IRAQ COMPACT PREPARATORY MEETING A SUCCESS

UNCLAS SECTION 01 OF 07 ABU DHABI 003629

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EB A/S DSULLIVAN, EB/IFD/ODF
S/I, C, NEA/I, NEA/ARP
TREASURY FOR D/S KIMMITT, CDOWNARD, DAS ASAEED
NSC FOR MOSULLIVAN

E.O. 129589: N/A
TAGS: EAID EFIN IZ PREL PGOV ECON AE
SUBJECT: IRAQ COMPACT PREPARATORY MEETING A SUCCESS

REF: A) STATE 144134
B) ABU DHABI 03097


1. (SBU) Summary: On September 10, the United Arab Emirates hosted
the Preparatory Group for the International Compact for Iraq (ICI).
The United Nations (UN) represented by Deputy Secretary General Mark
Malloch Brown, and the Government of Iraq (GOI),represented by a
delegation led by Iraqi Deputy Prime Minister Barham Salih,
co-chaired the meeting. The U.S. delegation was led by Deputy
Treasury Secretary Kimmitt and EB Assistant Secretary Sullivan. The
meeting was attended by 14 countries, the European Union, European
Commission, and League of Arab States, as well as the World Bank,
International Monetary Fund, Islamic Development Bank, and the Arab
Development Fund. Five Iraqi Ministers-- Finance, Oil, Planning,
Trade and the National Security Advisor--spoke at the meeting. They
each emphasized that the ICI is a policy of the Iraqi government,
and they were all consistent in their message regarding the
importance of the Compact. Deputy PM Salih said that the GOI is
committed to undertaking the reforms cited in the Compact, such as
effective public resource management, economic reform, social sector
reform, and energy, infrastructure, and agricultural investment.
The GOI is steadfast in its desire to work with its international
partners to make the effort a success. Salih also laid out the key
objectives and elements of the Compact and stressed the need to move
quickly in order to keep up the momentum and ensure buy-in by the
Iraqi people.


2. (SBU) Summary continued. Deputy Secretary General Malloch Brown
stressed that the security needs of Iraqi civilians must be
addressed, and he noted that internal political consensus among the
Iraqi people is a key component to Iraqi economic reform. "If
anything can stem the violence and offer peace and stability,
perhaps the Compact, with its emphasis on political stability, can
achieve this goal," he said. The next ICI Preparatory meeting will
be held in Baghdad in October. The Compact will be discussed on
September 18 on the margins of the UN General Assembly in New York
as well as at the World Bank/IMF meeting in Singapore the same day.
All of the delegates welcomed Iraqi leadership of the process.
Comments by key participants follow. Philippe Douste-Blazy, French
Foreign Minister, Sheikh Abdullah bin Zayed al-Hayhan, UAE Foreign
Minister and Sheikha Lubna al-Qasimi, Minister of Economy also
attended the meeting. Text of the Abu Dhabi Declaration: ICI
contained in paragraph 17, and a full list of delegates is at para

18. End summary.

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UN: Mark Malloch Brown
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3. (SBU) In his opening remarks, the Deputy Secretary General
stressed that the security needs of Iraqi civilians must be
addressed and noted that internal political consensus among the
Iraqi people is a key component of Iraqi economic reform. "Although
these two factors are painful, they are important for future gain,"
said Deputy Secretary General Malloch Brown. He noted that the
delegates need to understand the challenges facing ordinary Iraqis
such as rapidly rising food and fuel prices, and lack of basic
services such as water and electricity. He said that social services
need to be targeted to the poor. As such, foreign investment in the
Iraqi oil sector is critical to the reform process, according to
Malloch Brown. He also said the Compact process should neither be
too fast or too slow and that time is needed to build consensus
among the Iraqis. "If anything can stem the violence and offer
peace and stability, perhaps the Compact, with its emphasis on
political stability, can achieve this goal. The ICI offers Iraqis
confidence in the future of their country," said the Deputy
Secretary General. He urged donor nations and international

SIPDIS
financial organizations to offer financial support to the GOI "to
ensure their burden is not too heavy." All sources of support must
be provided to the GOI: debt relief, loans, grants, technical
assistance and foreign investment.

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GOI: Deputy Prime Minister Barham Salih
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4. (SBU) Deputy Prime Minister Barham Salih laid out the key
objectives and elements of the Compact and stressed a) the need for
a commitment from international partners, and b) the importance of
moving quickly in order to keep up the momentum and ensure buy-in by
the Iraqi people. Salih stressed the urgency because he said the
Iraqi people are concerned that the GOI does not have the
international buy-in necessary to move forward on the Compact. Salih
said, "the GOI is committed to political and economic reforms, but

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needs a high-profile and wider momentum in order to launch the
Compact as soon as possible." The Compact focuses on key reforms to
support Iraq's economic transformation and generate broad based,
sustainable economic growth. Salih said the GOI is committed to
undertaking the reforms in the Compact and working with its
international partners to make the effort a success. Iraq will
deliver its part of the reform program, including creating a
transparent and efficient oil sector, developing a transparent and
efficient budget, improving good governance, and phasing out
subsidies and tackling corruption, but it needs the international
community to do its part in the process as well, he said.


5. (SBU) Salih stressed the GOI's commitment to restoring political
stability and combating violence and corruption by implementing the
National Reconciliation Plan, which should be enacted by the end of
March 2007. Under the reconciliation plan, the Constitution and
election laws will be revised. An amnesty law will also be drafted
by January 1, 2007. Furthermore, by the end of 2006, 50 percent of
the Iraqi provinces will be protected by Iraqi security forces.
Combating corruption is the first priority of the Iraqi government,
Salih said. The proposed economic changes under the Compact will
benefit all Iraqis and the GOI will work to protect the poorest
Iraqis by establishing a strong social safety net.


6. (SBU) The Deputy Prime Minister laid out his plan to pass a
Hydrocarbon law by the end of 2006. The new law will improve
efficiency and transparency in the energy sector, while encouraging
both domestic and foreign investment. Iraq currently produces 2.4
million barrels of oil a day and hopes to increase production to 4.3
million of barrels a day by 2010, which will create new job
opportunities for Iraqis. Salih believes the private sector needs
support and welcomes Iraqis living outside the country to return
home and invest their skills and resources in Iraq's future. He
also said a new investment law should be signed by the end of this
month, which will strengthen the banking sector, ensure that
companies pay their taxes, and make it easier and more transparent
for foreign companies to invest in Iraq.

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Iraqi Ministers
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7. (SBU) Dr. Hussain al-Sharistani, Minister of Oil, stated that the
ministry has begun to make a series of fuel price liberalizations.
The former program of fuel subsidies fostered a system of corruption
and abuse. On September 5, a law was passed to liberalize the
importation and sale of fuels at market prices to private suppliers.
The ministry is also drafting a new Hydrocarbon law, which will
clarify the framework for decision-making in the oil sector, both at
the national and provincial levels. The new law, which
al-Sharistani hopes to be approved by December, will improve the
efficiency, transparency and accountability of the hydrocarbon
sector, and will encourage -- as well as regulate -- private sector
development. It will also establish dispute resolution mechanisms
and will ensure oil revenues benefit Iraqis in all regions. Once the
new law is approved, major international oil companies can begin
working in Iraq.


8. (SBU) Al-Sharistani said that although oil is plentiful in Iraq
and its revenues are the major source of the Iraqi economy,
supplying fuel to the nation is challenging because the
infrastructure is lacking. In the next five years, Iraq intends to
increase crude production to more than three billion barrels a day.
The Minister noted that if oil prices remain at their current
levels, Iraq would earn $60 billion a year. Fifty percent of the
money earned would be used for development and would "create a
balance in all provinces and improve the standard of living of all
Iraqis." The GOI will provide development permits in such a way as
to promote free market competition and promote transparency. The
GOI will invest in building refineries in order to increase oil
product output in the coming years. He stressed that in order to
succeed, these projects need the support of the international
community.


9. (SBU) Dr. Bayan Baqer Jaber al-Zuyoudi, Minister of Finance, said
the Iraqi Compact requires the GOI to extend its budget planning
from one year at a time to a five year timeline. The GOI is working
with the International Monetary Fund (IMF)on this project. The GOI
signed a Memorandum of Understanding (MOU) with the Paris Club by
which the GOI received an 80 percent reduction of its debts. The
ministry is planning on helping two million Iraqi families as part
of its development and social network plan. Bayan Jaber, like his
colleagues, discussed the importance of fighting corruption and said
that thousands of cases are currently before the Commission on

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Public Integrity. He also stressed the importance of revitalizing
the financial sector by restructuring state owned banks and
industries, and he noted that the GOI hopes Arab countries will
forgive all of the GOI's previously incurred debts.


10. (SBU) Dr. Mowaffak al-Rubaie, Iraqi National Security Advisor,
said the GOI must protect its citizens. He said the Baghdad Security
Plan has achieved results and that the level of violence in Baghdad
over the past month has been greatly reduced. The National
Reconciliation Plan's amnesty and detainee provisions will go a long
way towards a spirit of reconciliation. In conjunction with the
reconciliation plan and the cessation of violence, the National
Security Advisor said the militia must be demobilized and disarmed.
The GOI will provide training and employment opportunities for
militia members once they are disarmed. The GOI is committed to
fighting terrorism and is aware that fighting terrorism requires
that the GOI abide by: a) the Permanent Constitution, b) the
political agenda of the GOI, and c) a national reconciliation
project for building a democratic Iraq based on rule of law. Iraq
plays an integral part in regional security, and it is working
closely with other countries in the region to fight terrorism, he
said.


11. (SBU) Ali Ghaleb Hussain Baban, Minister of Planning and
Development Cooperation, said the ministry is focused on providing
opportunities for local and foreign private sector investments. In
order to achieve this goal, the GOI needs to ensure transparency.
Baban also said the GOI is working to control inflation and
rehabilitate the job sector in order to help the economy recover.
The ministry wants to consult with the international donor community
to rebuild Iraq.

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Delegates' Perspectives
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12. (SBU) Generally, the delegates were very supportive of the GOI
and of the Iraq Compact. Donor nations and international financial
organizations were pleased that the GOI is leading the Compact and
seem committed to the process of moving it forward. Many noted that
the GOI needs to work harder to combat corruption and promote
transparency. World Bank Senior Vice President and General Counsel,
Ana Palacio said, "the success of the Compact will be measured by
the GOI's ability to help its people within a reasonable budget
framework." Although the delegates were mainly supportive, many
were apprehensive about the security situation in Iraq. The French
Foreign Minister, Philippe Douste-Blazy called for the Compact to
delineate a troop withdrawal timeline.


13. (SBU) Although delegates did not make specific monetary
commitments during the Preparatory meeting, Saudi Arabia reiterated
a previous $1.5 billion pledge for development and trade commitment
and agreed to work closely with the Iraqi Ministry of Planning on
how to best use the money. Additionally, Kuwait said it wanted to
work with the GOI and pledged $500 million for energy, health and
railway network development, as well as $60 million for schools and
hospitals.


14. (SBU) Deputy Secretary of Treasury Robert Kimmitt said the USG
strongly supports this important Iraqi initiative. The parties
should move quickly on the Compact since the GOI is moving quickly
on passing important legislation that supports the ICI, and both
processes should be in sync. He said that both the political and
security framework timelines are important and believed Iraqi
officials are committed to reaching these goals. There is
significant scope for international support, including grants,
technical assistance, loans and debt relief. D/S Kimmitt suggested
the Compact be completed as soon as possible but not later than the
end of November and offered full USG assistance and resources in
order to achieve this goal.


15. (SBU) In order to push the Compact forward, the next technical
meeting will be held in Baghdad in October. There will also be an
intensive set of consultations between the Executive Committee and
the Preparatory Group via digital video conferences. At the
conclusion of the Preparatory meeting, the co-chairs circulated the
Abu Dhabi Declaration on the International Compact with Iraq, the
text of which is below. At the time of circulation, the Iraqi
Planning Minister said, "the content of the message is an assertion
of the international community to help Iraq. I consider this
document to mean that the Iraqi Compact is now accepted by all the
delegates."

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Press Conference
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16. (SBU) At the conclusion of the meeting, Deputy Secretary General
Malloch Brown and Deputy PM Salih held a brief press conference.
Malloch Brown emphasized that, "the world remains frustrated by the
ongoing crisis in Iraq despite the positive achievements to date."
The leadership to address this political, security and economic
crisis must be Iraqi, and the Compact will be the mechanism to
support the Iraqi government. This view is based on the certainty
that the international community cannot afford to see Iraq fail."
Salih addressed a question on how to convince the international
community that they are not squandering their resources in
supporting Iraq by pointing out that the progress made to date, as
well noting as the implementation of the Iraqi roadmap.

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Abu Dhabi Declaration: International Compact with Iraq
--------------


17. (U) The delegates agreed on an Abu Dhabi declaration:
International Compact with Iraq. Begin text.

On 10 September 2006, the Government of the United Arab
Emirates hosted a preparatory meeting on the International Compact
with Iraq (ICI) of States and multilateral institutions in Abu
Dhabi. The meeting was opened by H.E. Dr. Mohammad Khalfan bin
Khirbash, Minister of State for Financial and Industrial Affairs of
the United Arab Emirates, and co-chaired by H.E. Dr. Barham Salih,
Deputy Prime Minister of Iraq, and H.E. Mr. Mark Malloch Brown,
Deputy Secretary-General of the United Nations. The purpose of the
meeting was to assess the preparatory work of the ICI, an initiative
of the Iraqi Government supported by the International Community.
The event was attended by representatives of 13 Governments, the
European Union, European Commission and League of Arab States, and
senior officials of the World Bank, IMF, Islamic Development Bank,
The Arab Development Fund. The meeting resulted in an agreement on
the direction and process of the ICI as presented by the Government
of Iraq.

The ICI is an initiative of the Government of Iraq for a new
partnership with the International Community. The Compact, jointly
co-chaired by the Government of Iraq and the United Nations, with
the support of the World Bank, will, over the next five years, bring
together the International Community and Multilateral Organizations
to support Iraq in achieving its National Vision. This Vision seeks
to build a secure, unified, federal and democratic nation, founded
on the principles of freedom and equality, and providing peace and
prosperity for all its people, and fully integrated within the
region and the international community. Guided by the Millennium
Development Goals, the Government will work to meet basic needs,
protect the rights of all citizens and ensure the optimal use of the
country's resources for the common good.

The Deputy Prime Minister H.E. Dr. Barham Salih, together with
H.E. Dr. Bayen Baqer Jaber Al Zuyoudi, Minister of Finance, H.E. Ali
Ghaleb Hussain Baban, Minister of Planning and Development
Cooperation, H.E. Dr. Husain Al Sharistani, Minister of Oil and H.E.
Dr. Mowaffak al Rubaie, the National Security Advisor, spoke to the
objectives and commitments that it is hoped will realize the
National Vision. They outlined the key priorities on which to form
a Compact, such as effective public resource management and
institutional strengthening, economic reform in private Sector
development, social sector reforms and investment, energy and
agricultural reform investment. The Government of Iraq also pledged
its strong commitment to tackling corruption, creating a transparent
and efficient oil sector, developing a solid budgetary framework,
improving governance, and building and consolidating effective
national institutions.

The Government of Iraq also recognizes that good governance
and resolution of security and political challenges are interlinked,
and are pre-requisites for progress in all other areas, including
economic revival and normalization. The Government of Iraq
therefore expressed its strong commitment to making urgent progress
on national reconciliation, political inclusion and consensus
building, the rule of law, and the establishment of professional
security forces able to carry out their duties impartially.

The participants welcomed the commitments made by the
Government of Iraq within a comprehensive political, security and
economic framework that addresses the urgent needs of the Iraqi
people. The participants also pledged their support to work closely
with the Government of Iraq in further developing the ICI with the

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assistance of the United Nations and the World Bank. For its part,
the United Nations is committed to support and facilitate the
Compact, through its mission and agencies in Iraq and the good
offices of the Secretary-General and his representatives.

The participants look forward to the next stage of this process, the
High-Level Meeting, convened by the Secretary-General of the United
Nations in New York on 18 September 2006. The New York Meeting will
review the development of the ICI within the framework of relevant
Security Council Resolutions. The New York meeting will be followed
by an update on the ICI to Finance Ministers at the Annual World
Bank/IMF Meeting in Singapore on 19 September 2006.

The Preparatory Meeting recognized the need to expeditiously
complete the development of the ICI through a broad consultative
process at the national, regional and international levels. It is
the intention of the preparatory group to work towards finishing the
compact before the end of the year. End text.

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Delegates
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18. (U) The following is a list of delegates present at the
meeting:

United States of America
--------------
Robert Kimmitt, Deputy Secretary of the Treasury
Daniel Sullivan, Assistant Secretary of State for Economic and
Business Affairs
Ahmed Saeed, Deputy Assistant Secretary of the Treasury
Zalmay Khalilzad, Ambassador, Embassy of the United States of
America, Iraq
Michele Sison, Ambassador, Embassy of the United States of America,
United Arab Emirates

Government of Iraq
--------------
Dr. Barham Salih, Deputy Prime Minister
Bakr Jaber Al Zuyoudi, Minister of Finance
Husain al Shahristani, Minister of Oil
Ali Ghaleb Hussain Baban, Minister of Planning and Development
Cooperation
Muwafaq Baqer Al Rubai'i, National Security Advisor
Mohamed Al-Haj Hmood, Deputy Minister for Minister of Foreign
Affairs

United Nations
--------------
Mark Malloch Brown, Deputy Secretary General of the United Nations
Ashraf Qazi, Special Representative for the Secretary General for
Iraq
Jean-Marie Fakhouri, Deputy Special Representative for the Secretary
General for Iraq
Yacoub El Hillo, Deputy Reconstruction and Humanitarian Coordinator
for Iraq
Jehangir Khan, Iraq Team Leader, APD/DPA

Arab Fund for Economic and Social Development
--------------
Dr. Khalifa Ali Dau, Senior Financial Advisor

Canada/International Reconstruction Fund Facility for Iraq
-------------- --
Douglas Williams, Head of Delegation, Director General of Middle
East and Maghreb
Daniel Joly, Director of Iraq Task Force
Elizabeth Williams, Head of Aid for Iraq
Vera Nicholas-Gervais, Political Counselor, Embassy of Canada, Abu
Dhabi

European Commission
--------------
Patricia Llombart
Sophie Kisling, Administrator for Iraq
IIkka Uusital

Finland (EU Presidency)
--------------
Aapo Polho, Director General for the Department of Africa and the
Middle East of MoFA
Leena Pylvananen, Regional Manager Unit for the Middle East and
North Africa

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Republic of France
--------------
Jean-Pierre Guinhut, Ambassador, Head of Intergovernmental Mission
for Iraq's Reconstruction
Philippe Douste-Blazy, French Foreign Minister

Federal Republic of Germany
--------------
Ruediger Lotz, Director of the Iraq Task Force in the German
Ministry of Foreign Affairs
Jurgen Steltzer, Ambassador to the Embassy of Germany, United Arab
Emirates

International Monetary Fund
--------------
Ibrahim El-Tijani, Chief of Mission, Baghdad
Bennet, Resident Representative from Amman, Jordan

Islamic Development Bank Group
--------------
Dr. Osman El Fiel, Division Chief, Poverty Reduction Division, MENA
Region
Hassan Abdul Magid, Country Officer for Iraq

Republic of Italy
--------------
Vittorio Craxi, Under Secretary of State for Foreign Affairs
Paola Imperiale, Minister Plenipotentiary & Chief of Staff for Under
Secretary Craxi

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Gianludovico de Martino, Minister Plenipotentiary, Head of the Task
Force for Iraq at the Italian Ministry of Foreign Affairs
Maurizio Melani, Ambassador, Embassy of Italy, Iraq
Paolo Dionisi, Ambassador, Embassy of Italy, United Arab Emirates

Japan
--------------
Gotaro Ogawa, Ambassador in charge of Iraq Reconstruction
Assistance
Junya Matsura, Deputy Director, Second Middle East Division,
Ministry of Foreign Affairs

The State of Kuwait
--------------
Khaled al Maghames, Director of Coordination, Ministry of Foreign
Affairs
Marwan Al Ghanem, Technical regional Manager for Arab States, Kuwait
Development Fund

The Kingdom of Saudi Arabia
--------------
Saleh Al-Ouji, General Manager, Imports Insurance Management, Saudi
Development Fund
Nasir a-Alhooti, Acting Minister

The Republic of Korea
--------------
Ki-ho Chang, Ambassador, Embassy of Korea, Iraq
Bong-kae Do, First Secretary, Deputy Director of Development
Cooperation Division, International Economic Affairs Bureau,
Ministry of Foreign Affairs and Trade

Spain
--------------
Manual Pineiro, Ambassador, Embassy of Spain, United Arab Emirates
Sergio Carranza Forster, Director General for the Mediterranean,
Middle East and Africa
Don Cesar Espada Sanchez, Head of Iraq Office, Ministry of Foreign
Affairs

The United Kingdom of Great Britain and Northern Ireland
-------------- ---
Dr. Kim Howell, Minister of State, Foreign and Commonwealth Office
Dominic Asquith, Ambassador, Embassy of the UK, Iraq
Edward Oakden, Ambassador, Embassy of the UK, United Arab Emirates

United Arab Emirates
--------------
Sheikh Abdullah bin Zayed Al-Nahyan, Foreign Minister
Dr. Mohammad bin Khalfan bin Khirbash, Minister of State for
Finance
Khaled Ali Al Bustani, Assistant Under Secretary for Budget and
Resources
Muhammad Abdul Rahim Abdul Jaleel, Assistant Under Secretary for

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International Cooperation
Saeed Hamdan Al Naqabi, Minister for the GCC

World Bank
--------------
Ana Palacio, Senior Vice President & General Counsel of the World
Bank Group
Joseph Saba, Country Director for Iraq
Simon Stolp, Representative, Iraq


19. (U) (Note: This message has been cleared by A/S Sullivan and D/S
Kimmitt. End note).

SISON