Identifier
Created
Classification
Origin
08STATE42157
2008-04-22 13:44:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Secretary of State
Cable title:  

KUWAIT'S CONTRIBUTION TO THE PARIS CONFERENCE ON

Tags:  EAID ECON EFIN KDEM PGOV PREL AE AFIN KU QA SA 
pdf how-to read a cable
VZCZCXYZ0032
OO RUEHWEB

DE RUEHC #2157 1131350
ZNR UUUUU ZZH
O P 221344Z APR 08
FM SECSTATE WASHDC
TO RUEHBUL/AMEMBASSY KABUL IMMEDIATE 0000
RUEHKU/AMEMBASSY KUWAIT IMMEDIATE 0000
INFO RUCNDT/USMISSION USUN NEW YORK PRIORITY 0000
RUEHNO/USMISSION USNATO PRIORITY 0000
UNCLAS STATE 042157 

SIPDIS

SIPDIS
SENSITIVE

E.O. 12958: N/A
TAGS: EAID ECON EFIN KDEM PGOV PREL AE AFIN KU QA SA
SUBJECT: KUWAIT'S CONTRIBUTION TO THE PARIS CONFERENCE ON
AFGHANISTAN

REF: A. STATE 35680

B. KUWAIT 00038

UNCLAS STATE 042157

SIPDIS

SIPDIS
SENSITIVE

E.O. 12958: N/A
TAGS: EAID ECON EFIN KDEM PGOV PREL AE AFIN KU QA SA
SUBJECT: KUWAIT'S CONTRIBUTION TO THE PARIS CONFERENCE ON
AFGHANISTAN

REF: A. STATE 35680

B. KUWAIT 00038


1. (U) This cable contains an action request. See
paragraph 7-9.


2. (SBU) In the lead up to the Paris Support Conference
for Afghanistan on June 12, the U.S. Government is aiming
for significant increases in financial support from the Gulf
States
to bolster the international community's long-term
commitment to Afghanistan and show the insurgents that the
Gulf States support the Afghan Government (Ref A).
Considering the Gulf States are more likely to provide
assistance if the Government of Afghanistan takes the lead
in requesting help, we have recommended that the Afghan
Government approach Gulf States with particular
reconstruction
projects that will require donor support.


3. (SBU) The Kuwait Government expressed a cautiously
positive
response to similar lobbying efforts by the Lithuanians to
fund the road through the center of Afghanistan that would
cross
Ghor province. We strongly support this idea. However, the
Kuwait Fund for
Arab Economic Development (KFAED) tied additional aid to the
Government of Afghanistan signing a repayment agreement on a
$22 million soft loan that the KFAED provided Afghanistan
in 1977 for a sugar factory (Ref B).


4. (SBU) Kuwait and Afghanistan have been debating the loan
terms for years without resolution. The KFAED claims to
have offered the Government of Afghanistan exceptionally
favorable repayment terms, with a 16-year grace period and
a 40-year period to repay the loan at a 0.5 interest rate,
because
Afghanistan qualifies as a Highly Indebted Country. However,
according
to the U.S. Treasury advisor on debt to the Afghan Ministry
of
Finance, the March 2008 loan terms offered by Kuwait fail
to meet the Paris Club debt restructuring criteria under
the Heavily Indebted Poor Country (HIPC)arrangement. The
Paris Club

agreement requires Afghanistan to secure comparable
treatment from all its creditors. The latest loan terms
provided by the KFAED still do not qualify as comparable to
loan terms from other creditors. If the Afghan Government
accepts the latest loan terms provided by the KFAED, it would
be providing more generous treatment to Kuwait than other
creditors, thus violating the Paris Club agreement (and the
U.S.-Afghan bilateral agreement, and probably its other
bilateral agreements),and
possibly complicating receipt of billions of dollars of debt
relief.


5. (SBU) While the U.S. Government has been urging
resolution to this debate, Kuwait's decision to hinge all
future assistance to Afghanistan on the repayment of this
small and antiquated loan appears to be purely
politically-motivated.
Between 2003 and 2005, the Government of Kuwait was
willing to provide $45 million to Afghanistan's
reconstruction despite the existing debt. For example,
when Kuwait provided a $30 million grant for the Kandahar
ring road and salary payments for Afghan Government
employees, Kuwait funneled the money through the World
Bank's Afghan Reconstruction Trust Fund and the Asian
Development Bank. The KFAED administered the grants on
behalf of the Government of Kuwait because they did not
technically consider them to be "KFAED projects."


6. (SBU) Kuwait Emboff reported that it was conceivable
that the Kuwait Government could agree to provide
additional grants for Afghanistan in this matter, but that
this would require a political decision by the Kuwait
Government, not the KFAED (Ref B). Considering
the absence of legal restrictions preventing Kuwait from
providing assistance, and noting the Government of Kuwait's
previous willingness to contribute assistance, the U.S.
Government will continue to press Kuwait to provide financial
assistance to Afghanistan while continuing to work with the
Afghan Government to expediently agree on loan terms.


7. (SBU) Action Request for Embassy Kabul: On April 13,
Assistant
Secretary Boucher suggested President Karzai or Foreign

SIPDIS
Minister Spanta present to Gulf States reconstruction
projects that require financial support.
Department requests Embassy Kabul follow-up with other senior
Afghan government officials, urging them to present specific
projects (as enumerated in Ref A) to the Government of Kuwait
while continuing its effort to reach agreeable loan terms.


8. (SBU) Action Request for Embassy Kuwait: Department
requests
Embassy Kuwait urge senior Kuwait officials to consider
financing more reconstruction projects through
contributions to funds managed by international financial
institutions for Afghanistan in the lead up to the Paris
Conference.


9. (SBU) Both Embassies should express U.S. appreciation
for the tremendous progress made in Afghanistan over the
previous seven years, in large part due to the generosity
of the international community. However, Afghanistan's
stability remains fragile and a long-term commitment
from the international community is required to ensure
Afghanistan never again falls into the hands of the Taliban.
RICE