FORGIVENESS OF IRAQI DEBT, COMPENSATION NOT

C O N F I D E N T I A L KUWAIT 000071 SIPDIS SIPDIS E.O. 12958: DECL: 01/14/2018 TAGS: EFIN EAID PREL PGOV KU IZ SUBJECT: FORGIVENESS OF IRAQI DEBT, COMPENSATION NOT IMMINENT; MORE ECONOMIC REFORMS TO COME REF: A. KUWAIT 47 ¶B. 07 KUWAIT 1762 ¶C. 07 KUWAIT 1701 Classified By: CDA Alan Misenheimer for reasons 1.4 (b) and (d) ¶1. (C) CDA met on January 14 with Amiri Economic Advisor and former Finance Minister Dr. Yousef Al-Ebraheem to deliver a readout of the President's January 11 meeting with the Amir and follow up on the issues of Iraqi debt and UN Compensation Commission payments. CDA conveyed the President's request of the Amir that the GOK continue to look at both these issues and the Amir's response that "the day will come when we will be in a position to forgive Iraq's debt." CDA also congratulated the GOK on the passage through the National Assembly of four significant economic laws on the eve of the President's visit (Refs A and B). ¶2. (C) Al-Ebraheem said he had both heard and read very positive comments about the President's January 11-12 visit. He reaffirmed his belief that although the eventual forgiveness of Iraqi debt is in the common interest of both countries, it is currently impossible to get the National Assembly or the Kuwaiti public to support debt forgiveness. He emphasized that the GOK would not, however, pressure the GOI to service this debt. Al-Ebraheem said that ultimately it might be possible to make an arrangement whereby Iraq and Kuwait could swap debt for depressed Iraqi assets in sectors that could promote economic growth and strengthen bilateral economic ties. He added that the size and specific terms of Iraq's sovereign debt to Kuwait remain nebulous and will at some point need to be examined more closely. ¶3. (C) On UNCC payments, Al-Ebraheem repeated previous comments (Ref C) that whereas Iraqi debt is a bilateral issue, compensation should only be discussed in the multilateral forum of the UN. Al-Ebraheem added that like debt forgiveness, reduction of compensation payments is currently impossible due to Kuwaiti popular and parliamentary opposition to any such accommodation. He noted that with oil trading at 100 dollars/barrel, the Iraqis have no cause to complain about the five percent of oil revenues flowing to the UNCC. ¶4. (C) Regarding the approval of new economic laws on taxes, public-private partnerships, customs/warehousing, and airline privatization, Al-Ebraheem said, "The Amir really took the country by surprise and showed the quality of his leadership." He said more economic reforms were likely to come, including a general privatization law and a new law regulating public contracting. When CDA asked Al-Ebraheem whether dissolution of the National Assembly was in the offing, Al-Ebraheem said, "Only the Amir knows this, but he has been playing his hand very well" in terms of managing public perceptions and using the veiled threat of dissolution as leverage with the Assembly. Comment -------------- ¶5. (C) While Al-Ebraheem did not specifically discuss the subject of Kuwait's various offers of financial assistance to Iraq over the last three years, the Amir's comments to the President on the issue during their January 11 meeting -- to the effect that Kuwait has offered millions in aid to Iraq "if only they would take it" -- clearly indicate that the Kuwaitis believe the aid ball is in Iraq's court. We will transmit septel an update on the specifics of Kuwait's various aid pledges to Iraq, and from there we will need to work with both the Department and Embassy Baghdad on a strategy to get the aid flowing. ********************************************* * For more reporting from Embassy Kuwait, visit: http://www.state.sgov.gov/p/nea/kuwait/?cable s Visit Kuwait's Classified Website: http://www.state.sgov.gov/p/nea/kuwait/ ********************************************* * MISENHEIMER