TREASURY DEPSEC KIMMITT ADVOCATES SWF

C O N F I D E N T I A L KUWAIT 001701 SIPDIS SIPDIS E.O. 12958: DECL: 12/02/2017 TAGS: EFIN EINV PTER KTFN KU IZ SUBJECT: TREASURY DEPSEC KIMMITT ADVOCATES SWF TRANSPARENCY, INVESTMENT IN U.S., IRAQI DEBT FORGIVENESS REF: A. KUWAIT 1669 ¶B. KUWAIT 1598 ¶C. KUWAIT 1422 Classified By: CDA Alan Misenheimer for reasons 1.4 (b) and (d). ¶1. (C) During a dinner meeting with Amiri Economic Adviser and former Finance Minister Dr. Yousef al-Ebraheem on December 2, Treasury Deputy Secretary Robert Kimmitt strongly urged the GOK to engage positively in the international effort to develop voluntary best practices for sovereign wealth funds (SWFs). Underscoring the importance of foreign investment as a spur to job creation (especially in manufacturing) and growth in the American economy and the relative openness of U.S. markets, he argued that Kuwait should take advantage of its strong bilateral relationship and positive image in the U.S. to become a partner in the effort to dispel negative perceptions of SWFs as a potential threat to market stability. Kimmitt stressed transparency -- defined, not as opening of books or premature disclosure of planned investments, but as a published set of principles and practices that would be reflected in the direction of a fund over time -- as a crucial element. He also emphasized the need for effective action against illicit finance as a standard by which the intentions and reliability of countries holding SWFs will be judged. ¶2. (C) Ebraheem expressed familiar Kuwaiti reservations over possible regulation or restriction of SWFs, but also expressed receptiveness to the need for cooperation to forestall a politically motivated backlash against SWFs in the U.S. and elsewhere. He urged Kimmitt to continue dialogue on this issue with the Finance Minister and Managing Director of the Kuwait Investment Authority. ¶3. (C) Kimmitt also urged Ebraheem to support positive Kuwaiti action on Iraq,s sovereign debt. Easing the burden of Saddam-era debt is central to free Iraq,s ability to attract new investment. Ebraheem accepted the need to find ways to support Iraq, including on debt, but emphasized the extreme political sensitivity of any proposal related to Iraq,s debt. He cited the need to develop regional consensus via the GCC as a means of circumventing the Kuwaiti parliament's resistance to unilateral GOK steps. ¶4. (C) Ebraheem raised the issue of reparations paid by Iraq through the UN Compensation Commission, saying this topic was discussed between Iraqi President Talabani and the Amir during Talabani's recent visit. Ebraheem said this issue, too, needed to be handled in a low-key manner and would require involvement of the U.N. He confirmed Kimmitt's understanding that there had been discussion both of lowering the percentage paid by Iraq (currently 5%) and placing future payments in a separate account to be used for reconstruction in Iraq. ¶5. (C) Ebraheem said he would brief the Amir on his discussion with the Dep Sec. ¶6. (U) Deputy Secretary Kimmitt cleared this cable. ********************************************* * For more reporting from Embassy Kuwait, visit: http://www.state.sgov.gov/p/nea/kuwait/?cable s Visit Kuwait's Classified Website: http://www.state.sgov.gov/p/nea/kuwait/ ********************************************* * MISENHEIMER