DPM BARHAM SALEH OPTIMISITIC ABOUT THE BUDGET,

S E C R E T SECTION 01 OF 02 BAGHDAD 003753

SIPDIS

NOFORN
SIPDIS

E.O. 12958: DECL: 11/13/2017
TAGS: EFIN EPET PREL PGOV IZ
SUBJECT: DPM BARHAM SALEH OPTIMISITIC ABOUT THE BUDGET,
LEGISLATION, AND TURKEY -- LESS SO ON POLITICAL SITUATION

REF: A) BAGHDAD 3665 B) BAGHDAD 3731 C) BAGHDAD 3732

D) BAGHDAD 3733

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


1. (S/NF) Summary: In a November 12 meeting, DPM Barham Saleh
told the Ambassador and S/I Satterfield the budget is almost
ready and will go to the "core" cabinet November 13 for
approval. He is optimistic the Presidency Council will
support sending the de-Ba'athification law (leadership
version) to the Council of Representatives (CoR),but is
frustrated with the politics delaying the issue. More
progress is needed on the oil law, he conceded, but said
there is a window of opportunity right now to advance the
law. He noted the Kurds, specifically PM Nechirvan and
President Masoud Barzani, are too disengaged on the PKK
crisis in Turkey. He met with the Barzanis November 11 in
Northern Iraq and reinforced the message that steps will need
to be taken to prevent a crisis in the future. He commented
PM Maliki is losing his credibility, and questioned whether
he will survive politically with the crisis with Turkey and
tough security problems in Baghdad. End summary.

BUDGET ALMOST READY
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2. (C/NF) DPM Saleh said the 2008 budget is 48 billion USD,
but given some roll-over amounts from 2007 comes to
approximately 50 billion USD. The capital budget portion of
this overall budget is close to 15 billion USD, which
consists of 13 billion USD in projects and 2 billion USD in
related equipment. He noted close to 2.06 billion USD will
go towards provincial development. Saleh also announced the
budget will be taken to the "core" cabinet November 13 for
approval. (Comment: Media reports indicate the
cabinet/Council of Ministers passed the 2008 budget on
November 13. Post is verifying this information and has not
seen the final budget figures yet from cabinet discussions
(ref A). End comment).

DE-BA'ATHIFICATION AND HYDROCARBON LAWS
--------------


3. (S/NF) In response to the Ambassador's question on whether
the de-Ba'athification law will be sent by the Presidency
Council to the CoR, DPM Saleh said he spoke recently with
President Talabani and VP Adil Abd al-Mahdi and they will
push the leadership version. Saleh also talked with VP
Hashimi and said he is agreeable, but is less optimistic
about Prime Minister Maliki's support. DPM Saleh said, "The
PM has not given us his word and is uncomfortable about his
own leadership." He lamented the agreed upon signed
leadership text of the de-Ba'athification law is stalled
because PM Maliki keeps changing his story.


4. (S/NF) Regarding the oil law, DPM Saleh said KRG PM
Nechirvan Barzani is willing to travel to Baghdad for further
discussions, but added he is committed to the February 26
draft of the oil law. He noted PM Maliki and the KRG
exchanged side letters regarding the Kurdish oil contracts
and added he was not aware initially of the existence of this
side letter. Saleh said Nechirvan could bring KRG Natural
Resource Minister Dr. Ashti Hawrami to Baghdad, but the
Ambassador responded this discussion would not be productive
if Ashti is involved given November 8 discussions in Irbil
(ref B). S/I Satterfield urged the GOI to finalize
additional legislation on oil revenue management, the
re-establishment of the Iraq National Oil Company (INOC),and
the reorganization of the Ministry of Oil (MoO). DPM Saleh
agreed that resolving these strategic issues is important and
said there is a window of opportunity to make progress on the
law.

TURKEY
--------------


5. (S/NF) DPM Saleh traveled to Northern Iraq on November 11
and met with both President Masoud and Prime Minister
Nechirvan Barzani. They discussed candidly the situation
with Turkey and the Barzanis spoke positively regarding their
discussions with the Ambassador from his November 8 trip.
"The Barzanis understand the seriousness of the situation
with the PKK," Saleh said, "but think the crisis is behind
them." Saleh pressed the two Barzanis on the reality that
measures will need to be taken to address the PKK problem.
He mentioned that arresting PKK members is difficult to do
right now, noting its sensitivity.


6. (S/NF) DPM Saleh opined the Barzanis and Kurds appear to
be adopting a policy of disengagement on the PKK issue and
with the Turkish military. He talked about Turkish

BAGHDAD 00003753 002 OF 002


interactions with Kurds and the growing influence of
Iranians. He fears the PKK and al-Qaeda will gain strength
in the North if the PKK issue is not addressed.

INTERNAL POLITICS, LEADERSHIP NEEDED
--------------


7. (S/NF) DPM Saleh said, "The Kurdish role in Iraq needs to
be more effective," noting the importance of Iraq as a whole
to the Kurdish region as well as relations with the U.S. He
does not want to see the Kurds sidelined or decimated.
Towards these efforts, Saleh noted that he will visit
Northern Iraq again to meet with the Barzanis when President
Talabani returns on November 20 to discuss some of these key
Kurdish issues. He welcomed meetings and a close partnership
with the USG following these discussions.


8. (S/NF) Saleh urged President Talabani and Prime Minister
Maliki to exercise leadership in the current political
malaise. He criticized Oil Minister Shahristani and Finance
Minister Jabr and said they "need to go." He questioned
whether PM Maliki will survive politically given the crisis
with Turkey and security situation in Baghdad. He added "PM
Maliki is losing his credibility." Voicing concerns of the
Kurds, he said "We will use our votes to ensure reform in
Baghdad." He agreed with the Ambassador that the Kurds as a
whole need to re-engage in the political process.


9. (S/NF) DPM Saleh said the Sunnis are struggling and need
to "get their act together." He noted VP Hashimi is meeting
with Masoud and Nechirvan Barzani in Irbil soon to discuss
strategic policy issues, but did not go into detail. He
added ISCI is not content with the current status either. He
urged the Ambassador to use his leverage to push the
political situation in the right direction.
CROCKER