SAUDIS ON ASSISTING IRAQ

S E C R E T SECTION 01 OF 06 RIYADH 000708

SIPDIS

SIPDIS

DEPARMENT PASS TO NEA/I AND NEA/ARP, BAGHDAD FOR
SATTERFIELD, CETI AND MNF-I

E.O. 12958: DECL: 04/30/2018
TAGS: CIA ECON EFIN IR IZ MCAP MOPS PGOV PHUM PINR
PREL, SA
SUBJECT: SAUDIS ON ASSISTING IRAQ

REF: RIYADH 649

RIYADH 00000708 001.2 OF 006


Classified By: Deputy Chief of Mission Michael Gfoeller
for reasons 1.4(b) and (d).


1. (S) SUMMARY. Coordinator for Economic Transition in Iraq
and Economic Minister-Counselor Ambassador Charles Ries and a
delegation from Embassy Baghdad, MNF-I, and NEA-I visited the
Kingdom of Saudi Arabia on April 28-30 to discuss channeling
$500 million of SAG funding for humanitarian assistance
through the Commanders, Emergency Response Program (CERP)
and press for progress on debt relief negotiations before the
President's visit to the Kingdom, and the International
Compact ministerial on May 29. The delegation met with
Deputy FinMin Hamid al-Baz,y on 4/28, Foreign Minister
Prince Saud al-Faisal on 4/29, and General Intelligence
Services President Prince Muqrin and FinMin Ibrahim al-Assaf
on 4/30, accompanied by PolCouns, PolOff, and TreasOff.
Ambassador Fraker attended the meeting with FinMin al-Assaf,
and DCM Gfoeller joined the meeting with Prince Muqrin.


2. (S) Each SAG official thanked the USG for offering the SAG
a proposal detailing a mechanism to quickly and transparently
deliver assistance to Iraq and noted that helping Iraq's
people remains of paramount importance to the SAG. Prince
Saud and Dr. Baz,y expressed significant interest in the
CERP proposal and the technical details of the program, while
FinMin al-Assaf was more circumspect, recommending the
delegation meet with General Intelligence Service President
Prince Muqrin. Prince Muqrin took the idea in stride,
positively noting that he had also formed a committee of
Saudis to consider how to provide assistance. SAG
interlocutors all delivered the same message regarding debt
relief - the SAG is committed to provide relief, but the
total debt amount owed must first be negotiated, and a GOI
technical team must come prepared with documentation. The
SAG would welcome a visit by the GOI technical team for
negotiations before the International Compact ministerial at
the end of May. As for the SAG contributing funds, discussed
at $500M, for the USG to utilize in Iraq, all the Saudis were
receptive and willing to discuss implementation of this
proposal. END SUMMARY

PROGRESS IN IRAQ, KSA CAN HELP
--------------


3. (S) Ambassador Ries explained to each SAG interlocutor
that the purpose of his visit to the KSA was to follow up on
the earlier visit of Ambassador to Iraq Ryan Crocker and
MNF-I CG GEN David Petraeus (Reftel),whom the President
instructed to explore how the KSA can serve its national
interests by doing more for Iraq. Amb. Ries described how,
as the areas requiring kinetic operations have receded due to
the surge, and more importantly, the Sunni Awakening
Movement, the economic situation in Iraq has improved. He
discussed improvements in areas such as economic growth, oil
production and export, electricity, and agriculture and
described the transition in USG assistance away from
reconstruction. Amb. Ries continued by describing political
progress, including the unifying impact on Iraq's political
factions from PM Maliki,s recent operations in Basrah.
Noting that he would welcome the opening of a Saudi Embassy
in Iraq, he then stressed that there are two areas where the
KSA can really be of assistance even before the SAG is ready
to open an embassy in Baghdad: humanitarian assistance and
debt relief.

HUMANITARIAN ASSISTANCE
--------------


4. (S) Ambassador Ries noted that Iraq is not an easy place

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to do business, especially for NGOs and international
organizations like the World Bank, but after five years in
Iraq, the USG has a lot of expertise, and with 160,000 troops
in country, can securely and effectively deliver assistance
throughout Iraq. He noted the positive results the U.S.
forces have had both militarily and in terms of delivering
economic assistance. In recognition of this and its own
capacity constraints, the GOI has recently transferred $300
million of its own funds to the U.S. Commanders, Emergency
Response Program (CERP).


5. (S) It was highlighted that the USG is prepared to work
out procedures to channel SAG funds through either the CERP
in Iraq or an agreement according to section 607 of the
Foreign Assistance Act, if the SAG is interested. Both
approaches would prevent leakage of funds to other
intermediaries, and the CERP, in particular, would allow for
quick implementation of projects with minimum overhead costs.
Amb Ries recommended an initial SAG allocation of $500
million. In the meeting with Dr. Baz,y, Amb. Ries stressed
that the USG envisions this assistance would be in addition
to Saudi Arabia's $1 billion Madrid Conference pledge and
noted that the USG would still like to see that assistance
disbursed eventually.


6. (S) Discussion included how the GOI has designated certain
sectors on which its CERP funds should be used and how the
SAG would have the same choice. It was added that SAG funds
should be used on projects that benefit all segments of the
Iraqi population and which assist with humanitarian needs.
Amb. Ries provided each SAG interlocutor with a list of
sample projects that the SAG could fund through CERP. At the
request of Dr. Baz,y, the delegation also provided a paper
describing CERP to Minister al-Assaf. On a technical level,
the delegation explained that a memorandum of understanding
(MOU) would be necessary, the USG would have to disclose the
funding to Congress, and the USG and SAG will also need to
discuss how to transfer SAG funds.


7. (S) Dr. Baz,y conveyed that Iraq is important to the SAG,
and it wants to see a safe, secure, prosperous country.
However, he noted there are complex political elements that
must be worked out. He repeated that Iraq is rich in both
human and natural resources several times, but said that
Saudi assistance funding channeled through CERP is an idea
worthy of study. He said it was important to first
understand the program and then present the idea to more
senior SAG authorities. In response to Dr.
Baz'y's inquiry for more details about CERP, including
whether the delegation had anything written on it, CERP
contracting mechanisms, who the contractors are, who prepares
project specifications, and whether there is a limit on the
size of projects, the delegation described in detail these
aspects of the program.


8. (S) Prince Saud also expressed a strong interest in this
Saudi-CERP proposal, repeating Dr. Baz'y,s view that the SAG
needs to seriously study it. Prince Saud said that the SAG
wanted to help Iraqis, but the security situation prevented
delivery of assistance. He repeatedly stated that if the
CERP mechanism is the best way to quickly assist the Iraqi
people, then the SAG should consider it. Adding, he
appreciated the outreach and that it was very kind of the USG
to think of ways for the SAG,s assistance to reach the Iraqi
people. Prince Saud emphasized that the SAG does not seek
publicity when it gives aid and noted, "We are not trying to
make Saudi Arabia popular in Iraq; we are trying to make the
Iraqis popular with each other." He expressed the belief
that the proposed humanitarian projects could provide Iraqis
a small sense of what life could be like with political
reconciliation.

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9. (S) Prince Saud was also interested in the technical
details of the CERP program and USG reconstruction efforts.
He inquired about efforts to provide electricity and lure
back engineers and doctors to Iraq, asking for confirmation
that the assistance would be delivered by the U.S. military
and about the sectoral and geographic allocation of projects.
Prince Saud also wanted to know about CERP contracting,
including whether the program uses local contractors, and how
other donors deliver their humanitarian assistance to Iraq.
Amb. Ries noted that, based on the present circumstances in
Iraq, CERP has an advantage over other assistance mechanisms
because it is managed by local U.S. commanders in Iraq. In
addition, Prince Saud wanted assurance that the GOI approved
of SAG funds being channeled through CERP. Amb. Ries
responded that there was agreement among senior GOI officials
to pursue this proposal.


10. (S) FinMin al-Assaf displayed less overt enthusiasm for
the proposal. Although noting that the proposal is
interesting, he recommended that the delegation discuss the
idea with Prince Muqrin, as Prince Muqrin would know the most
about how to provide assistance efficiently. Nonetheless,
al-Assaf also thanked the USG for offering this assistance
channel to the SAG. He said that Iraq has lost many years of
development and hoped that it would use its new oil windfall
to promote economic growth, stressing that the welfare and
well-being of the Iraqi people is of great interest to the
KSA. Al-Assaf stated "Nothing is more important to us than
having a vibrant, stable country to our north. Everyone
knows the problems to the east of Iraq." He highlighted he
would be meeting World Bank President Zoellick later the same
day and would discuss how the World Bank can overcome
security issues and implement projects in Iraq. He noted
that the SAG remains interested in assisting Iraq directly as
well as opening direct trade links.


11. (S) In a later meeting with Prince Muqrin, he stressed
that the SAG wants money to go to the Iraqi people and wants
them to know it is from the KSA. He said that he had formed
a committee of Saudis, led by the former head of the Red
Crescent, to determine how to most effectively deliver a
large sum of money to needy Iraqis. He gave the committee a
month to prepare a report, which he expects soon. He said
that the SAG wants assistance to reach all Iraqi groups, with
a particular concern for refugees, both inside and outside
the country. Other priorities would be orphans, widows,
displaced persons, and "unemployed, qualified persons."


12. (S) Prince Muqrin explained that Saudi King Abdullah
al-Aziz (who he referred to as "my boss") was reluctant to
engage Iraq and refers to it as the "Iraqi swamp." However,
that view has begun to change, as the SAG has become
concerned that in the future, Iraqis will ask what their
large, rich neighbor did for them during the period of crisis
and the answer will be nothing. Prince Muqrin said he was
instructed not to use the Red Crescent Society as a
distribution channel for Saudi assistance, and that he should
coordinate closely with the Americans. The SAG is also
willing to coordinate with the GOI as necessary. Prince
Muqrin insisted that any assistance be transparent and free
of fraud and repeated that Iraqis must know it is from the
KSA, though not through flags and propaganda. He stressed
that he would like to see the assistance come back in the
form of business opportunities for Saudi companies in Iraq.


13. (S) Amb. Ries responded that the delegation was aware of
the conversations Prince Muqrin has already had with other
senior USG officials regarding assistance and wanted to offer
this as one channel for the SAG to consider. He asked Prince
Muqrin how he wanted to proceed. Prince Muqrin said he would

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share the draft MOU and CERP description provided by the
delegation with his committee for consideration. He will
then share his committee's findings and proposals with the
USG. Prince Muqrin said he was meeting King Abdullah
immediately following the meeting and would discuss the ideas
with the King.

DEBT RELIEF
--------------


14. (S) Amb. Ries summarized the SAG,s previously stated
commitments to provide debt relief for Iraq on Paris
Club-comparable terms. He emphasized that it is important to
clean up Iraq's balance sheet so that it can participate
fully in the global financial system. Amb. Ries mentioned
that the USG wants to see a reinvigorated dialogue on debt
relief, including possible technical negotiations, prior to
the International Compact ministerial in Stockholm on May 29.
He added that an early conclusion to a debt relief agreement
would be mutually beneficial to Iraq and the KSA, and the USG
would like to wrap up the debt issue before the end of the
year.


15. (S) Dr. Baz,y noted that the SAG and GOI technical teams
have held four meetings to discuss the amount of the debt,
which remains the critical outstanding issue. In contrast to
the readouts from the Iraqi technical team, Baz,y described
the most recent meeting in September 2007 as "constructive."
He said that the SAG technical team is always ready to meet
and expressed hope that a technical meeting could happen
before May 29. He asked whether the GOI team has specific
dates in mind for the visit. Amb. Ries replied that the
delegation from Baghdad could work with the GOI to propose
dates. In response to Amb. Ries, suggestion to meet in a
third country to avoid visa problems for the Iraqis, Baz,y
claimed that coming to Riyadh is not that difficult. Baz,y
also said documentation about the debt amount is in the hands
of the Iraqis when Amb. Ries raised the possibility of
providing the USG the documents in order to assist with the
negotiations.


16. (S) Prince Saud repeated many of Dr. Baz'y,s assertions
regarding debt relief. He noted that the discussion about
debt relief has "gone on and on," but the most recent
negotiations had been positive. He said the two sides would
set up a time to finalize negotiations on the interest, which
should finish quickly, adding that the Iraqis now have the
documents. Prince Saud highlighted that he had given a
public commitment to provide Paris Club-comparable debt
relief to Iraq; the parties just need to get down to business
and finalize it.


17. (S) FinMin al-Assaf made the same remarks about debt
relief. He said that the Iraqis have the documentation, and
the important issue to resolve is the actual principal. He
said he was ready to welcome the GOI technical team but
wanted the GOI to come prepared to discuss details. He added
that the SAG has announced its commitment to debt relief, but
the debt amount is larger and more complicated than for other
creditors. He said he was not sure that the issues could be
resolved before the International Compact Ministerial, but
that a technical meeting could take place. Al-Assaf claimed
that during a bilateral meeting in Washington on April 11,
Treasury Deputy Secretary Kimmitt told him that the GOI would
provide a proposal on debt relief soon. He said he looked
forward to seeing the proposal. Ambassador Ries replied that
he would convey the SAG,s willingness to move forward to
Iraqi Minister of Finance Bayan Jabr and that the SAG wants
the GOI to provide a proposal and come to a technical meeting
with supporting documentation.


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POLITICAL RECONCILIATION AND SAUDI EMBASSY IN IRAQ
-------------- --------------


18. (S) Prince Saud lamented that so much suffering could
befall Iraq, adding, "Everything seems to go askew in Iraq.
Good intentions do not achieve their objective, while bad
intentions do." He said that reconciliation is not possible
without the Marja,iya, especially Grand Ayatollah Ali
al-Sistani, joining the fray. He implored the USG to "be
good imperialists" by forcing Sistani to condemn the militias
and violence, arguing that Sistani can affect reconciliation
more than anyone. Prince Saud said that the Shiites in Iraq
should "return some of the favor you have done them." He
concluded that he hoped to see a repeat of the Emperor of
Japan's call on General MacArthur in his office with a visit
by Sistani to General Petraeus, office.


19. (S) Prince Saud also stressed that even if the SAG opened
an embassy in Baghdad, it would not be able to help Iraqis.
While the SAG will have more contact with the Iraqis,
including through visits and more Arab League meetings,
opening an embassy would be very difficult. He said that the
risk of losing diplomats was too high, and the SAG would be
"sending young people to their death." Prince Saud expressed
that the USG no doubt understands how unpalatable this is.
Amb. Ries replied that while security in Baghdad remains a
difficult challenge, he and other members of the USG
delegation felt safe enough to live and work there. Prince
Saud remarked that they are "brave people" and thanked them
for their service in behalf of the Iraqi people.


20. (S) Prince Muqrin also emphasized the risks to a Saudi
ambassador in Baghdad. He rhetorically asked what good an
ambassador would be if he were locked in the International
Zone all day. Amb. Ries explained that the USG has a lot of
experience providing security to its ambassadors in Iraq and
could speak with the Saudis regarding the problem of
organizing a robust security system. He noted that Coalition
Forces provide helicopter support to help many countries,
ambassadors move around the country. He also noted that the
presence of many senior GOI officials in the International
Zone allows diplomats to accomplish significant amounts of
work.

SECURITY PROGRESS
--------------


21. (S) The delegation updated Prince Muqrin on many of the
improvements in security and recent kinetic operations,
reviewing the progress expelling al-Qaeda in Iraq from Anbar
Province and other areas, formation of Sons of Iraq in many
communities, reduction in military and civilian deaths, the
decline in attacks, decreases in ethno-sectarian violence,
Iraqi Security Force improvements and continuing challenges,
and operations against the Special Groups of the Jaysh
al-Mahdi that are committing criminal acts, particularly in
Basra and Baghdad's Sadr City. Prince Muqrin welcomed the
briefing. Regarding ethno-sectarian violence, he cautioned
the USG not to underestimate the role of revenge in Arab
society. He claimed, "The revenge business is still going as
strong as ever."

COMMENT - SAUDIS MOVING WITH US ON IRAQ
--------------


22. (S) After over a year of not wanting to even discuss Iraq
with us, the Saudis are certainly moving forward with us in
this regard. That this working level delegation was so
well-received and that these extremely senior SAG officials
were so receptive to our proposals for Iraqi debt relief and
providing Saudi funds to be utilized through U.S. CERP was

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telling. The Saudis now recognize that Iraq's situation is
improving, although they remain reluctant to actually open
their Embassy in Baghdad. While they retain their suspicions
of Iraqi Prime Minister of Nuri al-Maliki, they see our
proposals as effective steps forward in stabilizing their
Iraqi neighbor while also countering Iran.
FRAKER