BULGARIA NEGOTIATING WITH IRAQ ON DEBT RELIEF

C O N F I D E N T I A L SOFIA 001562 SIPDIS SIPDIS E.O. 12958: DECL: 11/14/2016 TAGS: ECON EFIN IZ BU SUBJECT: BULGARIA NEGOTIATING WITH IRAQ ON DEBT RELIEF REF: SECSTATE 181094 Classified By: Amb. John Beyrle for reasons 1.4 B & D ¶1. (C) Ambassador Beyrle delivered talking points in reftel to Minister of Finance Plamen Oresharski on November 14, stressing the need for Bulgaria to reach an agreement that will allow Iraq to get its fiscal house in order. Although we have lobbied for Bulgaria to adopt a Paris Club-like agreement, Beyrle pushed for one hundred percent forgiveness as a robust commitment to the International Compact with Iraq (ICI) that would send a strong message that Bulgaria wants to help stabilize Iraq. ¶2. (C) Oresharski and his Iraqi counterpart met in Singapore recently and agreed on many details of an agreement, but have not fully clarified the amount of debt. The difference rides on how much interest has accrued. According to Oresharski, Iraq initially refused to consider any interest accrued after 1990, but has since softened a bit. In early November, the two sides made further progress during the visit to Sofia of Iraq's Deputy Finance Minister, but again, did not finish the deal. Oresharski predicted they would finalize the process in late December or early next year. ¶3. (C) Oresharski listened to the Ambassador's pitch on 100 percent forgiveness, but said it would be a difficult political sell. He promised to bring the idea to the Prime Minister. He felt a better option at this point is to convince the three-party political coalition that makes up the Bulgarian government to adopt a deal similar to the Paris Club terms. Oresharski said public expectations were "too irrational" for anything beyond Paris Club. Bulgaria recently received a proposal from an American investment company which we will translate and forward to the Bulgarian desk and EB/OMA. The proposal calls for an 11 percent recovery, all up front, which Oresharski informed us is equivalent to a 20 percent recovery over 23 years. Oresharski prefers this plan because it is cleaner, and resolves the issue immediately. He said the Iraqis are aware of the proposal, and agree in principle. BEYRLE