ARAB LEAGUE BOYCOTT: MAINTAINING IRAQ'S "UNDER

C O N F I D E N T I A L SECTION 01 OF 03 BAGHDAD 003826

SIPDIS

E.O. 12958: DECL: 11/23/2015
TAGS: KBCT ETRD PREL EFIN ECON EINV IZ
SUBJECT: ARAB LEAGUE BOYCOTT: MAINTAINING IRAQ'S "UNDER
REVIEW" STATUS

REF: A. BAGHDAD 2467

B. BAGHDAD 764

C. BAGHDAD 42

D. THOME-VINOGRAD-PHILLIPS E-MAILS NOVEMBER 2008

Classified By: Ambassador Ryan C. Crocker for Reasons 1.4 (b,d).


1. (C) SUMMARY: The Embassy continues to make progress on its
action
plan concerning the Arab League Boycott (ALB) of Israel. To
date in
2008, U.S. firms have reported five requests from Government
of Iraq
(GOI) entities to comply with this foreign boycott, down
significantly from previous years. Long isolated from trade
with
the U.S., ministerial officials are typically ignorant of ALB
provisions' negative impact on U.S. firms; this makes raising
their
awareness our biggest challenge. Once they learn about the
issue
and understand that our intentions are apolitical, GOI
officials
typically agree to replace ALB provisions with contractual
language
that is acceptable under U.S. law. Post recommends
maintaining
Iraq's "Under Review" status until June 30, 2009, so that we
may
continue to implement our action plan in an atmosphere of
good faith
and move toward our wider goal of encouraging U.S.-Iraqi
business as
a means of expanding Iraq's economic development. END
SUMMARY.

Action Plan Progress Report
--------------

2. (SBU) In 2006, U.S. companies, individuals and other
entities
("U.S. persons") reported (in accordance with regulations
under 15
C.F.R. Parts 730-774 of 2003) to the U.S. Department of
Commerce
(USDOC) 35 cases in which Iraqi government entities had
requested
them to include Arab League Boycott of Israel language in
contracts,
business registration requests, and/or patent or trademark
applications. In 2007, U.S. persons reported 23 such boycott
requests to USDOC. Nearly all of these cases originated with
three
GOI entities: the Patent and Trademark Office (PTO),the
Ministry of
Health (MOH),and the South Oil Company (SOC). In response,
Post
began engagement with the GOI and devised an action plan
aimed at
(1) finding a way, over the near term, to permit U.S. firms
to do
business legally in Iraq, thereby contributing to the
country's
reconstruction and economic development; and (2) over the
longer
term, moving the GOI toward ALB non-implementation (Reftel B).


3. (SBU) We have had success -- albeit to different degrees
-- in
implementing our action plan. In February and March, we
succeeded
in convincing the Trademark Office to cease requesting ALB
certifications from U.S. persons as part of trademark
applications
(Refs B, C) -- a step we consider to be an actual move in the
direction of de facto ALB non-implementation. In August, MOH
officials agreed to remove ALB language from standard
procurement
contracts with U.S. persons and replace it with alternate
contracting language that is acceptable under U.S. law (Ref
A).
While this is not actual ALB non-implementation, it is a step
that
will permit U.S. firms to supply badly needed quality
medication and
technology to the Iraqi health sector.


4. (C) Thus far, we have had less success with Basrah-based
SOC,
mainly because the company had refused to engage with us.
However,

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Economic Minister Counselor (EMIN) and EconCouns visited
South Oil
on November 12 -- the first U.S. officials to do so in
decades.
EMIN followed up with a letter to SOC officials detailing our
concerns (Ref D). We have explained the problem to Ministry
of Oil
(MOO) officials in the capital and have briefed our Basrah
Regional
Embassy Office (REO). SOC will be a difficult entity with
which to
negotiate; nevertheless, we are confident that with time we
will
ultimately be able to convince officials there to follow the
lead of
their counterparts at the MOH and the Trademark Office.
Thanks to
our efforts, in part, USDOC has only received five reports of
prohibited ALB request reports through the first three
quarters of
CY 2008.

Identifying the Problems and Raising Awareness
-------------- -

4. (SBU) Aside from SOC, our major challenge at this stage is
to
discover which GOI entities enforce ALB provisions and which
do not.
Some ministries have upgraded or redrafted their standard
operating
procedures since 2003, but many still operate under
regulations or
use standard contracting language from the Saddam era, which
typically include ALB provisions. Many officials are
completely
unfamiliar with the ALB -- or at least with the impact it has
under
U.S. law for U.S. businesses. This makes discovering which
entities
use ALB provisions "step one," and then directly negotiating
with
ministerial officials, contracting officers, lawyers and
often even
the minister to raise their awareness "step two."


5. (SBU) The process is painstaking, but it has yielded
results in
addition to those noted above. For example, in studying the
Ministry of Trade's (MOT) procedures for registering foreign
firms,
we discovered requirements that companies submit paperwork
declaring
that they honor the ALB. We raised the problem with the
Minister
and with the appropriate Director General, asking that the
requirement be removed and explaining the negative impact it
had on
U.S.-Iraqi trade. They could not immediately agree to our
request
(doing so requires promulgation of new regulations -- a
painfully
slow process in Iraq),but they did reassure us that the
requirement
will not, in practice, be applied to U.S. persons. In
another case,
a U.S. supplier to the Ministry of Agriculture discovered ALB
language in a procurement contract. The U.S. firm devised
its own
expedient solution by having a European subsidiary sign the
contract, but the case served to make the problem known to
us, so
that we could begin to engage. Both these cases demonstrate
the
long road we must travel to achieve our ultimate goal of
complete
ALB non-implementation. However, both also show the
willingness of
Iraqi officials to make accommodations that contribute to our
wider
goal of encouraging U.S.-Iraqi business.

Maintaining an Atmosphere of Good Faith
--------------

6. (C) Indeed, GOI officials have impressed us with how
willing they
are -- once aware of the problem -- to replace ALB provisions
with
alternate language that does not violate U.S. law. However,
this
requires establishing an atmosphere of good will. We are

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quick to
point out that, in this context, the USG regards the ALB as
principally a trade issue, rather than as a political issue.
Politically, the USG fully supports the GOI's rapprochement
with its
Arab League partners and we do not want the ALB issue to get
in the
middle of that process. And while our ultimate goal is full
Iraqi
non-implementation of the ALB, our main focus is not to use
this
issue to influence Iraq's foreign policy toward Israel. We
are
mainly focused on increasing U.S.-Iraqi trade, on giving
Iraqi
ministries access to high quality competitive U.S. goods and
services; and on improving Iraq's overall business climate --
all
goals our interlocutors typically share. Once this measure
of good
faith is established, we find we can move forward.

Recommendations
--------------

7. (SBU) Maintaining good faith will be the key to continued
implementation of our ALB action plan and to moving GOI
officials
beyond a spirit of willingness to resolve ALB cases on a
case-by-
case basis in order to promote Iraqi development through
trade, and
toward an eventual policy of non-ALB implementation. Based
on this
and on our success thus far, Post recommends maintaining
Iraq's
"Under Review" status until June 30, 2009, at which time we
will
again reevaluate our progress and the road ahead.
CROCKER