IRAQ COMPACT: GOI ACTIONS AND POST RECOMMENDATIONS

C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 001386

SIPDIS

SIPDIS

E.O. 12958: DECL: 04/23/2017
TAGS: ECON PREL EFIN
SUBJECT: IRAQ COMPACT: GOI ACTIONS AND POST RECOMMENDATIONS
FOR ACTION

REF: SECSTATE 50503

Classified By: Ambassador Ryan Crocker for reasons 1.4 (b) and (d).


1. (C) SUMMARY. The confluence of the May 3 Compact launch
and the May 4 Neighbors, Conference adds a further important
dimension to the Compact process. This message lays out
embassy thoughts on how to get the greatest bounce from the
Compact event and leverage the Saudi debt relief offer to
resolve as many of Iraq,s debt problems as possible,
recognizing the substantial efforts that Washington has
already made in that direction. Below are major developments
in GOI outreach efforts, as well as USG interventions in
support of these efforts. We also detail some additional
suggestions for the broader USG engagement to ensure a
coordinated effort as well as maximum participation and
robust commitments from Iraq,s international partners in
support of the ICI. END SUMMARY.


2. (C) The ICI launch, coupled with the Neighbors,
Conference the following day, will be critical to solidify
regional and international engagement with Iraq on both its
economic reform agenda and the process of national
reconciliation.


3. (C) With the May 3 event rapidly approaching, we need to
do all we can, in coordination with the Iraqis, to prepare
for success. We are aware that an action plan has been
developed through the inter-agency process in Washington, and
we are supportive of the efforts outlined therein. However,
we also wish to provide some additional perspective on this
plan to ensure actions are fully coordinated.

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Status of GOI Actions
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4. (C) The GOI is actively engaged in reaching out to the
international community to encourage the fullest possible
participation in the launch event. They will, however,
continue to require our support and encouragement to ensure
that these messages are reinforced from the international
community. PM Maliki will take up debt relief on his current
visit to Egypt, Kuwait, and the UAE. Central Bank Governor
Shabibi and UN Special Envoy Ibrahim Gambari will travel to
Kuwait, Bulgaria and Brussels to push for additional
commitments under the ICI. Foreign Minister Zebari has
become more actively engaged on the ICI since the
announcement of the launch event, and the FM says he intends
to call his counterparts in Bulgaria, Russia and China to
urge for debt relief under the ICI. Additional high-level
visits are possible. DPM Salih is equally engaged in
outreach to the Russians and Turks, and is coordinating those
efforts with the FM.

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USG Actions and Proposed Action Plan
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5. (C) We are actively tracking the GOI efforts leading up to
the ICI launch and believe that Iraqi-led efforts will
ultimately be the most effective way of showing the
international community that the GOI is able to lobby
effectively for its own interests. Thus, USG efforts should
follow on and support GOI activities.


6. (C) We have urged Oil Minister Shahristani to engage with
China to convince them to announce debt relief on May 3.
Barham Salih is meeting Shahristani April 23 to coordinate
this message. We are working closely with the DPM to ensure
the GOI has a coordinated media strategy for the May 3 event.
We have encouraged FM Zebari to call his counterparts in
Bulgaria, Russia and China. We are also recommending that
the DPM focus his efforts on the Arab development
institutions. Talking points on country-specific issues,
particularly on debt relief, are being made available to the
GOI.


7. (C) In support of these efforts, we suggest additional
efforts in the following areas as priority actions:

* We recommend continued approaches to capitals,
particularly those that the GOI will lobby directly based on
their own priorities. These include Kuwait, Egypt, Russia,
Bulgaria and the UAE. In particular, while pressing for
minister-level attendance is critical (we believe all of the
above have confirmed Ministerial participation except the
UAE),we hope posts will go a step further and make a final
push for robust commitments to be announced on May 3. Such
commitments should include debt relief but also technical
assistance, concessionary loans, and other forms of support.
Understanding that such commitments often require

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parliamentary or other lengthy approvals, we also encourage
governments to announce commitments or intended commitments,
in general terms if necessary.

* We suggest continued calls from S, Deputy Treasury
Secretary Kimmitt, and other high-level USG officials to

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their counterparts in the countries mentioned above to
underscore the importance of demonstrating robust support for
the ICI through commitments to be announced May 3.

* Kuwait: Given recent progress on restructuring of Saudi
debt, we believe that a final GOI push for Kuwaiti debt
forgiveness, backed by USG support, may show progress. This
is especially true given that Kuwait is unlikely to be able
to obtain better terms for debt relief in the future,
especially as more countries settle their claims against
Iraq. We appreciate the political sensitivity in Kuwait over
the issue, but also note that the GOI is convinced that now
is the time to seek progress on Kuwaiti debt. Suggest we
explore an innovative solution to the war reparations Iraq
pays to Kuwait from its oil revenues, by setting up a
framework for redirecting war reparations back into Iraq
through investment and development projects under the Kuwait
Fund. Barham Salih told emboffs on April 22 that this
approach would yield the greatest tangible benefits.
Finally, Kuwait should consider relinquishing its claims
against Iraqi Airways, which continues to comprise a
significant obstacle to the development of the air
transportation sector in Iraq. Given the political
sensitivity of these issues, it will be important to stress
that these are commitments to the Iraq people, and underscore
the interest for Kuwait of a stable, peaceful Iraq.

* Russia: As noted, FM Zebari said he will contact the
Russian FM to push for an announcement on debt relief. Our
message should focus on the need for Russia to live up to its
commitments under the Paris Club; what is being asked of
Russia is simply that they abide by their agreements and
should not be perceived as a special request. Thus, with
Russia in particular, Iraq efforts should be in the lead,
with supporting messages from USG counterparts.

* The finalization of the ICI should also be viewed as an
opportunity to press the UN to reaffirm their commitment to a
fully staffed operation in Baghdad. The drawdown of staff
late last year has reduced the UN,s ability to support the
many projects it has in Iraq, and the creation of ICI
implementation mechanisms will place an even greater demand
on their personnel. The World Bank,s recent increase in
staffing should give the UN additional impetus for returning
staff that were drawn down.
CROCKER