U/S JEFFERY MEETS WITH IRAQI FINANCE MINISTER TO

C O N F I D E N T I A L BAGHDAD 000593

SIPDIS

SIPDIS

E.O. 12958: DECL: 02/27/2018
TAGS: ECON EFIN EINV ENRG
SUBJECT: U/S JEFFERY MEETS WITH IRAQI FINANCE MINISTER TO
DISCUSS THIS YEAR'S PRIORITIES, HYDROCARBONS

Classified By: ECONOMIC COUNSELOR TODD SCHWARTZ for reasons
1.4 b and d


1. (C) SUMMARY: In a February 26 meeting with U/S for
Economic, Energy and Agricultural Affairs Reuben Jeffery and
Iraqi Finance Minister Bayan Jabr, Jabr indicated his main
goals for 2008 are to secure debt relief from Gulf state
debtors, restructure state banks, and further increase budget
execution. He touched on the Task Force for Business
Stability Operations (TF-BSO) project to develop a
Western-style hotel in the International Zone. Jabr also
said the Minister of Oil's proposal for technical service
agreements (TSA) will only delay hydrocarbons legislation
(HCL) and that to resolve the current impasse the Prime
Minister and the Presidency Council (PC) should have a
low-profile, private meeting and that Tawafuq support was
crucial. END SUMMARY


2. (C) Finance Minister Bayan Jabr discussed his Ministry's
priorities for the year during a February 26 meeting with U/S
Jeffery. Jabr said he believed the 2008 budget would be
signed by the Presidency Council (PC),but noted it was part
of a package of three laws that included the recently-vetoed
Provincial Powers law. He said the cash carry over from 2007
has been going well, with over "USD 9 billion" in ministerial
and provincial bank accounts. He said while the Ministry of
Finance (MoF) does not earn interest on this money, he was
happy because the funds help with investment and job
creation. Jabr also touted the success of the MoF's USD 200
million infusion in 2006 to the Real Estate Bank, which in
2007 resulted in 4,500 houses being built, funded by
mortgages from that bank. For 2008 the goal is for the Real
Estate Bank to give out mortgages for 10,000 houses to be
built (average mortgage is USD 10,000). Jabr's senior
advisor Mr. Aziz chimed in that each new house has 100-150
components that needed to be built, creating many jobs.


3. (C) Jabr then laid out three other major goals for his
Ministry this year: 1) gaining debt relief from Iraq's Gulf
creditors, which Jabr characterized as particularly difficult
politically; 2) restructuring Iraq's two state banks and
installing core banking systems; and 3) increasing budget
execution by hosting a major workshop to connect
international investors and companies with provincial
authorities. Jabr believes connecting businessmen with
provincial officials is "needed for budget execution".


4. (C) Jabr seemed especially enthusiastic to update U/S
Jeffery on his work with TF-BSO. He said that he had located
land for a "Marriot-style" hotel to be built in the
International Zone, with the help of TF-BSO. Jabr
highlighted his work with TF-BSO to explore a VISA card that
would work not just in Iraqi banks, but anywhere in the
world.


5. (C) U/S Jeffery reiterated to Jabr that resolving the HCL
impasse is crucial for Iraq to get the most benefit from its
resources and should therefore be a priority for the
government. The U/S asked Jabr how he would recommend
getting this done. Jabr said he believed a low-profile
meeting of all political leaders is what is needed,
specifically citing the "Executive Council" as the
appropriate body for that. He said he had done this with the
KRG Finance Minister for the 2008 budget and gained some
major concessions, including the KRG accepting Board of
Supreme Audit personnel into its administration and having to
open KRG telecommunications space to other companies. Jabr
stressed that these negotiations were "done all in a room
with no public attention, such as TV cameras." Jabr
recommended using the CoR recess period to get a workable HCL
draft for the CoR by solving the "Kurdish issues", and to
then move forward on the draft as soon as the CoR came into
session.


6. (C) Jabr was extremely critical of Oil Minister Husayn
Shahristani's proposal to begin TSAs in lieu of a new HCL. He
strongly believes TSAs will delay the HCL process. He agreed
that delay in passing the HCL is detrimental to Iraq's
efforts to bring in major international investors to the
energy sector. Jabr passed to the U/S an assessment done by
MoF experts on Shahristani's TSA proposal, which Embassy has
translated and sent to the Department via E-mail.


7. (U) This cable was cleared by U/S Jeffery during his visit.
CROCKER