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 RIYADH 00000708 002.2 OF 006 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. RIYADH 00000708 003.2 OF 006 ¶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 RIYADH 00000708 004.2 OF 006 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. RIYADH 00000708 005.2 OF 006 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 RIYADH 00000708 006.2 OF 006 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