1. (S) SUMMARY. In a February 10 meeting at President
Talabani's residence, Talabani told the Ambassador that he
hoped the Sadrists would agree to reconciliation efforts with
the Sunni IIP. He agreed that the hydrocarbon law was a
priority and that the Kurds needed to cooperate on its
passage. The Ambassador said PM Maliki hoped for Cabinet
endorsement of the law on February 15. With the February 8
passage of the 2007 budget, de-Ba'athification,
reconciliation, and the oil law are priorities, stated
Talabani. END SUMMARY

Reconciliation


--------------------------





2. (S) President Jalal Talabani discussed reconciliation
efforts briefly with Ambassador Khalilzad on February 10,
noting that a recent letter to the Ambassador from VP Tariq
Al Hashemi had been the VP's personal views, which would
require some alteration to be acceptable to others. The
President passed the Ambassador a three-paragraph statement
he was trying to get the Sadrists to sign (or recommend
amendments that would allow them to sign) in the context of
mediation between the IIP and the Sadrists.

Hydrocarbon Law / Kurdish Concerns


--------------------------





3. (S) The Ambassador stated that agreements in Erbil
regarding the hydrocarbon law were positive and offered a
constructive basis on which to discuss the issue with the PM.
The Ambassador recalled his meeting with the PM February 9,
in which the PM said he wanted the hydrocarbon law approved
by his Cabinet by Thursday, February 15, in preparation for
submission to the CoR (Council of Representatives); the
Ambassador hoped that timeline would be met. Talabani and
the Ambassador agreed that KRG Oil Minister Ashti needed to
play a more constructive role in developing the hydrocarbon
law.



4. (S) The President said he had told KRG President Masoud
Barzani three things in a recent conversation: 1) he needs to
remain calm and not over-react to pressure on elections and
other delicate political issues, 2) oil issues must be
settled satisfactorily and in cooperation with the USG, and
3) the Kurdish role in creating a moderate front with Arab
groups in Iraqi politics is critical -- the Kurds need to
play a constructive role as part of Iraq.

De-Ba'athification Law


--------------------------





5. (S) President Talabani said he wanted to finalize a draft
de-Ba'athification law that the Presidency Council could
propose to the CoR. He had not decided which VP might head
up that project, but he hoped to have a draft in short order.
The Ambassador said he would provide Talabani with ideas for
a "simple and clear" de-Ba'athification law by February 11,
an offer which the President appreciated. Citing passage of
the 2007 budget by the CoR February 8, Talabani said the
approval followed a "deal with the PM" on Peshmerga funding;
with the budget in place, priorities would be
deBa'athification, reconciliation and the oil law.
SPECKHARD