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 -------------- ¶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