MFA UPBEAT ON IRAQ NEIGHBORS MINISTERIAL, DEBT

C O N F I D E N T I A L SECTION 01 OF 02 MOSCOW 005425

SIPDIS

SIPDIS

E.O. 12958: DECL: 11/14/2017
TAGS: ECON IS IZ LE PREL RS SY
SUBJECT: MFA UPBEAT ON IRAQ NEIGHBORS MINISTERIAL, DEBT
RELIEF

REF: MOSCOW 5299

Classified By: AMBASSADOR WILLIAM J. BURNS FOR REASONS 1.4 (B,D)



1. (C) Summary: On November 15, MFA Deputy Director for Iraq
Aleksandr Kinshak told us that Russia considered the Iraq
Neighbors Expanded Ministerial in Istanbul "very successful,"
noting that the atmosphere was more positive in Istanbul than
at the previous ministerial in Sharm el Sheikh. Kinshak, who
accompanied DFM Saltanov to the ministerial, stressed that
the participating countries arrived at the conference with
similar approaches to the political and economic challenges
facing the Iraqis. Kinshak argued that Russia and most Arab
countries, including Iran and Syria, supported troop
withdrawal on a "realistic" timetable, but Russia took issue
with Iran's "confrontational tone." He reiterated Russia's
position that the announcement of a "realistic" timetable for
troop withdrawal would provide the necessary "stimulus" to
the Iraqi government and would undermine the extremists. On
bilateral relations, Kinshak was optimistic that a memorandum
of understanding addressing debt relief and key Russian
economic projects in Iraq would be signed by the end of the
year, noting that Iraqi officials were in Moscow November
14-16 to work out the remaining issues. However, Kinshak
claimed that Iraq's recent decision to uphold the
cancellation of Lukoil's oil contract was a sticking point.
End Summary.

Russia Very Upbeat on Iraq Neighbors Ministerial
-------------- ---


2. (C) MFA Deputy Director for Iraq Aleksandr Kinshak, who
accompanied Russian head of delegation Deputy Foreign
Minister Saltanov to Istanbul, characterized the November 1-2
Iraq Neighbors Expanded Ministerial as "very successful" and
noted that the atmosphere in Istanbul was more positive than
at the previous ministerial in Sharm el Sheikh in May. He
listed several reasons for Russia's optimistic assessment.
First, Russia had always called for further
"internationalization" of efforts to establish stability in
Iraq, including the involvement of Iran and Syria. Kinshak
said that the Russian delegation observed that the
delegations generally expressed genuine interest in
developing common approaches to key political and economic
challenges in Iraq, and expressed hope that the follow-up
mechanism would play an important role in facilitating the
work of future Iraq neighbors working groups and
ministerials.


3. (C) Second, the GOR welcomed the participating countries'
unanimous call for national reconciliation, which was
reflected in the joint communique. Kinshak pointed out that
since 2004, Russia had been promoting the need for greater
focus on national reconciliation.


4. (C) Third, the three working groups on energy, refugees,
and security, which convened prior to the Istanbul
ministerial, proved very effective in preparing the framework
for the discussions and the joint communique. Kinshak said
Russia will play an even more active role in all three of the
working groups that will convene before the next expanded
ministerial in Kuwait, which he learned from Turkish
officials would take place in March 2008.

Timed Withdrawal of Coalition Forces
--------------


5. (C) Kinshak said Saltanov stressed in his remarks the
importance of the USG providing a timetable for troop
withdrawal. Saltanov reiterated Russia's familiar position
that an announced timetable would go a long way in promoting
stability and national reconciliation. Kinshak explained
that a withdrawal timetable would provide the necessary
stimulus to the Iraqi government to tackle the "difficult
issues" (e.g., reaching a compromise with Moqadr al-Sadr) and
would eliminate the "reason for being" of the extremists in
Iraq.


6. (C) When asked to elaborate on Russia's positiQ on troop
withdrawal in light of the current political and security
situation in Iraq, Kinshak conceded that discussion of
withdrawal at this time was still a "delicate matter." He
added that the GOR fully agrees with the U.S. position that
troop withdrawal must be in accordance with progress on the
ground; "an artificial date cannot be picked from the air."
However, Kinshak insisted that the U.S. would observe more
and quicker progress in Iraq if it undertook a comprehensive
assessment of the progress of the Iraqi security forces over
the past several years and made a calculated projection when
the security forces would be sufficiently prepared to handle
security matters on their own. Kinshak continued that the

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completion of this calculated assessment would allow the U.S.
to announce significant, but gradual, troop withdrawal, which
would force the Iraqi government to speed up institution
building and national reconciliation.


7. (C) Kinshak asserted that Iran and Syria, "in addition to
most Arab governments and moderate Iraqis in Iraq," support
troop withdrawal on a "realistic" timetable. However,
Kinshak said Iran's problem, which was highlighted in
Istanbul, was that the regime spends too much time blaming
the U.S. for the problems in Iraq when it should be focusing
on practical solutions. When asked, Kinshak described as
"simply stupid" Iran's proposal to set up a regional security
force, made up of Turkey, Syria, Saudi Arabia, and Iran, to
fill in the security vacuum when Coalition forces depart
Iraq.

Debt Relief on Schedule, Hopefully
--------------


8. (C) Kinshak said that Russia is still on track to forgive
up to 90 percent of Iraq's $13 billion debt, but Russia
insists that debt relief is only one aspect of the
multifaceted economic relationship between the two countries
and Iraq must be willing to address Russia's core economic
concerns, including pending oil contracts. He noted that the
co-chairs of the Russia-Iraq intergovernmental commission on
trade and economics -- Iraqi FM Zebari and Russia Energy and
Industry Minister Khristenko -- are still scheduled to meet
in December and will likely sign a memorandum of
understanding addressing debt relief and greater economic
cooperation. Kinshak informed us that a 14-person Iraqi
delegation arrived in Moscow on November 14 for two days of
meetings at the experts (office director) level to work out
the remaining issues in preparation for the December meeting.
Kinshak predicted that if the experts meetings go well, and
if Zebari and the GOI accept Russia's investment and trade
proposals, an MOU should be signed in December.


9. (C) When pushed, Kinshak claimed that one sticking point
for Russia is the Iraqi government's recent decision to
uphold the cancellation of Lukoil's contract for development
of the West Qurna oil field in southern Iraq, although he
maintained that there was no connection between debt relief
and pending oil contracts. (Note: Deputy Finance Minister
Storchak also disavowed that there was a linkage between the
Lukoil contract and debt forgiveness. He did, nevertheless,
underscore the importance of the MOU as an implicit precursor
to a debt deal. See reftel. End note.) Kinshak told us
that the GOR and Lukoil strenuously object to the GOI
decision, and Lukoil senior representatives will travel to
Baghdad "in the near future" to try to work out an
arrangement.


10. (C) Kinshak said the GOR recently convened a meeting
with leading Russian companies interested in doing business
in Iraq, including Lukoil, to reassure the companies that the
GOR was doing its part to facilitate access to the Iraqi
market, but it was up to the companies to work out specific
agreements with the GOI. Kinshak was reluctant to speculate
further on the details of the MOU, but he acknowledged that
Russian businesses (especially Lukoil) have ratcheted up the
lobbying pressure on the GOR to push for a "comprehensive and
advantageous (to Russia)" MOU.
BURNS