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.

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SUMMARY
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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

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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

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financial and technical assistance and debt relief and
through new offers of assistance and cooperation.

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DEMARCHE OBJECTIVES
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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

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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.


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- Urge Iraq,s neighbors and friends to strengthen their ties
through the reopening of embassies and consulates and the
appointment of ambassadors.

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REPORTING DEADLINE
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6. (U) Posts are asked to report on their progress with this
demarche by cable to NEA/I no later than Monday, May 12.

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BACKGROUND
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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.

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COUNTRY REPRESENTATION
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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

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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).

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New Debt Arrangements
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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

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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.

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POINT OF CONTACT
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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