FM BILDT AND U.S. OFFICIALS DISCUSS IRAQ, IRAN

C O N F I D E N T I A L STOCKHOLM 000407

SIPDIS

EUR FOR NB

E.O. 12958: DECL: 06/04/2018
TAGS: PREL PGOV ECON IR IZ SW
SUBJECT: FM BILDT AND U.S. OFFICIALS DISCUSS IRAQ, IRAN

Classified By: Amb. Michael Wood for reasons 1.4 (B) & (D).


1. (C) Summary: On May 28, the day prior to the International
Compact with Iraq (ICI),Deputy Secretary of Treasury Robert
Kimmitt and Amb. Ryan Crocker, accompanied by Amb. Wood, met
with FM Carl Bildt and other MFA officials. Crocker briefed
Bildt on the improving situation in Iraq. Bildt announced
that Scania, a Swedish bus manufacturer, agreed to reopen an
assembly plant in Iraq (the MOU was signed May 30). Bildt
jokingly criticized French FM Kouchner for skipping the ICI.
Bildt said a key to unlocking negotiations with Iran is
offering a security guarantee. End summary.

Iraq Stability
--------------


2. (C) Bildt said with at least 100,000 Iraqis residing in
Sweden, hosting the International Compact with Iraq (ICI) is
an important first step in building a stronger Iraq-Sweden
relationship. He joked that French FM Kouchner's
non-attendance at the ICI could label him as a "traitor to
democracy and freedom."


3. (C) Referencing the NIE on Iraq from September 2007, Bildt
asked Crocker if the security situation in Iraq continued to
improve as the NIE predicted. Crocker said the NIE estimate
was on the low side; the offenses launched in March in Mosul,
Basra and Baghdad are contributing to greater security.
Crocker updated Bildt on the situation in Mosul and Basra,
commending PM Maliki for demonstrating his toughness as a
leader by taking on Iranian-backed insurgents in Basra.


4. (C) Crocker said Iraq will have provincial elections in
the fall--perhaps not by October, the target date, but soon.
He explained that the Kurds will be more supportive of a
decentralized Iraq as they take a long-term look at the
situation.


5. (C) Bildt asked if there has been a fundamental shift
towards stability. Crocker replied there has been an
incremental improvement since last spring, after four years
of a vicious circle. Bildt said the situation is much
improved from his visit to Baghdad in September 2007. They
agreed that Maliki's leadership is stronger than ever and his
relationship with the Kurds has improved.

Iraq's Economy
--------------


6. (C) Kimmitt responded to Bildt's general question about
the oil sector. He said 2008 oil revenues are estimated at
USD 70 billion; with such, Iraq does not need any longer
significant foreign aid, but rather technical assistance to
support a reorientation of its economy to increase production
capacity and deliver infrastructure and essential services.


7. (C) Bildt proudly announced that Scania, the Swedish
manufacturer of buses, trucks and diesel engines, was to sign
an MOU to reopen a bus assembly plant in Iraq.

Turkey and Iran
--------------


8. (C) Bildt stressed the need for Turkish-Iraqi engagement
and the importance of preserving stability in Ankara.
Crocker said dialogue is moving forward and both countries
understand the need to push back on Iran when it asserts
itself. Bildt replied Washington is sending an unclear
message for NGO opinions are drowning out USG policy on the
global stage.


9. (C) Turning to Iran, Kimmitt said Iran's economic problems
are affecting political change. Bildt opined that increasing
political problems could push Iranian FM Mottaki out of
office. He said security guarantees to Iran, e.g. an
agreement not to invade, could be a "key to unlocking
negotiations with Iran."


10. (U) This cable was cleared by Deputy Secretary of
Treasury Kimmitt.
WOOD