FRENCH SUPPORT FOR IRAQ COMPACT

C O N F I D E N T I A L SECTION 01 OF 03 PARIS 005657 SIPDIS SIPDIS STATE FOR NEA, EB, EUR/WE STATE PASS USAID E.O. 12958: DECL: 08/24/2016 TAGS: EFIN EIND EAID PREL IZ FR SUBJECT: FRENCH SUPPORT FOR IRAQ COMPACT REF: A. A) PARIS 3978 ¶B. B) PARIS 4817 ¶C. C) JEDDAH 543 Classified By: ECON M/C Thomas J. White, Reasons 1.4 B and D ¶1. (C) SUMMARY: Treasury Deputy Secretary Kimmitt led a delegation to France August 16-17 to discuss the Iraq Compact. French officials remained positive about the Compact's goals and were visibly engaged on the issue. Officials welcomed the briefing on USG discussions with Gulf countries, especially Saudi Arabia, and noted the French view that Gulf countries' buy-in to the process would be key to the success of the Compact. The French once again expressed reservations about what they view as a lack of political and security issues directly envisaged in the Compact; questioned the decision to keep Russia and Turkey out of the preparatory process; sought clarification on the role of the Compact,s preparatory group; and pressed for a high level of Iraqi participation. While the French maintain cautious optimism about the Compact, it is clear from their positive tone that they want to maintain a constructive dialogue on the way forward. END SUMMARY ¶2. (C) Treasury Deputy Secretary Robert Kimmitt led a Treasury delegation to Paris on August 16-17 following discussions in Jeddah on the Iraq Compact. Kimmitt met with Philippe Etienne, Director General of Cooperation and Economic Development, on August 17 to continue dialogue on the Iraq Compact and lay out a tentative calendar of the way forward. U.S. Treasury DAS Ahmed Saeed met with MFA and Finance Ministry counterparts on August 16. The delegation also met separately with the UAE Foreign Minister to discuss the Compact, as well as the situation in Iran and Lebanon. POLITICAL DISCUSSION AT THE MFA -------------- ¶3. (SBU) Participants to the meeting on August 16 included: Antoine Sivan, MFA DAS-equivalent for Iraq, Iran and the Gulf countries Ramon Fernandez, French Treasury DAS-equivalent for International Financial Affairs and Development Treasury DAS Ahmed Saeed Treasury Senior Advisor Catherine Downard Pol M/C Josiah Rosenblatt FinOff Otto Van Maerssen PolOff John Espinoza (notetaker) ¶4. (C) Sivan thanked Saeed for continuing the dialogue on the Iraq Compact, and expressed appreciation for the USG having taken French views into account when developing the work plan laid out in the July 20 communique. Saeed briefed the French on Iraqi and U.S. efforts to engage the Gulf countries on the Compact. Having just returned from Saudi Arabia, where Deputy Treasury Secretary Kimmitt met with King Abdullah, he gave a very positive account of the meeting, and noted that other countries in the region had reacted similarly. Sivan emphasized the GOF view that buy-in from the Gulf countries is vital to the success of the project, particularly Saudi Arabia and Kuwait to whom the GOI owes significant debt. News of Iraqi PM al-Maliki and Finance Minister Barham Saleh's efforts to engage the Gulf countries was especially welcome. ¶5. (C) Sivan noted a particular concern among the French about the lack of political and security issues directly envisaged in the Compact. While PM al-Maliki's security plan is helpful, he said, the Compact could be used as a tool in pushing the GOI in the right direction. Saeed responded that Iraq and the U.S. remain heavily focused on the security and political issues and that the Compact could be helpful in reinforcing those efforts through an improved economic situation. The Compact, Saeed said, could be tied to several areas where the economic sphere met the political, in particular corruption, but that the Iraqis want to focus the Compact more on promoting economic growth and less on getting into other political and security plans already laid out by PM al-Maliki. ¶6. (C) French officials were very interested in the tentative calendar of events and said that Ambassador Jean-Pierre Guinhut (French Interministerial Representative for Iraq Reconstruction) is still prepared to attend the first meeting of the Compact,s Preparatory Group, and depending on the timing, would take France's new ambassador to Iraq with him. Saeed laid out the tentative schedule, indicating that the PARIS 00005657 002 OF 003 first meeting could be as early as September 7 in Abu Dhabi, culminating in a last meeting to finalize preparatory work by the end of November (after U.S. elections). While the GOF is supportive of moving quickly, Sivan noted that hosting the meeting in the Gulf, as opposed to Iraq, sent a less positive message about the situation in Iraq, but conceded that it was worth it in order to get Gulf attendance. ¶7. (C) Sivan echoed Political Director Laboulaye's concerns (reftel A) about a lack of Russian and Turkish initial participation in the Compact, though he avoided once again making it a central issue of the conversation. Saeed explained that the Iraqis are convinced that the initial preparatory group had to consist of the players that counted most and are ready to work constructively with Iraq -- something the Russians had yet to demonstrate. Of course, Saeed said, many other countries are welcome and encouraged to join the Compact when the time is right -- after the preparatory work had been done to establish the guidelines and objectives. ¶8. (C) Iraqi participation and buy-in is the most important component, said Sivan. He asked if the U.S. is convinced that the Iraqis are really on board with the Compact. Saeed pointed to numerous instances where the Iraqis have taken the initiative on the Compact and where the U.S. is stepping back and assisting only when asked. While Sivan appreciated the U.S. response, he remained skeptical, but hopeful, about the reality of Iraqi leadership. He said that new system (government) in Iraq would take time but that responsibility needed to be handed over to the Iraqis if they were going to come to terms with the political and security situation. ¶9. (C) Saeed and Sivan agreed that the Compact needs to move forward quickly. Gulf countries need to forgive debt and monitoring mechanisms have to be put in place to make sure the GOI is living up to its end of the bargain. The political setup of the Compact might, by far, end up being the easiest piece of the puzzle. Sivan thanked DAS Saeed for keeping the GOF updated on the progress being made. THE PRACTICAL SIDE OF RECONSTRUCTION -------------- ¶10. (SBU) DepSec Kimmitt also met with MFA officials in charge of Cooperation and Development on August 17. Participants to that meeting included: Philippe Etienne, Director General of Cooperation and Development; Andre Siganos, Adjunct Director for Post-Conflict Training and Higher Education; Emmanuel Delloye, Office Director for Conflict Prevention and Reconstruction and Afghanistan Coordinator; Jean-Claude Boucher, Mission Director for Bahrein, UAE, Kuwait, Oman, Qatar and Yemen DepSec Kimmitt Treasury DAS Ahmed Saeed Treasury Senior Advisor Catherine Downard Charge Karl Hofmann Econ M/C Thomas J. White FinOff Otto Van Maerssen (notetaker) ¶11. (C) Etienne began by describing the responsibilities of his office, which includes EU development policy and the European Development Fund as well as bilateral official development assistance. Kimmitt provided an update on the Iraq Compact, noting that Iraq officials want to move quickly on the Compact to keep in step with the budget process of participating countries. Etienne expressed his appreciation for the update, noting the importance of maintaining cooperation in the face of current events in the Middle East. He stated France is happy to be part of the preparatory committee, and he has received reports from Ambassador Guinhut of the good progress made to date. He added that the basic criteria for France is ownership of the Iraq Compact, that is to say, it should be representative of the whole society and help restore Iraqi sovereignty. Another factor is that the Compact touches on three elements, namely political/security/economy, but noted that he is aware that we have heard this theme before from the GOF and thinks we are in broad agreement. Also important is how costs will be calculated, since the budgetary effect is significant. He remarked that a large proportion of French Official Development Assistance (ODA) to Iraq has been through debt cancellation via the Paris Club, and expressed the hope that creditors outside the Paris Club will soon follow suit. PARIS 00005657 003 OF 003 ¶12. (C) On the EU side, Etienne said the Europeans are fully committed to the substance of the Compact (liberalization of the economy, tax policy reform, customs modernization, etc.), but anti-corruption is most importance. Governance needs to be addressed both for the security of Iraq and the functioning of the real economy. Within the European framework, assistance is focused on governance and training issues. Siganos added that the Arab countries need to become involved, and Etienne observed that even with the professionalism of the Iraq government, the situation remains chaotic. ¶13. (C) Kimmitt said that the Treasury Department is sending seven officials to Baghdad to help Iraq with its budget and payments systems, to help resolve its budget execution problem. Responding to a question from Delloye about whether Turkey or Russia have reacted to their non-inclusion in the Compact preparatory group, Kimmitt said that the Saudi King had visited Turkey last week, as part of the ongoing chess game with Iran, but he has not heard of requests to join directly from either Russia or Turkey. Turkey will not be a donor country, and their issue is the PKK terrorist group, which will not be a Compact issue. Turkey in any event will attend the meetings in Singapore and New York in September. ¶14. (C) In closing, Etienne inquired about the role of civil society in the Compact. Kimmitt said it was a good point, but he is not aware of which NGOs operate effectively in Iraq, and welcomed French expertise on the topic. COMMENT -------------- ¶15. (C) Sivan was very positive in the meeting, despite expressing some basic reservations about the scope of the Compact. Both he and Etienne made clear that despite these lingering concerns, the GOF is ready to work constructively with the U.S. for a successful outcome. END COMMENT. ¶16. (U) The Treasury delegation cleared this message. ROSENBLATT# Please visit Paris' Classified Website at: http://www.state.sgov.gov/p/eur/paris/index.c fm Rosenblatt