VP ABDEL MEHDI AND AMBASSADOR REVIEW KEY

S E C R E T SECTION 01 OF 02 BAGHDAD 001813

SIPDIS

SIPDIS

E.O. 12958: DECL: 05/30/2017
TAGS: IR IZ PGOV PINS PREL
SUBJECT: VP ABDEL MEHDI AND AMBASSADOR REVIEW KEY
LEGISLATION AND IRAN TALKS


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


1. (S) Summary: Vice President Adel Abdel Mehdi told the
Ambassador on May 29 that the revenue sharing component of
the hydrocarbon law was very close to completion. The major
outstanding issue, he said, was the mechanism of distribution
of surplus revenue to regions and provinces. The Ambassador
urged Abdel Mehdi to find the best way of dealing with a
proposal in the Council of Representatives to legislate a
timeline for coalition withdrawal. The Ambassador gave Abdel
Mehdi a read-out of the May 28 talks with Iran, noting that
the U.S. needed to see a change in Iranian behavior on the
ground. Abdel Mehdi argued that the choice to participate in
the talks represented "a strategic choice" for Iran and urged
that they be continued. End summary.

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Hydrocarbons: Distribution of Surplus Revenues the Issue
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2. (C) Abdel Mehdi said that after several long negotiating
sessions there was an agreement on principles but still some
"suspicion in the details" on the revenue sharing component
of the hydrocarbon law. The KRG and the GOI agreed that the
budget mechanism was the appropriate framework for revenue
distribution, he said, and that there should be an automatic
transfer of revenues to, in the case of the KRG, and
independent account in Irbil. Abdel Mehdi said the KRG had
some concerns with letters of credit with the state-owned
Trade Bank of Iraq and that he had proposed that government
institutions open accounts in private banks (though he
acknowledged this solution might be risky given Iraq's
indebtedness.)


3. (C) The real issue that remained, however, was how to
distribute "surplus" revenues. The GOI, Abdel Mehdi said,
considered any surplus as akin to a supplemental budget. The
same principles should apply to surplus revenues as to the
regular budget, he continued, namely that it would be
distributed to regions and provinces per an agreed formula
unless there was some extraordinary reason that the central
government would need to use part of it (e.g., a "strategic
project" or to cover a projected revenue shortfall). The
KRG, Abdel Mehdi said, was insisting that surplus be
transferred immediately to regions and provinces per the
formula, with the understanding that if part of it might be
transferred back if necessary. Abdel Mehdi said he thought
that a decision on whether there was an "extraordinary need"
should be made before the surplus was transferred to regions
and provinces, but that he would agree to an immediate
transfer "as long as there is an article saying that if the
entity does not give back what is necessary in extraordinary
cases then the federal government can withhold that amount in
the future." The Ambassador agreed with Abdel Mehdi that the
two sides were very close and pressed him to reach an
agreement now.

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Other Key Legislation
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4. (C) The Ambassador said that Vice President Tariq
al-Hashemi had expressed his appreciation for the
constructive spirit of Abdel Mehdi's deBaathification reform
draft law and had only one or two issues to resolve. Abdel
Mehdi said he had not received formal feedback but would see
al-Hashemi on May 30. (He also expressed concern with a
recent statement of al-Hashemi calling for wholesale return
of units of the old Iraqi army, saying it made the Shi'a and
Kurds nervous.) Abdel Mehdi said that Prime Minister Maliki
wanted him to add an explicit prohibition on the return of
Saddam's special security services. On Kirkuk, he said that,
based on recent conversations, Kurdish leaders appeared
willing to accept a delay in Article 140 implementation but
would not necessarily want to announce a change in policy
until it was clear it was impossible for the referendum to
take place as scheduled. Both Abdel Mehdi and the Ambassador
expressed concern about a proposal in the CoR to legislate a
timetable for coalition withdrawal, perhaps linked to
training of Iraqi security forces (ISF). The Ambassador
urged that ISCI work with like-minded colleagues in the CoR
to either block the proposal or channel it into a statement
of support for building ISF to contribute to security in Iraq
and allow the coalition to complete its mission.

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Concern in Najaf
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5. (C) Abdel Mehdi, who had visited Ayatollah al-Sistani and
the three other leading marja' of Najaf within the past week,
told the Ambassador that the marja'iya were very concerned

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with security (including in the south) and lack of services.
They were critical of the government, he said, and wanted to
see more professional ministers. Abdel Mehdi said he
advocated for the moderate front solution, an alliance of
ISCI, Dawa, IIP, KDP, and PUK, giving the Presidency Council
a more active role through a PM plus Presidency mechanism for
making key decisions.

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Abdel Mehdi Urges Iran Talks to Continue
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6. (S) Asked by Abdel Mehdi for a readout from the May 28
U.S.-Iran-Iraq talks, the Ambassador provided the same
general description he gave in a press conference following
the talks. The Iranian team was clearly under strict
instructions that limited the depth of their engagement, he
added, questioning whether their intent was "talks for the
sake of having talks." Abdel Mehdi noted that it would be
difficult to dig deeply into substance in a first meeting.
He opined that the talks represented a "strategic choice" for
Iran, not just a tactical move; he added that those in Iran
who argued for the talks did so at some risk. The Ambassador
said that the U.S. had not expected Iran to admit to
providing lethal support to Iraqi militants: "We do not need
them to acknowledge what they have been doing; we need them
to stop it." Abdel Mehdi urged that the talks continue and
asked whether he might invite the U.S. and Iranian sides to a
private lunch away from the glare of the media. The
Ambassador said it would be worth floating the idea with the
Iranians and that it might be suitable after another formal
meeting, should one take place. (Note: A mortar or rocket
impact shook the windows in Abdel Mehdi's residence during
the meeting, prompting Abdel Mehdi to recall a discussion he
had with Quds Force leader Qassim Soleimani in Tehran just
prior to the May 28 talks. He said they speculated whether
indirect fire (IDF) would interrupt the talks in any way.
According to Abdel Mehdi, Soleimani joked that if the IDF was
accurate, it was his. End note.)

CROCKER