SCALE OF ASSESSMENTS: 22 PERCENT UN REGULAR BUDGET

1.(C) SUMMARY: UN Member States currently are engaged in
intensive and contentious discussions to determine the rate
of assessment that will be apportioned to each state in
support of the UN regular budget for the period 2007-2009.
The 22 percent ceiling now paid by the U.S. -- based on a
maximum cap established during the last scale of assessment
negotiations in 2000 -- is being challenged by the Group of
77 and China (G-77) and the European Union (EU) who advocate
that the U.S. share be increased to 25 percent of the total
UN assessment. They argue this increased share better
reflects the USG's capacity to pay, based on the fact that
the U.S. gross national income (GNI) as a percentage of
global GNI is currently 33 percent. In addition, the G-77
claims the U.S. reneged on promises made in 2000 to pay off
$926 million in arrearages associated with the Helms-Biden
legislation. USUN has refuted such charges by producing
copies of UN receipts and other documentation showing the
U.S. paid this amount as agreed in December 2000. USUN also
has pointed out the benefits enjoyed by 91 Member States
whose assessments for 2001 were reduced thanks to a $31
million U.S. voluntary contribution intended to facilitate
their collective absorption of the 3 percent reduction of the
ceiling from 25 to 22 percent in 2000. G-77 members,
however, continue to insist that the deal struck in 2000 also
contained provisions for the full payment, on time and
without conditions, of annual U.S. assessments. They point
to current U.S. arrearages of approximately $1.1 billion as
cited by the UN Secretariat. Claiming the U.S. has not made
good on its promises, the G-77, with active EU support, are
demanding the ceiling be raised.

2.(C) In addition to vigorously defending the current 22
percent ceiling, the U.S. Del also has advocated modification
of the current 80 percent discount, now given to 142
countries, mostly from the G-77, whose per capita income
falls below the world average. Under the U.S. plan, actively
supported by Japan, four states in this category whose gross
national income is 1 percent or more of the word GNI (China,
Russia, Brazil, India) would receive only a 60 percent
discount, or perhaps lower, thereby more equitably
distributing the low per capita income adjustment (LPCIA)
that benefits the poorest countries (and which is a key
element in the scale methodology). Proposals submitted by
the EU also advocate a modified gradient, but the EU
Presidency has made only passing reference to this approach,
preferring instead to focus on the need to increase the
ceiling. USUN is working with the EU and Japan to develop a
unified approach that maintains 22 percent cap on
assessments. If USUN efforts are not successful, USUN will
require high level diplomatic intervention, on an urgent
basis, to underscore that the 22 percent ceiling is essential
for the USG. END SUMMARY.


3.(C) Following four Fifth Committee (Administrative and
Budgetary) negotiation sessions on scales (reftels), it is
clear defense of the 22 per cent ceiling is the foremost
challenge facing the U.S. in the run up to a formal UN
General Assembly decision on December 22 to apportion
assessment rates for the period 2007-2009. (Congressional
support for payment of the U.S. assessed contribution has
been contingent in part on maintaining a 22 percent cap, and
any increase risks Congressionally mandated withholdings that
could put our relationship with the UN in deep crisis.)

4.(C) Having rejected proposals for a P-5 floor (U.S.,
Japan), gross national income based on purchasing power
parity (U.S.), and any modification of the low per capita
income adjustment (U.S., Japan, EU), the G-77 have mounted a
direct attack against the U.S. over the issue of the ceiling.
First claiming the U.S. reneged on its promises in 2000 to
pay off its arrears, a charge successfully refuted by
Ambassador Wallace, South Africa, as the current Chair of the
G-77 and China, now claims U.S. failure to pay its
assessments on time, in full and without conditions justify
an increase in the ceiling from 22 to 25 percent.

5.(C) The G-77 uses as a basis for this argument paragraph 2
of resolution 55/5-C, which "decides to review the position

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(of the GA concerning the ceiling) at the end of 2003 and,
depending on the status of contributions and arrears, to
determine all appropriate measures to remedy the situation,
including adjustments of the ceiling in keeping with its
resolution 52/215 A to D of 22 December 1997." Thus,
notwithstanding the fact that the U.S. has paid its
assessments since 2000, albeit based on our fiscal year
rather than the UN's calendar year budgetary cycle, the G-77
now seeks to penalize the U.S. for its late payments. USUN
noted in Fifth Committee discussions on December 6 that many
states, including G-77 members, do not pay their UN dues on
time. (In fact, U.S. payments to the UN accounted for 25-38
percent of funds actually received by the UN during the
period 2001-2005.) We have pointed out that if late payments
were going to be used in a punitive manner to raise levels of
assessments, there were many Member States that will be
affected.

6.(C) The EU also has aggressively advocated raising the 22
per cent ceiling, becoming ever more vocal in challenging the
U.S. position with every meeting. Though both the U.S. and
the EU have submitted proposals to alter the gradient
(discount), the EU repeatedly has chosen to emphasize
increasing the ceiling over modifying the gradient, joining
the G-77 in questioning whether or not the terms of the 2000
deal were met, even though the EU was a complicit partner and
beneficiary of the 2000 deal, receiving $12,936,892 of the
$31 million voluntarily contributed by the USG. The EU also
has repeatedly suggested that the benefit the U.S. receives
from hosting Headquarters should be considered in determining
assessments, though we have noted in response that not only
did the U.S. donate the land on which the UN Headquarters is
located, but any such increase would have to be applied to
Switzerland, Kenya and other states that serve as home to
various UN operations since their local economies benefit as
well from funds spent on UN activities.

7.(C) While the EU stands with the G-77 and China in
challenging the ceiling, they are isolated in their position
on creating a 6-year base period, which would significantly
lower the EU assessment rate. Japan and the U.S. have
proposed shortening the base period to 3 years, while the
G-77 and China seek to maintain the 4.5-year base period. As
recently as December 6, the Finnish Ambassador voiced the
unwillingness of the EU to negotiate on this issue. However,
as a consequence, the EU is becoming increasingly vulnerable
in its isolation in support of a 6-year base, although USUN
suspects quite a number of EU members could readily accept
maintaining the current 4.5-year period. The EU has
indicated that they will refrain in their attacks on the 22
percent ceiling if we join their position on the 6-year base
period -- notwithstanding hostility to this proposal by the
G-77 and China and Japan.
BOLTON