TUWAITHA BUYER UPDATE: POST PARIS MEETING

S E C R E T BAGHDAD 000591 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: 02/24/2018 TAGS: ECON ENRG PARM PREL POL EXEC SUBJECT: TUWAITHA BUYER UPDATE: POST PARIS MEETING REF: A. STATE 163968 ¶B. BAGHDAD 4126 ¶C. STATE 169324 ¶D. BAGHDAD 2454 ¶E. BAGHDAD 1787 ¶F. BAGHDAD 734 ¶G. BAGHDAD 004227 ¶H. BAGHDAD 00410 ¶I. BAGHDAD 00427 Classified By: Ambassador Charles Ries for Reasons 1.4 (B),(D) and (H ) 1.(S) Summary: Ambassador Ries met with Minister of Science and Technology (MOST) Raid Jahid (FAHMI) on February 22, 2008 at the Al Rasheed Hotel. Fahmi debriefed his Paris meetings with the three potential yellowcake buyers, Cameco, Areva and GE-Hitachi. Cameco and GE bid on the material. Cameco, the higher bid, set Feb. 29 as the date by which MOST must accept the deal or lose the price and conditions. GE provided its written bid but Areva will not be ready until mid-March. Fahmi wants the Areva bid by Feb 25 so he will have three, avoiding the need for a waiver of the GOI procurement requirements and preserving the Cameco bid option. Ries cited US costs of $55 M to date for Tuwaitha and estimated that the cost share should be $24M. Citing an independent cost study that the entire project should be about $17 M, Fahmi said he could not make a case to the Council of Ministers (COM) for that amount. Fahmi asked if the US could meet Cameco's required delivery date of May 30, 2008. Ries and the MNF-I representative confirmed the US could meet the date. Fahmi asked for Ries help to develop a long-term nuclear energy relationship with the US. Ries recommended that the GOI raise the issue in the on-going U.S.- Iraq Long-term Security Relationship discussions. End Summary Paris ¶2. (S) Fahmi openly discussed the discussions he had had with each of the prospective buyers in Paris, naming Cameco as the best bid, GE as low and the conversation with Areva as "only ten minutes on the deal." In addition to accepting key conditions the GOI requested, such as staged payments and an agreed fixed price, Cameco also followed up quickly with a written proposal detailing the Paris meeting results. Cameco set Feb. 29 as the time limit for MOST to accept the deal as outlined in Paris. After the 29th, both the price and conditions would need to be re-negotiated. Fahmi described 
the GE bid as low, commenting that GE called itself a big company in the world and, in regard to staged payments, "did not do it that way." MOST has asked GE to submit its best offer. Note: MOST confirmed later in the day GE did submit its bid. End Note) Fahmi believes that the difference in bids between Cameco and GE is based on Cameco being a producer, GE a trader. Cameco can buy and hold the yellowcake whereas GE is looking for a quick sale. Areva reportedly said it would take two weeks to finalize and provide its bid. Fahmi, primarily focused on preserving the Cameco option, has asked Areva for its proposal by Feb. 25. His goal is to have all the bids in hand and go to the COM by Feb 29. Cost Sharing/Committee Decision/Council of Ministers ¶3. (S) Ries commented that the situation today looked better than it had a month ago. Even though the GE bid is low, Fahmi can go to the COM with two and possibly three bids. Now the US is ready to discuss cost sharing. Handing Fahmi a one page summary, Ries noted that US costs to date were $55 M and that did not include the air transportation of the material to a buyer. Fahmi responded that he had an independent assessment done of the cost for the entire project which, using Iraqi labor, totaled $17 M. Fahmi cannot go to the COM arguing that even half that sum is going to the US in cost sharing. Ries stated that $24 M would be an amount sufficient to satisfy Washington and pointed out that MOST was receiving additional funds from the US. He had just approved $300 K to help Iraq select a replacement capability for the irradiators removed in January. Fahmi said he would discuss the amount of cost share with his Committee. Regarding how to make the payment to the US, Ries and Fahmi agreed that either the buyer could pay the US or the funds could be deducted from the DFI. ¶4. (S) Fahmi asked if the US could meet the Cameco May 30, 2008 delivery date to Canada. A key part of his briefing to the COM will be to state that the US can support the delivery date. Col Henderson, MNF-I, outlined several steps necessary, such as an interim move from Tuwaitha to Slayer near the Baghdad Airport, that would both save funds, reduce the security risks and speed delivery to the buyer. Fahmi agreed with the steps outlined and Ries stated that the US could meet the delivery date. Fahmi reiterated that his goal is to discuss the bids with his Committee on Tuesday, Feb. 26 and to brief the COM by Feb. 29. Ries urged Fahmi to move quickly and assured him that if he could brief the COM by Feb. 29, then he would work with Washington to finalize cost sharing and push for the necessary steps to deliver the material to the buyer. Long-term U.S.-Iraq Nuclear Cooperation ¶5. (S) As he has in previous discussions, Fahmi asked about establishing a long-term nuclear relationship between the U.S. and Iraq, stressing how important this is to the GOI. Ries responded that the GOI may wish to raise this as an issue in the U.S.-Iraq Long Term Security Relationship dialogue, although he noted that nuclear cooperation agreements can take an extended period of time to negotiate. Access to Tuwaitha Area B ¶6. (S) Fahmi stated that the Iraqi Ministry of Agriculture had collected a number of radiation sources and MOST needed access to the Tuwaitha site to properly store them. They are now in temporary storage and MOST would like to move them as soon as possible. Parks responded that the US will provide suggested procedures for access next week. Those procedures should allow for relatively quick access based on coordination with Col Ra'ad at the site. Fahmi thanked Parks and reiterated it was important to move the sources into the site soon. Status of MOST Senior Deputy Minister Dr. Samir Attar ¶7. (S) MOST Senior Deputy Minister Dr. Samir (ATTAR) was wounded in an IED attack on his vehicle en route to work at MOST on Wednesday, Feb. 20, 2008. Immediately afterwards, AMB. Ries authorized US treatment for his wounds and he was admitted to US Combat Support Hospital in the International Zone for initial treatment and medically evacuated to the USAF Hospital at Balad to treat his left eye. He has been released and is expected to recover sight in the injured eye almost fully within six months. Fahmi was very thankful for the help provided by the US. He stated that the attack on Attar was targeted and that others in MOST had received death threats during the week. Ries stated that he hoped Dr. Attar would recover quickly and that he was glad the U.S. could assist. Next Steps ¶8. (S) Ries and Fahmi agreed to talk via telephone over the next few days to finalize cost sharing and other issues as necessary. Attendees GOI Raid Jahid Fahmi, Minister of Science and Technology U.S. Ambassador Charles Ries, Minister for Economic Affairs Edgar Parks, Energy Attach, U.S. Embassy Robert Boudreau, NNSA Representative, U.S. Embassy Col James Henderson, USA, MNF-I CROCKER