KRG OFFICIALS DISCUSS WITH DEPUTY SECRETARY LACK

C O N F I D E N T I A L SECTION 01 OF 03 BAGHDAD 003915

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E.O. 12958: DECL: 12/01/2017
TAGS: PGOV PTER EPET ENRG TU IZ
SUBJECT: KRG OFFICIALS DISCUSS WITH DEPUTY SECRETARY LACK
OF POLITICAL PROGRESS, HYDROCARBONS, TURKEY/PKK AND MOSUL

Classified By: Charge d'Affaires Patricia A. Butenis for reasons 1.4 (b
) and (d).

This is an Erbil Regional Reconstruction Team message.

Summary
--------------


1. (C) In November 28-29 meetings with Deputy Secretary
Negroponte, S/I Satterfield, Ambassador Charles Ries, and
Senior Advisor David Pearce, KRG PM Barzani and VP Rasoul
praised Iraq,s improved security while criticizing PM
Maliki,s failing performance and cautioning that security
gains could be undone by flagging political progress.
Barzani stated that the KRG would soon more actively wield
its parliamentary influence to drive political change in
Baghdad. Barzani claimed the KRG was waiting however until
the Security Council adopted a new Chapter 7 United Nations
Security Council Resolution (UNSCR) to authorize
Multi-National Forces-Iraq (MNF-I) for another year as well
as the conclusion of the Declaration of Principles for a
Long-Term Relationship of Cooperation and Friendship (aka the
strategic agreement) with the United States. PM Barzani
agreed in principle to a process to move past the technical
difficulties in concluding the KRG,s hydrocarbon
legislation. That process would include harmonizing the July
and February texts of the hydrocarbon law, determining a
precise list of oil fields, and agreeing to the revenue
sharing law. Barzani and Rasoul agreed that continued
coordination on combating the PKK was necessary and welcomed
the opportunity for engagement and intelligence sharing; and
agreed to cooperate on fighting a growing Al-Qaida threat
moving north as insurgents are denied sanctuary in southern
and central provinces. Barzani noted the recent visit of
United Nations Special Representative De Mistura as
&excellent,8 and agreed a new way forward on Article 140 is
needed with U.S. and UN help. End summary.


PM Barzani: Security Gains Can Be Undone by Lack of
Political Progress; Maliki,s Performance: &A Failure; Time
to See Some Changes8
-------------- --------------


2. (C) Kurdistan Regional Government (KRG) Prime Minister
Nechirvan Barzani and Vice President Kosrat Rasoul praised
the overall improved security situation in Iraq but cautioned
that the improvements would be undermined without parallel
political progress in Baghdad. They criticized Iraqi Prime
Minister Maliki for his lack of flexibility in dealing with
issues, unwillingness to change, and lack of political
progress. PM Barzani complained that Maliki,s reluctance to
share authority for key portfolios had created a system that
failed to function. Barzani said the KRG was &tired of
dealing with Maliki;8 that he was unable to establish good
working relations with other political groups; and that
despite the KRG,s past support for the prime minister, it
was &time to see some changes.8


3. (C) Deputy Secretary Negroponte and S/I Satterfield noted
our concern over the lack of political progress and
encouraged Barzani to use the Kurdish party bloc,s
parliamentary leverage to impact policy and send a message to
PM Maliki that more needed to be done to move forward on
critical issues. Barzani took the point but claimed that the
KRG was waiting first for the adoption of the next UNSCR
authorizing the MNF as well as for the conclusion of the
strategic agreement with the United States. The KRG, Barzani
claimed, did not want to complicate progress on those vital
issues. He indicated that he would take up the issue with
President Masoud Barzani, who would be returning in early
December from medical treatment in Germany.


KRG Agrees to Process to Push Past Hydrocarbon Impasse
-------------- --


4. (C) The Deputy Secretary raised the lack of progress on
resolving the hydrocarbon legislation issues and stressed
that the legislative agenda needed to move forward in step
with security improvements in order to show tangible results.
Left unresolved, the hydrocarbon issue risked undermining
U.S. political and public support for Iraq and could scare
off large oil and gas investors over time. PM Barzani
expressed willingness to resolve the issue but indicated the
KRG,s misgivings over Baghdad,s moves to exert more
centralized control over the industry. Trust was the issue.
He indicated that the KRG was ready to sign the revenue
sharing law -- with nothing to add to it, but took issue with
the article in the February text of the hydrocarbon law that
allowed for KRG contracts/production sharing agreements
(PSAs) to be reviewed by &Baghdad,8 arguing this was

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tantamount to a veto.


5. (C) Ambassador Ries clarified that the February text, in
accordance with the constitution, provided for a 60-day
review of contracts by the independent Federal Oil and Gas
Council; that the hydrocarbon law, together with the revenue
sharing law, guaranteed a regional role in the oil and gas
sector; and that as oil prices rose, the KRG,s influence in
the sector would rise )- provided the legislative package
was concluded as soon as possible. Responding to Barzani,s
concerns, Ambassador Ries proposed (1) convening a
non-political technical committee to correct the July draft
of the law (which Barzani complained the Shura Council had
substantively altered) so that it was consistent with the
February text; and (2) and to open negotiations on a precise
and accurate list of oil and gas fields according to the
following four categories: (a) discovered and developed; (b)
discovered and near-developed )- categories that the Iraqi
government would control; (c) discovered and
far-from-developed; (d) not discovered )- categories in
which regional PSAs could apply. Ries stressed that the
package would need to include a corrected and agreed February
text, a precise list of fields, and an agreed revenue sharing
law; and that it all must be legally sound and possible to
implement. The KRG,s trust issues could be resolved by a
close eye to oversee the process, and that this process
offered the advantages of a definitive time frame, clear
parameters, and an absence of political influence. PM
Barzani indicated the KRG would want to review the make-up of
the technical committee but agreed to the process as a way
forward. Ambassador Ries said that the Secretary has asked
Under Secretary Reuben Jeffery to travel to Iraq in the
coming weeks to discuss next steps.


Situation with Turkey Calming: Ongoing Need for
Coordination on PKK
-------------- ---


6. (C) The Deputy Secretary noted that the situation with
Turkey over the PKK had calmed but stressed the need for
continued consultation and cooperation, including in the area
of intelligence, between Iraq and the U.S. The situation
still required great care and coordination of effort between
the U.S., Iraq, the KRG, and Turkey, and we needed to do the
maximum to avoid any destabilizing action by Turkey.
Ambassador Negroponte expressed appreciation for measures the
KRG has taken to date to counter the PKK and pointed to the
potential for developing a stronger Iraqi-Turkish strategic
relationship once the PKK threat was resolved. Vice
President Rasoul offered that the KRG stood ready to
coordinate with the other governments on the PKK issue, but
turned to the familiar argument that support for the PKK
would dissolve if the rights of Kurds in Turkey were
respected. A general amnesty (by Turkey for the PKK) would
change the overall dynamic of the problem. The Deputy
Secretary responded that one could support democratic rights

SIPDIS
for the Kurdish people in Turkey while rejecting and
confronting terrorism; the two were not mutually exclusive
)- the question was how to apply both principles
effectively. Ambassador Satterfield noted that the Kurds,
situation in Turkey was moving forward; that any military
action would jeopardize this progress; and that the PKK,s
strategy had less to do with agitating for Kurdish rights
than with polarizing Turkish politics by destabilizing
southeastern Turkey. PM Barzani said there was broad
agreement that the PKK was a problem, and Vice President
Rasoul welcomed the opportunity for continued engagement on
the issue.


Support for New Mosul Operations Command
--------------


7. (C) Senior Advisor David Pearce noted that Ambassador
Crocker had asked that we raise the GOI's intent to establish
a Mosul Operations Command. This has our full support.
The GOI also will appoint MG Riyad as commander of the MOC.
He has our full support, and we expect our friends to
cooperate with him as we try to calm the atmosphere and face
a common AQI enemy in Ninewa. Ambassador Satterfield stressed
our critical operational concern (as we increased pressure on
Al-Qaida elements) to continue to deny them opportunities to
regroup and gain strength in KRG border areas. Barzani
readily agreed to cooperate seriously in confronting Al-Qaida
as it looked for new havens in the north.

Barzani Open to UN Involvement on Article 140
--------------


8. (C) On Article 140, Barzani said that time is heading to
the end point; a solution is needed. United Nations Special

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Representative De Mistura visited Erbil and it was
&excellent8 to have him here, Barzani noted. We want the
U.S. to engage on Article 140 and have the United Nations
help us technically. We need to find a way out by end of the
year and avoid problems with public reaction to further
delays. Ambassador Satterfield replied we fully support and
encourage implementation of Article 140, but agree there will
not be resolution by year,s end. We hold the same position
as yours on UN involvement.


9. (U) The Deputy Secretary's party has cleared this cable.

BUTENIS