RESPONSE TO ACTION REQUEST OF WAY FORWARD ON ASSET TRANSFER

UNCLAS BAGHDAD 001839 SIPDIS STATE FOR NEA/I, L, INL/I E.O. 12958: N/A TAGS: EAID PREL IZ REL UK SUBJECT: RESPONSE TO ACTION REQUEST OF WAY FORWARD ON ASSET TRANSFER REF: SECSTATE 35260 ¶1. SUMMARY: Over the past few months, Mission has raised with GOI officials our need to secure written acceptance of the transfer of major USG-financed assets, pressing for resolution of this long-standing issue. Based on these discussions, we believe that the most viable means of achieving an asset transfer agreement is through a series of Memoranda of Understanding (MOU) between the Department of State (DOS) and the applicable Ministries within the Government of the Republic of Iraq (GOI) that will address asset transfers and that contain a statement that no claims may be made against the United States Government (USG) in connection with these assets. Our proposed memoranda would also state that the GOI will be responsible for all operation and maintenance (O&M) following transfer. When signed, these MOUs would release the USG from liability for: a) assets already transferred to the GOI, whether through mutual agreement or a unilateral process; b) assets completed but not yet transferred to the GOI. Post will continue to press the subject with the Ministry of Finance (MoF) and Ministry of Planning & Development Cooperation (MoPDC). We will also work through them to gain PM Maliki's endorsement of this course of action in the form of a letter or memo that will serve to strengthen our hand and give individual ministers the political cover to execute the MOUs. Post will also continue efforts to improve the process for the functional transfer of assets to designated GOI entities, in their current condition, in a manner sustainable by the GOI. END SUMMARY. - - - - - - - - - - - - MOU BETWEEN USG AND GOI - - - - - - - - - - - - ¶2. Mission is in receipt of the draft MOU prepared by L, and understands its underlying intent. Our discussions with GOI officials on this subject, however, indicate that it would be a very tough sell. ITAO, in cooperation with the Embassy's joint Asset Recognition and Transfer Operations Group (ARTOG),has prepared a version that may have a greater chance of succeeding in the current Iraqi political environment. ¶3. Our proposed MOU will seek to document USG transfer to the GOI of any DOS-funded capital asset over $250,000 in a manner that protects the USG from liability and responsibility for O&M. In accordance with our discussions with the Ministry of Finance, the applicable GOI Line Ministers will be signature authorities for this MOU. We will seek a communication from the Prime Minister to all relevant Line Ministers authorizing/encouraging them to work directly with us to conclude a MOU for asset transfer in their areas of responsibility. We propose that the MOU be accompanied by a transfer letter that will document assets already transferred to the GOI (whether through mutual agreement or unilateral process) as well as assets already completed but not yet transferred to the GOI. This approach will enable transfer of projects from multiple reconstruction programs. ¶4. We will coordinate this draft MOU through the Baghdad Asset Recognition and Transfer Operations Group (ARTOG) and then submit it to the Department's Legal Advisor for review and approval. If the GOI ministries do not accept the MOU, post will document the given reasons and consult with L before proposing any adjustments to the MOU. Post will continue to negotiate the MOU with the intention of concluding the MOU before expiration of Iraq Relief & Reconstruction Fund (IRRF) obligation authority on September 30, 2008. Post is also developing a process for supporting the process of functional transfer, to include information and advice on effective Iraqi assumption of Operations, Maintenance and Sustainability, and to design and implement procedures for end-use-monitoring that will allow periodic reviews on the status of major transferred assets to ascertain that assets are being used for or in support of their intended purpose. - - - - - - - - - - - APPENDICIES TO THE MOU - - - -- - - - - - - - ¶5. The data requested as an appendix to the MOU represents thousands of records of data. While a list of the projects would be beneficial at the presentation of the MOU to the GOI, it is recommended that the list not be made a part of the MOU document, especially since the information is still changing on a daily basis. The list of projects (data as of March 28, 2008) was presented to the Minister of Finance and the Minister of Planning & Development Cooperation by Ambassador Ries on April 7, 2008. The current list of USG funded projects will be presented to each Ministry along with the Transfer Letter. (A draft Ministry Transfer Letter will be forwarded to L for approval.) It is intended that these letters in conjunction with the MOU will provide a uniform method for sustainable transfer and release from liability for the USG mission in Iraq. - - - - - - - - - -- - - - INTER-AGENCY MOU and ARTOG - - - - - - - - - - - - - ¶6. Post will draft an inter-agency process on procedures for asset recognition and transfer (ART) of USG funded capital assets to the GOI. A charter will also be drafted to reform the inter-agency ART operations/working group (ARTOG),which has existed since 2006, in support of unified ART efforts and improved coordination with the GOI. The process and charter will submitted to Legal for review. - - - - - - - - - - - REALISTIC EXPECTATIONS - - -- - - - - - - - - ¶7. Our discussions with GOI officials on asset transfer - with DPM, MoF, MoPDC - lead us to believe that we must moderate our expectations. GOI ministers have already balked at the prospect of signing blanket agreements. They will likely accept our lists of assets, but will want to document any incomplete projects, or inferior design, materials, or workmanship. This will take time. Our MOU will stipulate acceptance of assets "as is," but we expect a natural caution to be exercised. Iraqi ministers are averse to accepting responsibility for any action that may subject them to accusations of incompetence or corruption in future. This negotiation will take time and the asset transfer program itself will require manpower, time and resources to negotiate, document and implement. - - - - - - - PRDC PROJECTS - - - - - - - ¶8. Two kinds of projects - PRDC and Rule of Law - have already established separate procedures for transfer and O&M. PRDC projects that fall under the FY07 supplemental are directed to have 'Letters of Sustainment' (LOS) which become part of the documentation and close-out package. However, an LOS was not included in the FY06 project packages. Post will ensure that asset transfer and release from liability is part of the close-out process for PRDC projects. Asset transfer documentation becomes part of the close-out documentation and is scanned for uploading into the IRMS database. This documentation represents tens of thousands of pages of information and it is not suitable for transmission over the DOS cable system. Post requests a point of contact if this documentation is required. It should also be noted that the separation and review of these documents may be very difficult without the direct use of the IRMS database. Through the ARTOG, Post is also evaluating the ART process for inclusion of letters of sustainment for all future U.S. funded projects. - - - - - -- - - - - RULE OF LAW PROJECTS - - - - - -- - - - - ¶9. To date, the asset transfer mechanism for Rule of Law capital assets - including facilities for law enforcement, judicial and corrections systems-has fallen under the transfer processes used by the relative executing agencies, usually the Gulf Region Division (GRD) of the U.S. Army Corps of Engineers (USACE). INL has oversight responsibility for all IRRF- and INCLE-funded prison construction projects, which are being built under GRD-managed contracts. Post's Rule of Law Coordinator's Office (ROLC) has also obtained letters of sustainment for some projects with the Ministry of Justice. The first official handover of an IRRF-funded prison facility to the Ministry of Justice is due to be conducted in June 2008. ROLC and INL will work with ITAO to ensure that transfers for ROL project track the capital asset transfer and release of liability procedures described in this cable. Butenis