ICI ANNUAL REVIEW CONFERENCE - STOCKHOLM, MAY 29,

UNCLAS SECTION 01 OF 05 STATE 060123 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: EAID IR IZ PGOV PREF PREL SW EUN SUBJECT: ICI ANNUAL REVIEW CONFERENCE - STOCKHOLM, MAY 29, 2008 REF: STATE 43799 ¶1. (U) Posts may draw upon this report as needed in their discussions with host governments about Iraq. ¶2. (U) Summary: In a meeting that most participants and commentators agreed helped to improve international perceptions of Iraq, eighty-four countries and twelve international organizations met in Stockholm on May 29, 2008 to mark the first anniversary of the International Compact with Iraq (ICI),complete the first annual Ministerial Review, and chart the way ahead. Nearly all delegations acknowledged that Iraq has made real progress over the year with all three of the ICI "pillars" of security, political reconciliation / democracy building and economic development. Yet nearly all noted much work remains to be done. All agreed that continued success depends on Iraq marshaling its own substantial financial, human and physical resources. Participants noted that Iraq's international partners will need to contribute technical assistance for institutional capacity building, measures to reduce barriers (e.g., avoiding restrictive visa policies),and greater engagement to promote economic and political re-integration, regional cooperation and greater trade and investment. ¶3. (U) Summary continued: Iraq and its major partners pressed remaining creditors to reduce Saddam-era debts on Paris Club terms. Iraq also pressed for canceling its remaining compensation and reparations obligations, and called for continuing the immunities that protect its financial assets from legal attachment. The UN, Sweden, Jordan and France mentioned the need for more humanitarian assistance for refugees and displaced persons. Iraqi officials pointed to programs within Iraq for helping displaced persons and to USD 40 million given for refugees in neighboring countries. The conference concluded with the adoption of the "ICI Stockholm Declaration" that elaborates a set of principles for development cooperation that center on Iraqi ownership of the process, points to possible future co-financings, records agreement to hold the ICI ministerial reviews annually for the remaining life of the Compact (through 2012),and extends an invitation from the Government of Iraq to host next year's ICI ministerial in Baghdad. End summary. ¶4. (U) With unsurpassed hospitality and efficiency Sweden hosted the First Annual Review at the ministerial level of the International Compact with Iraq (ICI) on May 29, 2008. Welcoming remarks were delivered by Swedish Prime Minister Fredrik Reinfeldt, Iraqi Prime Minister Maliki and UN Secretary General Ban Ki-Moon. The results of the First STATE 00060123 002 OF 005 Annual ICI Review Report were presented by Deputy Prime Minister Barham Salih. All pointed to the real progress made since the launching of the ICI on May 3, 2007, in the three key areas ("pillars") of security, political reconciliation, and economic reconstruction and development. DPM Salih said, "it pains Iraqis" that the progress Iraq has made is not adequately understood or appreciated abroad, and not reflected in foreign media reporting on Iraq. ¶5. (U) All noted the improvements in the capabilities of Iraq's security forces and the important contributions that the Iraqi people are making to their own security. They underlined the progress toward political reconciliation as reflected in the strong stand the Maliki government has taken against sectarian extremism and illegal armed groups, and for key legislation such as the laws for the Independent Electoral Commission, Justice and Accountability, Amnesty, Provincial Powers, and Pensions. All favorably noted Iraq's accession to the UN Convention against Corruption and steps to establish a National Institute for Human Rights and a strong and independent judiciary. Both Maliki and Salih noted the progress being made at the provincial level and said that the provincial development strategies would be taken fully into account. ¶6. (U) In a marked improvement in tone from a year ago, many delegates remarked on the notable progress that Iraq has made on both the political and economic fronts and the significance of re-integrating Iraq within its region and the rest of the world. UK Foreign Minister Miliband remarked pointedly on the favorable change in tone, and Finland's Foreign Minister Stubb noted that Iraq soon will be on the border of Europe (referring to Turkey's bid to join the EU). ¶7. (U) Cited often were the indicators that describe the economic progress that Iraq has made since last year, including the reductions in inflation and unemployment, and gains in budget allocations and execution, oil exports and GDP growth. ¶8. (U) The European Commission (EC) and the individual European states were of one voice in expressing their support for Iraq and their intention to increase engagement. The European Union has budget Euros 90 million (about USD 135 million at current exchange rates) for technical and humanitarian assistance in 2008. This is in addition to the Euros 829 million (about USD 1.1 billion at then prevailing rates) disbursed from 2003 through 2007. EC representative Hugues Mingarelli added a strong exhortation to Iraq to strengthen its structures for implementing ICI measures. France pledged to uphold this engagement when it takes over the EU Presidency in June. The UK, Denmark, Spain and Germany said their bilateral assistance programs would continue. Greece pledged to "soon" overcome hurdles and honor its commitment made at the ICI's launch a year ago to reduce Iraq's debt. STATE 00060123 003 OF 005 ¶9. (U) Japan reviewed its substantial development assistance contributions including its grants and soft loans, and noted that it has hosted two conferences for top Iraqis to promote the process of political reconciliation. Korea reaffirmed its ICI launch pledge of USD 200 million in assistance and soft loans and intentions to remain deeply engaged in Iraq through its PRT in Erbil. ¶10. (U) China made a new assistance pledge of about USD 7.2 million on top of the USD 17.3 million it has already delivered. It said that it has already canceled Iraq's sovereign debt (about USD 6 million),and will work with Iraq to settle the amounts owed to China's state-owned enterprises (perhaps USD 8 billion). ¶11. (U) Also making new pledges were Hungary (USD 100,000 for scholarships),and Australia -- which more than doubled its assistance program with a new pledge of AUSD 150 million, including funding for 100 scholarships and a program for Iraqi agricultural development. ¶12. (U) Russia pointed to its agreement to reduce Iraq's debt by about USD 12 billion and its new bilateral agreement with Iraq for trade, investment, education and technical cooperation. ¶13. (U) The new Foreign Minister of Georgia, Ms. Eka Tkeshelashvili, delivered a strong message of political support and complimented Iraq on the improvements in security. ¶14. (U) While railing against "the occupier," Iranian Foreign Minister Mottaki acknowledged the progress Iraq is making and described the elements of Iran's bilateral cooperation for tourism, reconnecting railroads, adding nine electricity transmission lines and improving health care. Perhaps the biggest project will be for dual pipelines to take crude oil from Iraq to the Abadan refinery in Iran, and then to return refined products (e.g., kerosene). Mottaki reconfirmed Iran's offer of USD 1 billion in soft loans and intentions to provide USD 10 million to the International Reconstruction Fund Facility for Iraq (IRFFI). He said Iran will help "rebuild" the holy sites in Najaf and Karbala. Border officials from Iran and Iraq have agreed to meet to discuss issues of common concern. Mottaki pointed to the good that is coming from the Iraq Neighbors Process, and wants particularly for the Neighbors working groups to continue. ¶15. (SBU) In reference to the pledge Saudi Arabia made when the ICI was launched a year ago to reduce Iraq's Saddam-era debt on Paris Club terms, Saudi State Secretary Mr. Madani bin Obeid said the Saudis had sent an "offer letter" to Iraq. However, in a meeting on the margins of the conference Iraq's Finance Minister Bayan Jabr said that no "offer letter" had been received. STATE 00060123 004 OF 005 ¶16. (U) Several international organizations presented their ongoing and planned assistance efforts for Iraq. The OECD is actively engaged in helping Iraq to develop its National Investment Commission. The Islamic Development Bank reaffirmed its pledge to provide up to USD 500 million in financing assistance, reported progress working with Iraqis in the agricultural sector, and appealed to Iraq to establish more flexible mechanisms for coordinating and approving donor assistance. The Arab Monetary Fund is making progress to reschedule Iraq's Saddam-era debt as a final step toward restoring Iraq to full membership. The AMF will offer its training programs to Iraq on a priority basis. The IMF reaffirmed its supportive relationship with Iraq noting that Iraq is on track to obtain the third segment of Paris Club debt relief at the end of 2008. On the World Bank was vague regarding its future plans for working with and supporting the Iraqi government, perhaps reflecting that decisions are needed about staffing in Baghdad. ¶17. (U) There was noteworthy progress for greater diplomatic engagement. Brazil will open an embassy in Baghdad before year-end. Turkey is opening a consulate general in Basra and joining with the UK and Iraq to open a free trade zone on the Kuwaiti border. Germany announced it will open a consulate in Erbil. ¶18. (U) The levels of representation at the event were generally good. At least thirty delegations were headed by ministers, heads of organization, or their senior deputies. Among Iraq's immediate neighbors, Iran, Turkey and Jordan were represented by their foreign ministers. Iraq's Gulf neighbors, however, were represented at relatively low levels. None sent their foreign ministers; only one (Saudi Arabia) sent a minister of state; the rest were represented by division chiefs. ¶19. (U) In the spirit of openness and transparency, the ICI documents and reports, and information about the Stockholm ICI event can be found on-line at: www.IraqCompact.org, www.UNIraq.org/ici.asp, and www.Sweden.gov.se/sb/d/7010. ¶20. (SBU) Comment: The ICI First Annual Review Report was aptly subtitled, "A New Beginning." This theme -- that Iraq is succeeding in achieving a genuine new beginning -- resonated through all of the speeches. Maliki and Salih emphasized that Iraq needs partnerships -- not financial aid. But as noted by UK Foreign Minister Miliband and others, Iraq must keep up its end of the ICI bargain to follow through with key reforms. For their part, Iraq's ICI partners must continue their support in the form of technical assistance for capacity development and, increasingly, for private sector trade and investment. Success will reflect that the leading edge for international engagement will have progressively less to do with a sense of obligation, and more to do with developing mutual opportunities. As DPM Salih STATE 00060123 005 OF 005 noted, "Iraq's resources can help to alleviate needs the world over." To be credible, between now and the next ICI ministerial, Iraq must meet the challenges of passing the Hydrocarbons Laws and other key legislation while improving the effectiveness of ICI implementation. Iraq needs to do a better job at inter-ministerial coordination and become more adept and flexible at coordinating relations with its ICI partners. End comment. RICE