ARAB LEAGUE BOYCOTT: STRATEGY FOR IRAQ

C O N F I D E N T I A L BAGHDAD 000764 SIPDIS SIPDIS STATE FOR NEA/I AND NEA/RA TREASURY FOR CMORAVEC COMMERCE FOR ACHOPPIN/FDAVIDSON E.O. 12958: DECL: 03/03/2018 TAGS: KBTC ECON ETRD PREL EFIN IZ SUBJECT: ARAB LEAGUE BOYCOTT: STRATEGY FOR IRAQ REF: A. BAGHDAD 42 ¶B. BAGHDAD 90 ¶C. BAGHDAD 393 Classified By: Economic Counselor Todd P. Schwartz, for reasons 1.4 (b) and (d). ¶1. This is an action request (see para 16). ¶2. (C) SUMMARY: Iraq's status as a "boycotting country" under the League of Arab States' boycott of Israel (Arab League Boycott -- ALB) has been listed as "under review" since the beginning of Operation Iraqi Freedom in March 2003. Some elements in the GOI have cooperated with Embassy and U.S. companies, individuals, and other entities ("U.S. persons") by not implementing ALB provisions in the registration of trademarks. Others, to include private Iraqi firms, continue to sign contracts which include anti-boycott compliance language. As a result, U.S. persons continue to file quarterly reports with the Office of Anti-Boycott Compliance (OAC) of Iraqi contracting instruments that contain proscribed ALB implementation language. Embassy will continue to encourage supervisory ministries in the areas of intellectual property protection to further entrench non-implementation practices for trademark, patent, and copyright registration. Where feasible, we will engage specific GOI ministries to provide alternatives to proscribed language and insist on its immediate use. And we will make clear at the highest levels of the GOI that continued reports of ALB implementation in contracting will result in Iraq's listing as a boycotting country, to the detriment of Iraq's reputation in the U.S. Congress and in international trade and investment circles. END SUMMARY. Jumped the Gun -------------- ¶3. (C) Post reported ref A that, although the existing ambiguity of GOI law required our request of a waiver of Section 565 of the prohibition against contracting with firms that comply with the ALB, we believed that practice under the law had moved in the direction of non-implementation in Iraq of ALB provisions. We gave as evidence the experience of Embassy's contracting officers with Iraqi suppliers who routinely signed contracts with the USG that included specific language countering ALB practices. We later reported ref B what we considered to be good news regarding trademark applications that had been registered and gazetted 
without implementation of ALB provisions. We saw these as indicators that, as the Minister of Industry and Minerals had told us, the GOI had made a determination at the level of Council of Ministers to cease de facto implementation of the Arab League Boycott of Israel (ALB). We suggested that these elements were sufficient for a positive reconsideration of keeping under review Iraq's status as a "boycotting country". ¶4. (C) Post stresses that these facts on the ground are indeed indications of a move toward de facto non-implementation of ALB provisions. However, in other areas of GOI practice, we continue to be informed that specific GOI entities continue with contracting practices that contain ALB implementation elements. ¶5. (C) USG anti-boycott regulations (15 CFR Parts 730-774 (2003),Export Administration Act of 1979 as amended) require U.S. persons to report quarterly to the OAC requests they have received to take actions to comply with, further, or support an unsanctioned foreign boycott. There were 21 prohibited requests in 2007, down from 33 in 2006, with U.S. persons reporting two GOI requests to comply with ALB provisions in Q1 (January-March) 2007; three requests in Q2 (April-June); 14 requests in Q3 (July - September) 2007; and two requests in Q4 (October - December) 2007. (Comment: Unfortunately, it is impossible to determine how many total contracts or tenders were issued over this period; as such we cannot determine on a percentage basis how widespread this problem is. End comment.) "Refusals to do Business" -------------- ¶6. (C) 15 CFR Section 760.2(a) of the anti-boycott regulations prohibits "refusals to do business" and agreements to refuse to do business when those actions are pursuant to a request from a boycotting country. A "refusal to do business" is an action that, inter alia, requires a U.S. person to choose to do business with one person over another on the basis of the ALB against Israel, or to carry out another person's boycott-based selection when they know or have reason to believe that the selection is boycott-based. ¶7. (C) SOUTH OIL COMPANY: The majority of prohibited requests in 2007 came from South Oil Company and relate to language in shipping instructions for hydrocarbon products that state: "Supplies of our purchase order should never be consigned or shipped by steamers included on Israel Boycott List." This language is downloaded from the South Oil web site www.soc-basrah.com. Prohibited Requests for Information -------------- ¶8. (C) MINISTRY OF HEALTH: Several prohibited requests originated with the Ministry of Health (MoH). MoH purchase contracts include the following language requiring a U.S person to supply information about its or another's business relationships with Israel, prohibited under 15 CFR Section 760.2 (d): "Certificate of origin (should certify that the goods are wholly produced or manufactured in the country of origin and do not comprise any parts, raw materials, labor or capital of Israeli origin and should bear the following certification: 'The producer or manufacturer is not a branch or mother company of firms in the Israeli boycott blacklist') is required with the offer from each item offered." ¶9. (C) Certain requests have been connected to trademark applications, also requiring a U.S. person to supply information about its or another's business relationships with Israel, as prohibited under CFR Section 760.2(d) The Way Forward -------------- ¶10. (C) TRADEMARKS: We believe that the type of prohibited requests reported in Q3 2007 related to trademark registration applications have now been addressed, as reported ref A. Embassy will continue to closely monitor trademark registration applications currently in process through the supervisory ministry (Ministry of Industry),as well as related intellectual property protection applications for copyright and patent protection handled through the Ministries of Culture and of Planning and International Cooperation, respectively. We will hold Minister of Industry Fawzi Hariri to his word that he has obtained the cooperation of the Council of Ministers to ensure that these applications are no longer subjected to a de facto implementation of ALB provisions. The Ambassador has sent a letter to Minister Hariri thanking him for his help in addressing this matter in a positive way. ¶11. (C) SOUTH OIL COMPANY: Embassy has little practical ability to influence this company, given its physical presence in and control by specific elements within southern Iraqi communities which are uncooperative toward USG initiatives and interests. Nonetheless, we will engage the Minister of Oil, and request that the Ministry impose a change of contracting language on all entities under the Ministry's authority, replacing the offending shipping instructions with the following: "Shipping instructions: Supplies of our purchase order should not be shipped by Israeli vessels." Embassy understands that this language would not be reportable to the OAC under U.S. regulations. ¶12. (C) MINISTRY OF HEALTH: Embassy will address the Minister of Health to inform him of the prohibited language contained in the Ministry's procurement contracts. We will request the Ministry replace the offending certificate of origin clause with acceptable language as indicated under U.S. statute: "These goods are wholly of U.S. Origin." High Level Engagement -------------- ¶13. (C) USDOC's Secretary Gutierrez raised the issue of Iraqi implementation of the ALB with Prime Minister Nouri al-Maliki on Feb 10 (Baghdad 393) and received a commitment from him "to work with the relevant authorities to find a solution." EMIN and EconCounselor have pressed the issue within the last two months with Deputy Prime Minister Barham Salih, and with Minister of Trade Abd-al-Falah al-Sudani. ¶14. (C) Embassy will continue to use every opportunity to impress upon GOI interlocutors at the highest level the importance of eliminating all implementation of ALB provisions in dealings with U.S. persons. ¶15. (C) We will seek specific assurances that the changes to procurement and contracting language described above be made by the end of Q2 (April - June) 2008. We will stress that, absent these changes, the USG will no longer be able to list Iraq's status as a boycotting country as "under review". We will ensure that our interlocutors understand the negative trade and financial ramifications for the Iraqi economy that will result from the USG's explicit listing of Iraq as a boycotting country, as well as the serious negative impact such a listing will have on Iraq's reputation in the U.S. Congress. Action Request: Proposed Talking Points -------------- ¶16. In order to reinforce the Embassy's message, we ask the Department to provide the following talking points to high-level administration officials visiting Iraq, as well as to CODELS, for use in their meetings with GOI officials. BEGIN TALKING POINTS: -- Your government, including specific ministries and State-Owned Enterprises, continues to implement measures of the Boycott of Israel of the League of Arab States against US-origin companies seeking to conduct business with Iraq. -- Implementation comes in the form of contracts demanding that our companies agree to abide by measures against Israel that are prohibited under US law. -- It has also come in the past in the form of refusing or delaying trademark, patent, and copyright registration for US-origin companies unless they agree to abide by measures that are prohibited under US law. IPR Protection -- We are concerned by reports that the Ministry of Trade's Boycott Office has continued to send such registration applications to the Central Boycott Office in Damascus. -- We are also concerned that applications for trademark registration contain requirements to furnish information about the firm or company's business relationships with Israel. Contracting -- Refusals to do Business -- US law prohibits acceptance of "refusals to do business" when such actions are pursuant to a request from a boycotting country. -- US-origin companies have informed us that SOUTH OIL COMPANY consistently imposes the requirement to sign contracts containing the following boycott language: "Supplies of our purchase order should never be cosigned or shipped by steamers included on Israel Boycott List." -- Documents with this language are found on the web site www.soc-basrah.com. -- The following change to this language would be acceptable under US law: "Supplies of our purchase order should not be shipped by Israeli vessels." Contracting -- Prohibited Requests for Information -- US-origin companies have also informed us that the Ministry of Health consistently imposes the requirement to sign contracts containing the following boycott language: "Certificate of origin should certify that the goods are wholly produced or manufactured in the country of origin and do not comprise parts, raw materials, labor or capital of Israeli origin and it should bear the following ce4rtificdation: 'The producer or manufacturer is not a branch or a mother company of firms in the Israeli boycott blacklist' is required with the offer from each item offered." -- It would be acceptable to change this language to "Certificate of origin should certify that these goods are wholly of U.S. origin". Consequences and Deadline -- We do not believe it is in the interest of Iraq to be spesifically listed as a boycotting country. U.S. firms and investors will have to take this into account when making decisions as to whether to do business with Iraq. They are prohibited by U.S. law from complying with your contracting requirments. The U.S. Congress will take an extremely negative view of such a determination; our ability to obtain continued funding from the Congress for our engagement with you will certainly be jeopardized. -- We ask that you inform us before June 30, 2008, of the actions you intend to take to eliminate de facto implementation of the Arab League Boycott from your government's practices. END TALKING POINTS CROCKER