(S) TUWAITHA UPDATE: PREPARING FOR PARIS MEETINGS

S E C R E T BAGHDAD 000410 SIPDIS SIPDIS NEAI: RSCHMIERER NEA/I: PM: TBETTS ISN/RA:KKESSLER S/I:KNUTT L/NPV:THISCH DOE: JSELLEN JS: SNORWOOD OSD: TBENNET E.O. 12958: DECL: 02/06/2018 TAGS: ECON ENRG PARM PREL IZ SUBJECT: (S) TUWAITHA UPDATE: PREPARING FOR PARIS MEETINGS REF: A. STATE 163968 ¶B. BAGHDAD 4126 ¶C. STATE 169324 ¶D. BAGHDAD 2454 ¶E. BAGHDAD 1787 ¶F. BAGHDAD 734 ¶G. BAGHDAD 004227 ¶H. FOR REASONS 1.4 (B) ¶I. (D) AND (H) Classified By: CLASSIFIED BY AMBASSADOR CHARLES RIES, FOR REASONS 1.4 (B),(D) AND (H) ¶1. (S) Summary: Energy Attach Parks and DOE/NNSA Representative Boudreau met with Minister of Science and Technology (MOST) Raid Jahid (FAHMI) on Tuesday evening, Feb 5, 2008, at the Al Rasheed Hotel. The key points included moving the material as quickly as possible after completing repackaging, preparing for meetings possible buyers in Paris next week, assuming liability during transportation of the material, and pre-staging the material from Tuwaitha to a point closer to the Baghdad Airport. Fahmi recognized that the key US goal is to transport the repackaged yellow cake to the buyer and thought contracting could be complete to support a move in March. He and his team are leaving for Paris Feb 8, pending visas. The full committee, including the mercurial Srood Najib representing MFA, will attend discussions with the three prospective buyers. AREVA will meet with the Iraqi team either Feb 12 or 13, GE Feb 14 and Cameco Feb 15. Fahmi wants only Iraqis in the actual negotiations but agreed that both a DOE technical representative and a DOD transport specialist should be valuable on the margins. Regarding Paris, Fahmi said he was not fully ready because there were two key, related unknowns: 1) what price range to expect in a bid; 2) how much the US was going to ask in cost share based on expected US costs for transportation. DOE responded that the updated quantity provided and the quality assessment with each type of material should allow MOST to closely gauge the expected price. The DOE Team included experts well versed in such assessments. On transportation costs and cost sharing, Parks agreed to provide a "ballpark" figure before Friday. Finalizing cost sharing required a decision on delivery place and time as well as consideration of the bids received. On liability, Fahmi agreed in principle that the GOI would accept the risk of losing the yellow cake in transit. He also agreed to the US proposal to "pre-stage" the repackaged material near Baghdad Airport but needed to check with his experts and IRSRA (Iraqi Radioactive Source Regulatory Authority). Several times during the meeting, Fahmi spoke of the importance of having the right questions answered for the Council of Ministers (COM) to obtain their approval for the sale. End Summary Confirms Meeting in Paris/Finalize Contract for March Movement ¶2. (S) Fahmi met with Energy Attach Parks and DOE/NNSA Representative Boudreau Tuesday evening Feb 5 in his quarters at the Al Rasheed Hotel. The Minister confirmed that he and his Committee (eight total) will go to Paris on Friday, Feb 8, pending visas for other team members. Srood (NAJIB) will attend as both a member of the Committee and a representative of the MFA. The Prime Minister's legal counsel, Dr. (JAWAD), will also attend. Fahmi added that he was pleased with the phone calls he had had with GE and Cameco during which he agreed to meeting dates, 14 and 15 February respectively. Fahmi also plans to meet with AREVA. He asked for our help to arrange a phone call with the AREVA representative to ensure the meeting next week would be possible. DOE noted that AREVA would like the Minister to call them and provided him the contact name an number. Parks offered to arrange the call and Fahmi agreed, asking that it occur before he leaves for Paris. (Comment: Lower level call between MOST and AREVA on Feb 8 began dialogue. The Minister and AREVA counterpart are expected to talk on Monday Feb 11 via phone. End Comment) Fahmi stated he was willing to extend negotiations into a second week if necessary. DOE emphasized that the key goal is for him to complete the contract in order to keep up the momentum and move the repackaged material from Tuwaitha to a buyer by early March. Fahmi said he understood and agreed the contract should be complete in March. Ready for the Negotiations? 3.(S) Parks asked if Fahmi felt prepared for the negotiations. Fahmi responded he was not fully prepared because there were two big unknowns. In order to know what price to ask for he needed an accurate value of the material. He asked how the US had determined its quality index for the specific material lines in the updated inventory. Boudreau replied that although there was subjectivity in the assessment, the DOE Team at Tuwaitha had experts with the training and experience to make those assessments and the information provided to the Minster was used by the US to form its own estimates. (Comment: Alex Riedy, the DOE Team leader on-site, was asked the same question the day before by the MOST technical lead, Dr. Ali (MAGEEB) observing the repackaging work. Boudreau's answer echoed Riedy discussion with Mageeb. End Comment) Fahmi identified the second unknown as the cost to the US to transport the material and the amount of the Iraqi cost share with the US. He needed to know the amount of cost share in order to determine the acceptability of a bid. His responsibility is to maximize the value of the sale to Iraq. Parks offered to provide a ball park figure of the total removal cost to the US but reminded Fahmi that Ambassador Ries had specifically stated that the cost share discussion should come late in the process, when Iraq knew how much would be received for the material from the buyer and the US could determine the total removal costs. At that point an appropriate cost share amount could be determined. Parks suggested that the Minister meet with Ambassador Ries and General Wendel to discuss both the cost share and transport issues. Fahmi agreed. ¶4. (C) Fahmi asked what information the buyers had received about the materials and what questions had they asked. He wanted to know what they knew going into the negotiations. Boudreau answered that most questions focused on the chemical composition of materials in specific lines in the inventory and the details of how each line was packed. Each prospective buyer had received a copy of the 2004 inventory. The Minister suggested that Boudreau meet with Mohammed (AL SHARA'A),a member of the Committee and the Director General of the Monitoring at MOST, to discuss the issue in more detail. Boudreau agreed and the meeting is scheduled for Thursday Feb 7. 5.(C) The Minister expressed concern over the falling price of yellow cake and the effect on the sale for Iraq -- maybe it would be better to wait. Parks stated that the US strongly urged that the sale go forward as quickly as possible. Boudreau added that DOE experts believed the down turn in prices could be short lived. Fahmi stated he had been told the same. Staging and Waivers 6.(S) Regarding next steps, DOE raised the MNF-I concept to move up to 25% or more of the repackaged material from Tuwaitha to a location near Baghdad International Airport. Fahmi thought that it would not be a problem since the material was not leaving Iraq. However, he would need to ask the relevant agencies such as IRSRA. Focusing on potential issues that could slow down the final decision by the Council of Ministers, Parks asked what, if any, problem Fahmi expected regarding the three bid waiver and the waiver of the law requiring full payment. Fahmi responded that he did not expect a problem with either waiver when a contract benefiting Iraq was available to show to the Council of Ministers. The meeting closed with Fahmi commenting on the importance of preparing the sale in the right way so that the COM knows that the Committee made every effort to obtain the best value for Iraq. Update ¶7. (S) Minister Fahmi had, in a January 12 discussion, provided insight into the GOI team handling the issue. His Committee had both a Deputy Minister of Industries and a senior official from the Finance Ministry. These two individuals were added to ensure the negotiations accorded with Iraqi rules and regulations and therefore the deal reached would be acceptable to the Council of Ministers. Fahmi also noted that his Committee would sit with the former Tuwaitha Committee, chaired by Srood Najib, in order to obtain their advice, consider adding some of their number to Fahmi's Committee and listen to their recommendations as to obtaining legal and technical advisors. Ries reminded Fahmi that the USG would be looking to negotiate a cost sharing of he yellow cake packaging and removal costs once the sales agreement was reached and the GOI knew the amount it was receiving from the Buyer. Ries added that negotiations would include the determination whether or not the USG would help acquire substitute non-nuclear devises for the four removed irradiators. CROCKER