SCENESETTER FOR THE OCTOBER 31 IRAQ COMPACT

C O N F I D E N T I A L SECTION 01 OF 02 KUWAIT 004212

SIPDIS

SENSITIVE
SIPDIS

TREASURY FOR DEPSEC KIMMITT

E.O. 12958: DECL: 10/24/2011
TAGS: PREL PGOV EAID ETTC IQ KU
SUBJECT: SCENESETTER FOR THE OCTOBER 31 IRAQ COMPACT
MEETING IN KUWAIT - CORRECTED COPY

REF: A. BAGHDAD 3758


B. KUWAIT 4119

C. KUWAIT 0201

D. 05 KUWAIT 5299

E. KUWAIT 0167

Classified By: CDA Matt Tueller for reasons 1.4 (b) and (d).


1. (C) Deputy Secretary Kimmitt and Counselor Zelikow, we
look forward to your visit. The October 31 meeting of the
International Compact with Iraq (ICI) Preparatory Group (PG)
will involve delegations from 22 nations and will be hosted
by the Kuwait Fund for Arab Economic Development. Kuwait
Deputy Prime Minister and Minister of Foreign Affairs Shaykh
Dr. Mohammed Al-Sabah Al-Salem Al-Sabah will be the senior
GOK representative present. The PG will follow up on
progress made during the recent ICI meeting in Baghdad (ref
A). Post's recent discussions with the GOK affirm support
for the ICI, but there are underlying reservations about the
rapid pace of the Compact process and the ability of the
Maliki government to carry out the Compact agenda (ref B).


2. (SBU) In addition to the ICI meeting, Post has requested
meetings with Deputy PM and Foreign Minister Al-Sabah,
Minister of Finance Bader Al-Meshari Al-Humaidhi, Kuwait Fund
for Arab Economic Development (KFAED) Director General Abdul
Wahab Al-Bader, Arab Fund for Economic and Social Development
(AFESD) Director General Abdulatif Al-Hamad, and Kuwait
Investment Authority Managing Director Bader Al-Saad.

Iraq - Kuwait Relations
--------------


3. (C) Kuwait and Iraq are slowly rebuilding their
diplomatic and economic relationship, in fits and starts.
While Kuwaitis well understand their stake in the success of
the Iraqi government, they believe they are subject to
particular security risks from Iraq, and remain wary of what
they see as continuing former regime influence among Sunnis,
as well as Iranian influence in Iraq's southern provinces.
With hundreds of Kuwaitis still missing and unaccounted from
the first Gulf War, Iraq remains a highly-charged political
issue in Kuwait. Nevertheless, Kuwait has privately stated
its willingness to send an Ambassador to Iraq if the GOI
first designates an Ambassador to Kuwait, and has informally
selected the Chief of the Humanitarian Operations Center
(HOC) retired Lt. General Ali Al-Mu'min as its nominee.
Al-Mu'min has traveled several times to Iraq and plans
another trip in November. Iraq is represented in Kuwait by a
Charge d'Affaires who is not seen here as a substantive
interlocutor. Kuwait remains active in regional engagement
on Iraq, and has agreed to host the next Iraq "Neighbors'
Conference" of Interior Ministers early next year.

GOK Aid to Iraq
--------------


4. (SBU) Kuwait announced $1.5 billion in bilateral aid to
Iraq at the Madrid Conference, $1 billion of which will be in
the form of in-kind assistance in support of Operation Iraqi
Freedom (OIF). Of the remaining $500 million, the GOK
committed to $440 million in concessionary loans for power
sector projects, and $60 million in grants for educational
and health projects. Beyond its Madrid pledges, in June
2005, Kuwait committed an additional $60 million for health
and education through the Humanitarian Operations Center
(HOC). In addition, the GOK has provided $10 million to the
International Reconstruction Fund Facility for Iraq (IRFFI),
and $5 million in medical aid to the HOC.


5. (SBU) From December 2002 - December 2004, Kuwait provided
over $2 billion in free fuel for U.S. and Coalition use in
Operation Iraqi Freedom (OIF) and as Assistance in Kind (AIK)
for Kuwait-specific activities under the Defense Cooperation
Agreement (DCA). Kuwait continues to provide fuel at a
concessionary rate, saving the military and U.S. taxpayers
millions of dollars a year. It also provides
assistance-in-kind support, estimated at $1-2 billion
annually, for the U.S. military presence in Kuwait. Kuwait's
support facilitates the U.S. military's mission in Iraq and
Afghanistan, both of which are supported by over 22,000
troops in Kuwait.

Debt Forgiveness
--------------


6. (C) Iraq owes Kuwait approximately $11 billion in
pre-Gulf War debt. The Government of Kuwait has agreed to

KUWAIT 00004212 002 OF 002


meet the Paris Club commitment of 80 percent debt reduction,
but will need to push through legislative approval for the
measure. The issue of pre-war debt raises strong feelings
among many Kuwaiti MPs, and some believe it should be linked
to outstanding claims for Gulf War-related compensation.
Since the Madrid Conference, Kuwait has also committed $575
million in aid to Iraq, in the form of $135 million in grants
and $440 million in soft loans, to be administered by the
Kuwait Fund for Arab Economic Development. However, only $15
million has been disbursed so far (refs C, D, and E).

********************************************
For more Embassy Kuwait reporting, see:
http://www.state.sgov.gov/p/nea/kuwait/index. cfm?cables

Or Visit Embassy Kuwait's Classified Website:
http://www.state.sgov.gov/p/nea/kuwait/
********************************************
Tueller