JUNE 25 MEETING WITH GOI REGARDING TUWAITHA YELLOW

S E C R E T BAGHDAD 001971 SENSITIVE SIPDIS E.O. 12958: DECL: 06/25/2018 TAGS: CA ECON ENRG IZ KNNP PARM PREL SUBJECT: JUNE 25 MEETING WITH GOI REGARDING TUWAITHA YELLOW CAKE DELIVERY TO CANADIAN BUYER, CAMECO REF: A. SECSTATE 55887 ¶B. BAGHDAD 01775 Classified By: CETI, AMBASSADOR C RIES FOR REASONS 1.4(B),(D) AND (E). ¶1. (S) SUMMARY: EMIN and Energy Attach met on June 25 with Minister of Science and Technology, Raid Fahmi,to hear Fahmi's views about the financial consequences of USG's delivering the 550 MT of natural uranium (Yellow Cake) to Canada after the Sales Contract's June 15 delivery date. Fahmi asked the USG to provide him with a letter explaining why the delivery is being made after the June 15 date and suggested the USG share the financial responsibility for the estimated $23 m reduction in sale proceeds Fahmi expects due to the post-6/15 delivery. EMIN responded that Post will draft a letter explaining the reasons for the so-called "late" delivery and proposed that the USG reduce by half the previously agreed $14 m transportation cost-share in settlement of the issues, (i.e.,for a total of $7 m). Fahmi agreed with EMIN to discuss these proposals with his Committee and therafter with the Council of Ministers.END SUMMARY. ¶2. (S) Fahmi told EMIN he had discussed the delivery with GOI's Yellow Cake Sales Committee. The Committee, he said, was concerned that GOI not absorb all the reduction in sales proceeds resulting from the late delivery. Based on spot market price trends Fahmi's experts estimate the reduction will be $23 m from the Contract's full price of $90 m. He was concerned about possible allegations of corruption because the sale proceeds will not equal the $90 m he had promised to the COM. Fahmi requested Embassy to explain by letter how the late delivery occurred, resulting in the lower price under the GOI-Cameco Sales Contract. EMIN agreed that the Embassy will draft such a letter which will explain that the USG had unilaterally made the transport arrangements based on the need for OPSEC. ¶3. (S) Regarding splitting equally the amount of reduced sale proceeds (estimated by Fahmi at $23 m) between the USG and GOI, Fahmi first noted that GOI would favor (under these circumstances) that USG pay the entire transport cost, thereby eliminating the entire $14 m cost-share previously agreed to be paid by GOI. EMIN countered that USG needed to show Congress that GOI contributed to the cost of the transport. Eliminating the entire $14 m cost-share would not be feasible. Moreover, EMIN reminded Fahmi that USG intended to spend the receipts from the cost-share in Iraq through I-CERP. The Minister worried also that under the circumstances an allegation was possible that GOI was negligent in not insisting on a transport contract with the USG for removing the Yellow Cake to Canada. But Fahmi noted the Committee's view that USG, being in charge of the transport, had significant responsibility for the resulting loss of GOI's sale proceeds. ¶4. (S) EMIN first suggested that USG would take responsibility for a proportionate percentage of the loss, based on GOI's percentage reduction of the sale price. As the $23 m expected market adjusted shortfall was roughly 25% of the $90 m full Contract price that GOI would've received if the YC was delivered by June 15, EMIN offered to drop 25% off of the $14 m cost-share due to the USG (reducing GOI's cost-share by $3.5 m to $10.5 m). Fahmi said he thought this would be insufficient. EMIN then suggested that since the USG had been responsible for transport perhaps we could drop the GOI's cost-share $14 m by one-half to $7 m. Fahmi agreed to consider this once the Embassy's proposal was offered by letter. EMIN agreed to send Fahmi the Embassy's proposal in writing, along with a separate letter on the circumstances attending the transportation scheduling arrangements. ¶5. (S) The Minister suggested the parties await the actual spot market price in effect on the date of delivery (expected to be July 3rd) before finalizing any agreement. EMIN agreed. ¶6. (S) Embassy will prepare both letters requested by Fahmi and clear them with Washington Agencies before discussing further with Minister Fahmi. CROCKER