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.

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For more reporting from Embassy Kuwait, visit:
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Visit Kuwait's Classified Website:
http://www.state.sgov.gov/p/nea/kuwait/
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MISENHEIMER