IRAQI DEBT: MEETING WITH SAUDI MINISTRY OF FINANCE

C O N F I D E N T I A L RIYADH 001923 SIPDIS SIPDIS E.O. 12958: DECL: 09/17/2017 TAGS: EFIN PREL IZ SA SUBJECT: IRAQI DEBT: MEETING WITH SAUDI MINISTRY OF FINANCE Classified By: DCM Michael Gfoeller for reason 1.4(b). ¶1. (C) Summary. In a meeting on September 16 with the DCM, Hamad Al-Baz'y, Deputy Minister for Economic Affairs in the Ministry of Finance, conveyed a lack of urgency in reconciling the debt owed by Iraq to he Kingdom. Al-Baz'y described the three meetings in which the Saudis and the Iraqis have discussed this issue, and shared his expectation that both sides would disclose the amount of debt they believe is owed during the fourth such meeting scheduled to commence on or around September 22 (see discussion of the lack of clarity on the meeting schedule in para. 5) in Riyadh. Al-Baz'y did not appear to be aware of the Iraqi request to suspend payments to the UN Compensation Committee Fund but seemed to instinctively oppose it. End Summary. ¶2. (C) Upon the DCM's prompting, Al-Baz'y explained his view of the history and status of the Kingdom's negotiations with Iraq regarding the debt owed to it by Iraq. Al-Baz'y said that they have had three meeting with the Iraqis on this issue. He reported that the Iraqis came to the first meeting without any documentation relating to the debt and that the team's notion of the amount owed was formed only by what they had "heard." The Iraqis claimed the documentation had been looted, but Al-Baz'y found it "strange" that the Iraqis have documentation of the debt owed to some creditors, e.g., Russia and European countries, but not that relating to the debt owed to the Kingdom. The SAG then provided the Iraqis with the documentation they have. Al-Baz'y said that no progress was made in the second meeting because the Iraqis raised the same questions that the Saudis thought they had answered in the first meeting. He thought the third meeting was better focused (though the Saudis again had to provide the same documentation) and expressed appreciation that the Iraqi Central Bank Governor and Deputy Minister of Finance attended those meetings and will attend the upcoming fourth meeting as well. ¶3. (C) Al-Baz'y expects that the amount of the debt owed will be discussed for the first time during the upcoming meeting. While the SAG has provided the numbers it has to the Iraqis, the Iraqi team has not responded to those numbers. Al-Baz'y says that he hopes the SAG's and the Iraqis' numbers are close, because it will be "quite difficult" if their numbers are far apart. While Al-Baz'y did not comment on the SAG's opening position on the amount owed, he did state that in their view some interest (though not commercial interest) was owed, especially on the $9 billion of cash loans. Al-Baz'y said that it would exceed his mandate to confirm that the SAG remains committed to forgiving 80% of Iraqi debt, and instead observed that it was important to reconcile the numbers before moving to the "next stage." ¶4. (C) The DCM asked for the Kingdom's reaction to the Iraqi request to suspend payments to the UN Compensation Committee Fund. Al-Baz'y did not appear to be aware of this request, but correctly recalled that the Kingdom is still owed for environmental claims. While his response was vague, Al-Baz'y seemed to instinctively oppose the request. ¶5. (U) Al-Baz'y expressed confusion regarding the schedule for the upcoming fourth meeting. Al-Baz'y's understanding is that the Iraqi team has moved its arrival forward to the evening of September 22. While the Saudis could meet that evening, September 23 is Saudi National Day and the SAG will not be able to conduct meetings on that day. Further, Al-Baz'y would like to clarify whether the team's departure has also been moved up a day. FRAKER