SCALE OF ASSESSMENTS: AGREEMENT REACHED ON SCALE

C O N F I D E N T I A L SECTION 01 OF 03 USUN NEW YORK 002283

SIPDIS

SIPDIS

E.O. 12958: DECL: 12/22/2016
TAGS: AORC UNGA KUNR
SUBJECT: SCALE OF ASSESSMENTS: AGREEMENT REACHED ON SCALE
IN FAVOR OF U.S. INTERESTS, EUROPEAN UNION STILL REELING

REF: A. USUN 02184

B. USUN 02208

C. USUN 02217

D. USUN 02227

E. USUN 02262

F. USUN 02244

G. USUN 02272

Classified By: Classified By: Classified By: Amb. Mark D. Wallace; Reas
ons 1.4 (b) and (d).



1. (C) SUMMARY AND COMMENT: On December 20 and 21, the Fifth
Committee reached agreement on a methodology for the scale of
assessments for the biennium 2007-2009. The 22 per cent
ceiling was preserved. The path to consensus at first seemed
unattainable, as the European Union (EU) remained entrenched
in its proposal of a six-year base period, subsequently they
modified to five years, which ran counter to the expressed
desires of all other delegations (U.S., Japan, Group of 77
and China, Russian Federation, Mexico, CANZ). The EU
ultimately acquiesced to a 4.5 (NOTE: existing) year base
period. The Coordinator said formal consultations on the
draft resolution would take place on Friday, December 22.
Once approved by the Committee, the resolution will move to
the General Assembly for formal adoption. END SUMMARY AND
COMMENT.

December 20 Informal Consultation
--------------


2. (C) On December 20, the Coordinator (Iran) began by
noting there was no consensus on the most contentious issue,
the base period. He asked Committee members to come to
agreement on that issue so that other elements of the
methodology could be resolved. All parties concurred with
the Coordinator to start negotiations based on the scales
methodology agreed upon in 2000, which included the current
base period average of six and three years. Very quickly,
however, Ambassador Gronberg of Finland (on behalf of the
European Union) reiterated his delegation's firm position on
a six-year base period (reftels).


3. (C) Ambassador Kumalo (South Africa) again called the EU
proposal "self-serving," with a goal of lowering the
contribution by the EU at the expense of the world's
developing nations. Ambassador Shinyo (Japan) called the EU
"stubborn and unyielding," attacking them for attempting to
readjust an element that affected the most vulnerable.
Wallace noted how the U.S. moved from its original proposal
of a three-year base period in order to achieve consensus.
He asked the EU to do the same. The Russian Federation
delegate noted that the Committee on Contributions (COC)
reported that whatever the base period was, it should be a
multiple of three years, the time frame historically set for
each scale period. The EU proposal opposed all
interventions.


4. (C) There was a short discussion on the low per-capita
income adjustment (LPCIA),with the G-77 and Mexico offering
alternatives, and Japan proposing a new machine scale based
on a 75 per cent gradient rather than the current 80 per
cent, but the discussion quickly moved to other issues. The
G-77 again tried to bring the Committee around to discussing
the ceiling, but Ambassador Wallace reiterated that the
G-77's claims of non-payment of arrears were baseless because
the U.S. had proof and confirmation in the form of EFT's,
cover letters, etc. as confirmed by the Secretariat that its
end of the bargain struck during the last scale negotiations
in 2000 was met. (refs a, b, c, d, e). He noted any claim
about late payments -- a point brought up again by the G-77
that evening -- was a new element, not an existing part of
the scale or ceiling. If the G-77 sought to look at the
issue of late payments, then it should do so for all late
payers. On the G-77 proposal for phased-in scale increases,
the EU, Mexico, and CANZ again voiced opposition to the G-77
proposal to phase in scale increases of 50 per cent or higher
over a three year period.


5. (C) When the Coordinator moved the discussion back to the
base period, the EU asked for time to talk the issue over
amongst themselves. During an informal meeting chaired once
again by the U.S. (ref g),the EU (Finland, UK, France,
Germany),U.S. and Japan met to discuss the base period and
scale. Ambassador Wallace told the EU the case had been lost
long ago on trying to change LPCIA by moving to stepped
gradients (ref g). He noted the outcome of the scale
negotiations rested with achieving consensus on the base
period. Until the EU joined consensus with others in

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agreeing to maintain the current average of three and six
years, there was no way to move ahead with other elements.
The UK, led by DPR Pierce, disagreed on Ambassador Wallace's
point on where negotiations were headed. She and UK
management and budget section chief Wasim Mir believed that
by pushing negotiations to the final minute, perhaps even up
to December 31, the EU would prevail. Wallace explained that
if the EU were to do so, they would still not achieve their
objectives. Japanese DPR Shinyo agreed. Gronberg said that
regardless of where negotiations led that night, EU members
could not move forward on the issue until they had time to
confer with their respective governments.


6. (C) As informal consultations continued, Ambassador
Pierce, rather than Gronberg, spoke for the EU, noting that a
complete rollover of the current methodology would "offer
nothing for the EU." Seemingly playing into the G-77's
hands, Pierce said the main issue was getting emerging
economies to pay more to the Organization (reftels) to lessen
the burden on the EU, which could be done via stepped
gradients or a longer base period. Kumalo called Pierce on
her blunder, saying that such language confirmed the EU's
"true intentions." Gronberg once again noted the EU was the
"largest contributor." He claimed that the EU paying nearly
40 percent during the next scale period was "not fair" and
not reflective of capacity to pay, since the combined EU
share of GNI fell far short of the percentage that was being
assessed.


7. (C) The EU asked the Coordinator to consider bringing the
General Assembly President and/or Secretary-General to help
moderate the discussions since the Committee could not reach
consensus. The G-77 declined the offer. Kumalo said the
issue could still be resolved in the Committee. The
Committee reconvened two hours later with agreement among
parties that nothing could be done until the following day,
after Gronberg said EU members needed to confer with capitals
for guidance.

December 21 Informal Consultation
--------------


8. (C) Before the informal consultation began, Ambassador
Kumalo pulled Ambassador Wallace aside and said he thought it
was funny to see the EU in its current position. He said the
G-77 used to claim it was the "EU of the future." But now,
the EU was "more like the U.S. of the past," Kumalo said
laughing. Ambassador Wallace reminded Ambassador Kumalo that
the EU was asserting "it" was the largest contributor -- an
unseemly assertion to the U.S., GOJ and G-77 alike. Also
before consultations began, the U.S. confidentially worked
with the Fifth Committee Secretary to prepare a chairman's
text that adopted the current methodology (with the 22 per
cent ceiling) and also importantly deleted references that
arose in 2000 to payment of arrears/late payments. The Chair
agreed to introduce such a text.


9. (C) Negotiations started with agreement by the U.S.,
Japan, Russian Federation, Mexico, CANZ, and G-77 to proceed
using the Coordinator's text. Gronberg reminded the
Committee that any attempt to push through the draft
resolution as it currently stood, without something for the
EU, would not enjoy EU support. He said even if the
resolution was put to a vote in the General Assembly, the EU
would not recognize it. Kumalo also attacked the EU for its
unseemly assertion that it was the largest contributor as it
was offensive to the G-77 as it implicitly diminished their
contributions as well as large contributors like U.S. and
GOJ. Kumalo also said the issue need not be handled through
a vote, and could still be negotiated in the Fifth Committee.
The U.S., Japan and G-77 all noted how they had withdrawn
several proposals to reach consensus. Kumalo noted the G-77
had agreed not to pursue raising the ceiling or phased-in
scale increases in order to reach agreement on the scale.
When the EU asked for time to review the Coordinator's text,
Kumalo at first resisted, believing any attempt to do so
would allow delegations to "find loopholes."


10. (C) The Committee resumed negotiations after a three-hour
break. During the break, permanent representatives and
deputy permanent representatives negotiated in varying
configurations over the text. Once informal negotiations
resumed, the Coordinator announced the EU had requested the
addition of a new (face saving) paragraph as a compromise for
joining consensus on the text. The new language requested
that the COC "review the elements of the methodology of the
scale of assessments in order to reflect member states'
capacity to pay and report thereon to the General Assembly by
the main part of its 63rd session." (NOTE: the Committee on

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Contributions would undertake such a revision at such time
regardless of this language.) The Coordinator and Committee
Chair noted formal consultations on the issue would be held,
December 21, before moving to the General Assembly for
approval. The Committee agreed to the addition of the
meaningless paragraph as a means of face saving for the EU.

COMMENT
--------------


11. (C) This year's round of scale negotiations were marked
by EU disarray and a willingness among some remaining Members
to accept the current scale methodology rather than engage in
prolonged and contentious debate over possible modification
of individual scale elements. Particularly noteworthy were
USUN's role in mediating between the EU and Japan over the
base period and U.S. alignment with the G-77, CANZ, Mexico
and Japan against a fragmented EU to force a consensus
agreement. Internal EU disagreements and the EU's failure to
coordinate more closely early on with the U.S., the Japanese
and CANZ undermined what otherwise could have been a
successful unified effort to achieve a "stepped" gradient or
purchasing power parity that would have committed the larger,
fast-growing developing countries (China, Russia, India,
Brazil) to invest more in UN activities. The U.S. narrowly
averted a concerted effort by the G-77 and the EU to increase
the current 22 per cent ceiling, a red line that will be even
more difficult to defend when the GA returns to consider the
scale and "capacity to pay" in several years. In addition to
preserving the 22 per cent ceiling, USUN also succeeded in
eliminating language that appeared in resolution 55/5 C
calling on the GA to review the status of contributions and
arrears to determine whether measures were needed to remedy
the situation, including possible adjustments of the ceiling.
While similar language was not included in this year's text,
the issue of the ceiling, and U.S. capacity to pay more, will
likely be the dominant theme in future scale discussions,
especially given EU (particularly UK and French) anger and
resentment (NOTE: that also seems to carry over from scale
negotiations in 2000) over the outcome of this year's
negotiations.


WOLFF