FINANCE COMMITTEE CHAIR DESCRIBES TAWAFUQ PLANS,

C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 002528 SIPDIS SIPDIS E.O. 12958: DECL: 07/30/2017 TAGS: ECON EFIN PGOV IZ SUBJECT: FINANCE COMMITTEE CHAIR DESCRIBES TAWAFUQ PLANS, PENDING LEGISLATION Classified By: Economic Minister Charles P. Ries for reasons 1.4 (b) an d (d). ¶1. (C) Summary: In his first meeting with Economic Minister, Council of Representatives (CoR) Finance Committee Chair Ayad ¶S. Samarrai (Sunni-IIP) discussed the reasons for Tawafuq's decision to withdraw from the government. He complained that PM Nouri al-Maliki's government was paying no heed to Sunni demands. Clarifying the pull-out, Samarrai stated that Tawafuq MPs would retain their posts, but cabinet members would resign. Samarrai indicated that al-Maliki remaining PM was acceptable to Tawafuq, but at a minimum a cabinet reshuffling would be necessary. Vice President Adel Abdul Mehdi gave Vice President Tariq al Hashimi a paper on July 28 laying out a way forward with 19 points. VP al Hashimi is reviewing the points now, according to Samarrai, who has seen the paper, and, after al Hashimi's approval, the paper will be shared with key leaders of the Kurdish and Shi'a blocs in order to obtain consensus and negotiate a way forward. Samarrai said that IIP is willing to work with other blocs, but does not like the idea of creating a new 'moderate front', preferring to remain part of Tawafuq. On pension reform, Samarrai said that the legislative proposal, which had gotten far too expensive as it had proceeded through the parliamentary process, had been returned to the Council of Ministers (CoM) for revisions. End Summary. -------------- Clarifying Tawafuq's Demands -------------- ¶2. (C) EMIN asked for clarification on the recent Tawafuq threat to pull out of the government by August 1. What would this mean to CoR members? Samarrai said that Tawafuq CoR members would retain their seats, but cabinet members would resign. Tawafuq was primarily aggrieved because, according to Samarrai, PM Nouri al-Maliki was not taking the Sunnis into account in policy making and governance. VP Adel Abdul Mehdi gave al Hashimi a paper with 19 points describing a way forward on the major issues, covering constitutional issues, hydrocarbon resources, security concerns, and the balance of power. The paper also includes other less crucial issues, such as evaluating government performance. With some changes, Samarrai guessed, al Hashimi and Abdul Mehdi could reach a bilateral understanding. The next step would be to take it to the PUK and Shi'a Alliance leadership in order to obtain a broader consensus. Samarrai described Abdul Mehdi's paper as comprehensive and fair. Removing PM Maliki from power was not among Tawafuq's demands; rather, Maliki could keep his seat, but the current Cabinet composition would need to be changed. Maliki, however, needs to take Tawafuq's demands more seriously and share power. ¶3. (C) EMIN noted that the USG hoped the Iraqis would solve their problems peacefully and democratically. Still, EMIN cautioned, the USG support that the GOI has enjoyed to this point cannot be taken for granted. If, by September, the GOI has not made significant progress on the political benchmarks, it will have a serious effect on USG political support. -------------- Revenue Management Law Impasse -------------- ¶4. (C) Samarrai indicated that the disagreement on the revenue management law was due to Kurdish intransigence regarding the distribution of oil revenue. Specifically, the Kurds were demanding that in the event of a budget surplus, all the additional revenue be disbursed directly to the regions based on population. The Sunnis believe that, as with budgeted revenue, all revenue should be subject to the proposed revenue sharing process, which reserves a (still unspecified share) of the funds for sovereign expenses and "national strategic projects." -------------- Pension Reform Update -------------- ¶5. (C) On pension reform, Samarrai noted that the legislation had been fraught with problems since its introduction, and had been heavily amended in a budget-breaking direction. Samarrai expressed surprise that the executive branch had not been more supportive of its own proposal. Instead, Samarrai said, Minister of Finance Bayan Jabr had requested that Samarrai make a presentation to the CoR on behalf of the law, which Samarrai felt was unfair. The CoR recently sent the law back to the Council of Ministers for revision. EMIN noted that pension reform is notoriously difficult politically in many countries. In light of the upcoming Stand-by Arrangement negotiations to be held in September 2007, EMIN urged BAGHDAD 00002528 002 OF 002 Samarrai to encourage the CoR not to approve a pension law with benefits so generous that it might jeopardize Iraq's fiscal stability. CROCKER