in Hungary."

GoA Unhappy With Trade Bank of Iraq



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4. (SBU) Gerhard Kinzelberger, Director for export credit guarantees in the Austrian Control Bank, told post recently that the Control Bank suspended issuing export credit guarantees for Austrian investors in Iraq after the Coalition Provisional Authority (CPA) turned over sovereignty to Iraqi authorities in June 2004. Kinzelberger added that the Trade Bank of Iraq, the Iraq entity overseeing the management of government contracts, "is still not a reliable business partner." The new authorities have not been able to take on the responsibilities vis?vis foreign trade banks that existed under the CPA. Kinzelberger maintained that almost all other European export-import entities held similar views on the Trade Bank of Iraq. According to Kinzelberger, only the Czech Republic is currently seeking an agreement with the Trade Bank. (Note: At the 2003 Madrid Conference, Austria pledged Euros 10.2 million in export guarantees available to Austrian investors in Iraq. End Note.)



5. (U) Minimize considered.

VAN VOORST