SUBJECT: FINANCE MINISTER JABR ON OIL REVENUE LAW

C O N F I D E N T I A L BAGHDAD 001838

SIPDIS

SIPDIS

E.O. 12958: DECL: 06/01/2017
TAGS: ECON ENRG
SUBJECT: SUBJECT: FINANCE MINISTER JABR ON OIL REVENUE LAW

Classified By: ECONOMIC MINISTER COUNSELOR DANIEL WEYGANDT FOR REASONS
1.4 (b) AND (d).


1. (C) SUMMARY. Representatives of the Kurdish Regional
Government (KRG) and the central Government of Iraq have been
making importatant progress in completing negotiations on a
draft of the Oil Revenue Management Law. Recent negotiations
have resulted in important breakthroughs in a number of areas
including, the types of accounts into which revenues will be
placed, the number of signatures needed to authorize release
of monies from the Petroleum Revenu Fund, and automatic
payments into regional accounts. Areas of ongoing
negotiations include, a KRG proposal for the establishment of
two Future Funds, composition of the Revenue Commission
membership,the treatment of surplus funds, and the auditing
of non-petroleum revenue held by the KRG. Post is
encouraging the KRG negotiator to return to Baghdad to
complete the negotiations as expeditiously as possible. END
SUMMARY.


2. (C) Finance Minister Bayan Jabr met June 1 with CETI
Amb. Carney, Econ Counselor and Treasury officer to discuss
inter alia the status of the Oil Revenue Management Law.
Jabr was anxious to brief on the negotiations, and seemed
pleased at his own role in bridging gaps between the Kurds
and Tawafuq, as well as mediating between the KRG and Oil
Minister Shahristani. Jabr recounted that over the preceding
day, he had met with Shahristani, Planning Minister Baban and
the PM,s Oil Adviser Thamir Ghadhban to develop a GOI
response to the Kurds, last draft He said the draft had
been sent to the KRG but confirmed this move by calling
Ghadhban during the discussion to make sure it had been sent.
N.b., Ghadhban sent the draft to KRG Natural Resources
Minister Ashti.


3. (C) Jabr said that with respect to the Kurds, proposal
for two accounts to be maintained by the KRG at the Central
Bank of Iraq branch in Erbil one in dollars, one in Iraqi
Dinars that Baban had on behalf on Tawafuq insisted that the
Kurds not be given the right to maintain a dollar account.
Jabr noted with some satisfaction that he had prevailed on
Baban to accept the dual account provision. According to
Jabr, Baban had negotiating authority from Tawafuq, so that
what was ultimately agreed to as a text of the revenue law
should be supported by the Tawafuq block in the Council of
Representatives. Jabr also took credit for convincing
Shahristani and Baban to go along with a two signature model
for releasing monies from the Petroleum Revenue Fund. - the
PM and the Finance Minster - as well as with the Kurdish
requirement for automatic payments to their accounts.


4. (C) Jabr said that the Kurds were now insisting on two
Future Funds in the law, one for the KRG and one for the rest
of Iraq. Jabr thought he could persuade the KRG to drop this
demand, however, and asked that the U.S. intervene to get the
Kurds to drop the idea. (Embassy comment: our impression is
that the Kurds are floating this idea to trade for some other
issue in subsequent bargaining. It does not make much policy
sense to argue for separate Iraqi futures, if one of the
goals of the revenue law is to promote reconciliation and a
common benefit from Iraq,s oil wealth. End comment.) Jabr
said that one new element in the revised GOI counter-proposal
was to have the Revenue Commission membership include
representatives of producing governorates, as well as to be
chaired by the Finance Minister along with regions such as
the KRG.


5. (C) The other main focus of the GOI draft is to make
explicit that KRG revenues from non-oil sources have to be
audited by the Board of Supreme Audit or some agreed auditing
authority. The issue of the failure of the KRG to forward
customs and other revenue to Baghdad over the last four years
has however already been agreed to in principle by the KRG.
Another issue is the balance of the Revenue Fund to be held
in the DFI. The Kurds want to hold the smallest possible
balance in the Fund, with liquidation of the balances (and
payments to the region) no less frequently than every three
months. Jabr felt that a compromise on this point could also
be reached that would combine the Kurds, desire for maximum
payouts with prudent management. Jabr also said that he
intends to address the Kurds, concerns about having the fund
go through the national budget by spelling out that the Kurds
would automatically get 17% of such amounts. He also felt
that he could accommodate the Kurds, concerns about
surpluses via supplementary budgets.


6. (C) (Comment: Getting Shahristani and Baban on board
with a GOI proposal was a necessary step if any agreed text
is to be approved by the Energy Committee. The only members
of the Committee not party to yesterday,s discussions were
the Electricity minister and DPM Barham Salih. The next step
will be to get the Kurdish negotiator, likely former DPM
Rowsch Shuways, back to Baghdad to try to conclude an
agreement as soon as possible. Embassy is endeavoring to
encourage Rowsch to do so. While we doubt reaching agreement
will be as easy as Jabr seemed to think, it is also apparent
that the two sides are continuing to try to reach an
agreement and, certainly relative to the framework
hydrocarbon law, are moving much more constructively to reach
a deal. End comment.)
CROCKER