DEMARCHE: PARTICIPATION IN INT'L COMPACT WITH

UNCLAS SECTION 01 OF 08 STATE 043799 SIPDIS SENSITIVE SIPDIS E.O. 12958: N/A TAGS: EAID ECON EFIN EINV PGOV PREL IZ SUBJECT: DEMARCHE: PARTICIPATION IN INT'L COMPACT WITH IRAQ MINISTERIAL REF: A. 08 STOCKHOLM 278 ¶B. 08 KUWAIT 435 ¶C. 08 USEU BRUSSELS 583 ¶D. 07 STATE 47346 ¶1. (SBU) This is an action request. Please see paragraph five. -------------- SUMMARY -------------- ¶2. (U) The first anniversary International Compact with Iraq (ICI) Ministerial will be held in Stockholm, Sweden on May 29, 2008. The meeting will be hosted by the Government of Sweden and co-chaired by Iraqi Prime Minister Nouri Al-Maliki and UN Secretary General Ban Ki-Moon. ¶3. (U) As noted in the ICI invitation, since its launch in Sharm El-Sheikh, Egypt, on May 3, 2007, "the International Compact with Iraq (ICI) has been a key vehicle for developing STATE 00043799 002 OF 008 a mutually reinforcing dynamic of national consensus and international support for Iraq. The ICI has emerged as the main framework for cooperation between Iraq and international donors in the major spheres of...governance, reconstruction, economic and social recovery and human rights. The Conference in Stockholm will provide an opportunity for the participants to review the progress made in achieving the objectives of the ICI and discuss further steps toward fulfilling its objectives. The Iraq Compact Annual Report is currently being finalized." All invited countries and organizations are to receive a copy of the report prior to the Conference. ¶4. (U) The United States Government,s goals for the ICI Ministerial are to: - Solidify and expand international support for the Government of Iraq (GoI); - Consolidate and extend gains made during the first year of the ICI, e.g., for budget execution, hydrocarbons sector reform, agricultural development, state bank and financial sector restructuring and anti-corruption. - Clarify how the international community will support Iraq's reform goals including through meeting prior pledges of STATE 00043799 003 OF 008 financial and technical assistance and debt relief and through new offers of assistance and cooperation. -------------- DEMARCHE OBJECTIVES -------------- ¶5. (SBU) In an effort to lay the groundwork for the ICI Ministerial, Department requests action addressees to pursue the following objectives with host governments and participating international organizations, particularly the Arab Monetary Fund, Islamic Development Bank, Arab Fund for Economic and Social Development and OECD-MENA. - Urge all countries and institutions to be represented at the ministerial level, particularly members of the ICI Preparatory Group (see list in paragraph 8). - Encourage those attendees that have already pledged assistance to come prepared to update the group on progress made towards delivering on pledges (see list in paragraph 8). - Recommend that host government consider announcing intentions to work with the ICI Secretariat to identify specific technical assistance needs as related to the areas covered in the Compact (e.g., for ministerial or provincial STATE 00043799 004 OF 008 capacity development, education, health care, rule of law, good governance or human rights). - Encourage participants to consider showing their support for Iraq through multilateral assistance, such as contributing for projects such as technical assistance to either or both of the UN Development Group or World Bank Iraqi Trust Funds, which together comprise the International Reconstruction Fund Facility for Iraq (IRFFI). - Urge creditor countries that have not yet reached bilateral debt reduction agreements on Paris Club-comparable terms to do so before the end of 2008, so they can start to receive payments on schedule in 2009 or before. (See paragraph 9 for more details.) - Suggest to countries that may have little to give by way of financial and technical assistance or debt relief that they consider contributing with gestures that demonstrate desires to establish good and growing relations, including assistance for Iraqi refugees, student or teacher exchanges, sister city or brother university programs, or offers of medical treatment for children and others with special needs for common as well as war-related afflictions. STATE 00043799 005 OF 008 - Urge Iraq,s neighbors and friends to strengthen their ties through the reopening of embassies and consulates and the appointment of ambassadors. -------------- REPORTING DEADLINE -------------- ¶6. (U) Posts are asked to report on their progress with this demarche by cable to NEA/I no later than Monday, May 12. -------------- BACKGROUND -------------- ¶7. (U) The ICI Conference is part of a series of very high level conferences intended to provide Iraq with the international coordination and support it needs in order to address its most pressing internal and external issues. The Secretary of State will lead the U.S. delegation. The full SIPDIS list of those accompanying the Secretary will be provided to Embassy Stockholm and the conference organizers separately when it becomes available. -------------- COUNTRY REPRESENTATION -------------- STATE 00043799 006 OF 008 ¶8. (U) At the May 2007 launching of the ICI the following countries and organizations were represented by ministers or equivalent: Armenia, Bahrain, Bulgaria, China, Denmark, Egypt, Estonia, Germany, Greece, Italy, Kuwait, Korea (ROK), Lithuania, Macedonia, Oman, Poland, Qatar, Romania, Saudi Arabia, Sweden, Turkey, United Arab Emirates (UAE),United Kingdom, European Union, Islamic Development Bank, League of Arab States, and Organization of the Islamic Conference. -- The members of the Preparatory Group for the ICI were Iraq, United Nations, World Bank, International Monetary Fund, Arab Fund for Social and Economic Development, Islamic Development Bank, European Union/Commission, Japan, South Korea, United States, Canada (as former IRFFI Chair),United Kingdom, Germany, France, Italy, Spain, Saudi Arabia, Kuwait and the United Arab Emirates. -- The following countries pledged financial or technical assistance at Sharm el-Sheikh: Australia (over $20 million), China ($6.5 million in new assistance, plus debt reduction on Paris Club terms),Denmark ($35 million),Korea ($200 million),Spain ($20 million),and the UK ($400 million). -- The following countries have substantial amounts of STATE 00043799 007 OF 008 unsettled outstanding Iraqi debt: Brazil(est. $427 million), China (est. $6-$9 billion),Egypt (est. $800 million to $1.3 billion),Greece (est. $231 million),Jordan (est. $2 billion),Kuwait (est. $8 billion),Morocco (est. $11 million),Pakistan (est. $83 million),Poland (est. $786 million),Qatar (est. $5 billion) , Saudi Arabia (est. $16-$39 billion),Turkey (est. $2 billion) and the UAE (est. $4 billion). -------------- New Debt Arrangements -------------- ¶9. (U) Iraq has been a responsible debtor country and has made good faith efforts to reach debt agreements with its creditors. For the creditor countries that have not yet reached debt reduction agreements, however, by the end of 2008 Iraq intends to set up a suspense account, setting aside funds for future debt payments for agreements negotiated after 2008. These payments will be calculated on Paris Club terms and will be available for disbursement after bilateral agreements are concluded. Countries that have signed agreements will start receiving interest payments in 2009 and principal payments in 2011. Thus, it is in the interest of the outstanding creditor countries to conclude bilateral debt reduction agreements with Iraq before end-2008. Some STATE 00043799 008 OF 008 countries might be able to receive lump-sum cash payments at 10.25 cents on the dollar rather than payments over time, and these payments could be made in 2008. -------------- POINT OF CONTACT -------------- ¶10. (U) Questions or concerns about this demarche or the Conference should be directed to Kevin Taecker, NEA/I/ECON, 1-202-647-6314, TAECKERKR2-AT-STATE.SGOV.GOV or TAECKERKR2-AT-STATE.GOV. RICE