CHATAH GRATEFUL TO USG FOR PARIS III SUCCESS

C O N F I D E N T I A L SECTION 01 OF 03 BEIRUT 000145 SIPDIS SIPDIS NSC FOR ABRAMS/DORAN/MARCHESE/HARDING E.O. 12958: DECL: 01/28/2027 TAGS: PREL PGOV EFIN EAID LE SY SUBJECT: CHATAH GRATEFUL TO USG FOR PARIS III SUCCESS Classified By: Jeffrey Feltman, Ambassador, per 1.4 (b) and (d). SUMMARY -------------- ¶1. (C) Mohamed Chatah, Senior Advisor to Prime Minister Siniora, gushed exuberantly about U.S. leadership in achieving a successful Paris III conference. He expressed delight as well with the CEO Partnership event, saying that the GOL would now hire someone to serve as permanent liaison with the U.S. companies. While thrilled at the overall sums raised, Chatah expressed some concern about the reactions of the financial markets upon examination of the Paris III details: nearly all of the commitments are for project financing. The USG is one of the largest providers of much-needed cash (assuming congressional approval and that reform benchmarks are met). Chatah bemusedly described Jacques Chirac's use of Paris III to promote Central Bank Governor Salameh's presidential ambitions. Chirac, Chatah claimed, was merely doing the bidding of Nazek Hariri (widow of Rafiq),who shares Salameh's disdain of Siniora and did not want to Paris III to be seen as a Siniora achievement. Aware of the rumors, Chatah expressed doubt that Salameh could have engaged in profiteering through rolling over debt prior to Paris III, but the issue needs to be investigated. He said that Siniora used Paris III as an excuse to call Emile Lahoud and Nabih Berri to brief them, and Chatah agreed to use Paris III to reopen his channel to the Aoun bloc, to see whether Michel Aoun might now be more flexible in his approach. Chatah also reported that Saudi Foreign Minister Saud bin Faisal had traveled to Ankara after Paris, supposedly to discuss the Special Tribunal. End summary. THRILLED WITH PARIS III, GRATEFUL FOR U.S. LEADERSHIP -------------- ¶2. (C) On 1/27, the Ambassador met with Mohamed Chatah a few hours after Chatah's return from Paris, Noting that "you will hear this directly from the PM when you see him" in a meeting scheduled for 1/29, Chatah effusively praised the United States and Secretary Rice in particular. The U.S., France, and Saudi Arabia deserve the credit for the success of the Paris III conference, Chatah said. Chatah went into detail with the Ambassador on all of the Paris III-related events, expressing appreciation for U.S. active participation at each step. SUCCESSFUL CEO PARTNERSHIP EVENT PROVOKES DECISION TO HIRE STAFF -------------- ¶3. (C) Chatah also expressed enthusiasm for the Partnership event with U.S. CEOs and said that, as a result of the keen interest in the CEOs to advance the Partnership more quickly, he had convinced PM Siniora to hire someone reporting to Chatah whose primary responsibilities will be Partnership activities. He expected that the recruiting process would take about a month, so he anticipated having someone on board at the end of February. Until then, Chatah said that he will continue to follow up with the CEOs. He said that he had already reached out to one person he expected would get the job, but Chatah said that it was premature for us to be in touch with the person. ACTUAL PARIS III SUM NEAR USD 9 BILLION; CONTRAST WITH BEIRUT RIOTS PERHAPS NOT ALL BAD -------------- ¶4. (C) Chatah said that the USD 7.6 billion of support announced at Paris III "matched our dreams, our hopes" and well beyond what most Lebanese thought realistically was possible. If one adds in a USD 1 billion private sector facility from the Islamic Development Bank and a few other private-sector facilities that aren't yet fully fleshed out, then the total amount raised at Paris III approaches an astonishing USD 9 billion. While emphasizing that no one wished Beirut to erupt into riots as Paris III participants met, Chatah said that there were some benefits to the contrasting pictures that day. Lebanese saw the choices before them: a reform program backed by unexpectedly generous international support, or civil war. Chatah thought that the GOL and March 14 leaders could exploit the contrasting images to strengthen their hands vis-a-vis the BEIRUT 00000145 002 OF 003 March 8-Aoun opposition. MOST FINANCING FOR PROJECTS -------------- ¶5. (C) Chatah said that, given the "apples-and-oranges" nature of the sums announced at Paris III, he expected the pro-Syrian media and politicians in Lebanon to use the details of the programs (which are only now starting to emerge) in an attempt to downplay the achievements of the Siniora cabinet at Paris III. While the pro-Syrians may be able to reduce some ("but not much") of the positive spin about Paris III, the most important reactions will come from the financial markets. The key question is whether the banks and other private-sector lenders have renewed confidence in Lebanon. Chatah said that, while the GOL will never say so publicly, one aspect of Paris III was a disappointment: the amount of financing available for debt relief this year (assuming reform benchmarks are met): USD 250 million from the USG (assuming congressional approval),USD 100 million from the Saudis' USD 1.1 billion commitment, USD 200 million from the UAE's USD 300 million commitment, something under the IMF's Emergency Post Conflict Assistance program. The rest, Chatah said, is all project financing, which "may or may not" impress the bankers who will no doubt pour over the details of the Paris III commitments. CENTRAL BANK GOVERNOR SALAMEH SEEMS TO GET CHIRAC'S BACKING FOR PRESIDENT -------------- ¶6. (C) The Ambassador asked Chatah about the rumors that Central Bank Governor Riad Salameh had done some questionable debt rollovers just prior to Paris III that allowed preferred bankers to make money before interest rates dropped. Chatah acknowledged the rumors but said that the financial markets were already anticipating Paris III well before the conference began. So Chatah did not believe that the margins would be significantly different before or after Paris III. But the rumors definitely need to be investigated, he said. ¶7. (C) On Salameh, Chatah said bemusedly that it was almost embarrassing how strongly Jacques Chirac used Paris III to push Salameh's presidential bid. The GOL requested three chairs at the main table, for Siniora, Finance Minister Jihad Azour, and Economy and Trade Minister Sami Haddad -- the three authors of the reform plan Paris III was designed to support. The French responded that the Lebanese had only two chairs at the table, one for Siniora and one for Salameh. The fuss lasted until the last minute, with the Lebanese insisting that Azour, too, needed a place at the table. While ultimately Azour got his seat, Salameh sat prominently between Siniora and Chirac. At a lunch he hosted for the Lebanese delegation the previous day, Chirac ignored Azour and Haddad, barely mentioned Siniora, and emphasized how the success of Paris III stemmed from the international confidence in Salameh. "It was all too much," Chatah said, predicting that the excessive attention will harm, not help, Salameh's presidential chances. Chatah speculated that Chirac's fixation on Salameh stemmed entirely from Nazek Hariri (dubbed "the Queen Mother" here),known to despite Siniora and to have the ear of the French president. As Siniora and Salameh do not get along, Chatah believes that Nazek is showing the PM who is boss by getting Chirac to promote Salameh. USING PARIS III AS EXCUSE TO RE-START POLITICAL CONTACTS -------------- ¶8. (C) On political contacts, Chatah said that Siniora used Paris III as an occasion to call Lebanese and Arab leaders to brief them. Surprisingly, both President Lahoud and Speaker Berri took the PM's call, which Chatah interpreted in Berri's case meant that the Speaker is hoping to reduce tensions. When Siniora spoke with Egyptian President Mubarak and Arab League Secretary General Amr Moussa, he urged Moussa to return to Lebanon to continue his shuttle diplomacy. Chatah said that Siniora was surprised to learn that Saudi Foreign Minister Prince Saud bin Faisal had gone to Turkey after Paris, reportedly to discuss the details of the documents on the Special Tribunal for Lebanon. The Turks, Chatah said, apparently have some insight to Syrian concerns over the tribunal. BEIRUT 00000145 003 OF 003 ¶9. (C) The Ambassador briefed Chatah on a possible opening from General Aoun's camp (septel) and urged Chatah to reopen his channel to Aoun via Aoun bloc MP Ibrahim Kanaan; Chatah agreed to use the excuse of a briefing on Paris III to check via Kanaan for potential new flexibility on Aoun's part. The Ambassador also briefed Chatah on recent messages we have received from Berri (septel),offering to restart the National Dialogue and removing people from the street if the GOL and March 14 leaders could allow the tribunal to be "frozen" until June. Chatah suspected a trick and suggeseted that the Ambassador and PM should discuss Berri's thinking when they meet on Monday morning. FELTMAN