CWC: WRAP-UP FOR SEPTEMBER 8-12, 2008

UNCLAS THE HAGUE 000776

SENSITIVE
SIPDIS

STATE FOR ISN/CB, VCI/CCA, L/NPV, IO/MPR,
SECDEF FOR OSD/GSA/CN,CP>
JOINT STAFF FOR DD PMA-A FOR WTC
COMMERCE FOR BIS (ROBERTS AND DENYER)
NSC FOR FLY
WINPAC FOR WALTER

E.O. 12958: N/A
TAGS: PARM PREL CWC
SUBJECT: CWC: WRAP-UP FOR SEPTEMBER 8-12, 2008

REF: THE HAGUE 755

This is CWC-040-08

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SUMMARY
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1. (SBU) Budget negotiations began in earnest
September 8 and a consultation on the External
Auditor's Report was held on September 10. The
Western European and Others Group (WEOG) met twice,
once for its regular weekly discussion and again on
September 11 as the "WEOG PLUS" (including non-WEOG
European Union Countries, Japan and South Korea) for
a debrief from members of the visiting team just back
from the Shchuchye destruction facility in the
Russian Federation, including ISN/CB Director
Mikulak.


2. (SBU) The U.S. Delegation and others continued to
push for an early meeting on industry cluster issues
against the resistance of the Technical Secretariat;
Ambassador Javits even raised our concerns with the
Director General. A meeting has subsequently been
scheduled for September 29. The Italian delegation
invited Amb. Javits, German Amb. Burkart and Delreps
to discuss the upcoming conference in Florence on low
concentrations and Other Chemical Production
Facilities (OCPFs).


3. (SBU) ISN/EX Deputy Executive Director Bill
Amoroso visited September 11-12. His productive
round of discussions included two new prospects, a
possible co-occupant for the Delegation's office and
standardizing the Del's leases within State's
Overseas Buildings Operations (OBO).

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BUDGET: VERIFICATION
--------------


4. (U) On September 8, budget facilitator Martin
Strub (Switzerland) chaired the first consultation on
the draft 2009 budget after the summer break.
Following Strub's previously-circulated schedule of
meetings, the consultations focused on the budget for
the Verification Division. Horst Reeps (Director,
Verification) gave an overview of planned activities
for 2009 and clarified some portions of his
division's budget. Reeps reported that he expects
China and Russia to start making electronic
declarations in 2009. In addition to the countries
already making e-declarations, this would mean that
over 70% of the total number of annual declarations
would be provided to the TS electronically. In
conjunction with the International Cooperation and
Assistance Division (ICA),Reeps noted that his
division will conduct four workshops on e-
declarations and will hold a number of bilateral
meetings with national authorities to promote
providing declarations electronically and to
introduce the TS's e-declaration software (Electronic
Data submission for National Authorities, EDNA),
which will be released by the end of 2008.


5. (U) On inspections, Reeps stated that, due to the
new site selection methodology introduced in January
2008, the number of inspections to countries with
more Schedule 3 facilities and OCPFs has increased
and will continue to do so in 2009. Before
addressing the TS's plans for bio-sampling in 2009,
Reeps posited that sampling and analysis (S&A) at
Schedule 2 facilities has been successful and useful
and said that he expects the use of S&A to continue
smoothly without any problems. Due to the extremely
high investment required to develop in-house bio-
sampling capabilities, Reeps said that the TS instead
has decided to build up a network of labs and out-
source bio-sampling. Reeps' division will bring in
an expert to assist with development.


6. (U) The Netherlands suggested revising many of the
key performance indicators (KPIs) to reflect results
that the TS can strive for -- instead of results that
depend more on States Parties rather than the TS.
South Africa and Iran also spoke in favor of refining
the KPIs to make them realistic and more measurable.
Japan noted that a number of KPIs in the draft 2009
budget are more abstract than in 2008 and also noted
the need to ensure consistency between the indicators
in the budget and the TS's performance report. The
DDG responded that the TS is trying gradually to
improve KPIs but maintained that many targets
naturally are dependent on States Parties' actions.


7. (U) China voiced its support for VIS but noted
that moving to e-declarations poses technical
challenges and requested support and advice from the
TS on successful implementation. China, supported
later by Iran, also noted its concern at the proposed
increase in OCPF inspections, stating that refinement
of declarations and a review of the site selection
methodology need to be discussed before changing the
frequency of inspections.


8. (U) Delrep and Japan both questioned the large
under-spend for equipment in 2007 and asked for
clarification on what happened to the unspent money.
Reeps responded that the under-spend resulted from a
supplier's inability to deliver some equipment by the
end of the year, so the unspent money was transferred
into the TS's Equipment Special Account for use
later. Reeps said that his division adheres to a
procurement and equipment replacement plan and that
he expects to spend most of the money budgeted for
equipment in 2008. Labib Sahab, Head of Budget and
Planning, noted when asked that, as of the end of
July, Verification had spent or obligated just under
40% of its 2008 equipment budget.


9. (U) Aside from stating that developing countries
need assistance with S&A, Iran reiterated its
insistence from previous years that "non-
proliferation" not be included in the budget
document, arguing that it should be brought in line
with the Convention and the report of the Second
Review Conference (RevCon).

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WEOG
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10. (SBU) On September 9, Coordinator Ruth Surkau
(Germany) chaired the weekly meeting of the Western
European and Others Group (WEOG). The meeting
focused on budget consultations, industry issues, and
Article XI. The budget facilitator, Martin Strub
(Switzerland),shared his view that the Technical
Secretariat (TS) had answered most questions well
during the first consultation. Strub highlighted
that China and Iran had voiced unhappiness with
increased inspections, especially for Other Chemical
Production Facilities (OCPFs),and suggested that
agreement on the number of inspections for 2009 will
require delicate discussions.


11. (SBU) In contrast to Strub, delegates from
France, the UK and the Netherlands all expressed
their dismay at the TS's unwillingness or inability
to answer many questions clearly or coherently. The
French delegate said it was not optimistic for future
consultations given the active nature of Non-Aligned
Movement (NAM) delegations such as South Africa,
India, and Iran. She also portrayed the Iranian
refusal to accept references to "non-proliferation"
anywhere in the budget document as "deja vu" from
last year's budget consultations.


12. (SBU) The UK rep noted that the TS was not as
prepared to answer questions as it should have been,
particularly following the meeting of the Advisory
Body on Administrative and Financial matters (ABAF)
the week before. The UK also characterized
Verification Director Reeps' presentation as a bit
inappropriate at times, citing some personal attacks
on countries. Turning to the next budget
consultation, the UK delegate shared that her
government views 10 additional OCPF inspections as
insufficient and will push instead for 20-30
additional OCPF inspections.


13. (SBU) Sweden noted that Cuba had remained silent
during the consultation and suggested that NAM
delegations had not been acting in a coordinated
manner but rather were following national positions.
The Swedish delegate also observed that the NAM had
met following the budget consultation, so the bloc's
coordination might increase in later consultations.


14. (U) Moving to industry issues, Surkau reported
that, according to Bill Kane (Head, Industry
Verification Branch),the next Industry Cluster
meeting would probably be planned for late October or
early November. The Netherlands, the UK, and the
U.S. Del all spoke in favor of having the Industry
Cluster meet sooner, preferably before EC-54, to
discuss a number of important outstanding issues.
Italy briefly announced its upcoming Florence seminar
to discuss OCPFs and low concentrations.


15. (SBU) Surkau announced that Article XI
facilitator Li Hong (China) plans to hold a
consultation before the end of September. The UK
noted that its national paper on Article XI had been
written in London and had been circulated only to the
WEOG, Li Hong, and Kalimi Mworia (Director,
International Cooperation and Assistance).

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EXTERNAL AUDITOR'S REPORT
--------------


16. (U) On September 10, facilitator Takayuki
Kitagawa (Japan) held the first consultation on the
External Auditor's Report for 2007; the document had
been deferred from EC-53 to EC-54 (ref B) to allow
for consultations on the report. Ron Nelson
(Director, Administration) represented the TS and
responded to delegations' questions.


17. (U) A number of delegations asked about the high
level of under-spend (termed "savings" by the
External Auditor) for 2007, particularly in
Verification and International Cooperation and
Assistance (ICA). The Netherlands noted that some
divisions and programs regularly under-spend each
year and asked what the TS can do to tackle this.


18. (U) Nelson explained that the budget is always an
estimate and not an accounting document, so there
will always be variances. According to Nelson, the
OPCW's annual under-spend rate is in line with the
average for other international organizations (2-3%).
Throughout the year, the TS's Budget Committee
(chaired by the DDG) tracks spending and consults
with programs showing an under-spend to identify
areas where they can spend the money or other
programs to which unspent funds can be transferred.
Nelson indicated that the under-spend rate for 2008
will be lower than in 2007.


19. (U) South Africa asked what percent of under-
spend was directly related to late payment by States
Parties of their annual assessed contributions and
suggested that a change in the financial rules to
allow the TS to obligate funds based on estimated
income (rather than on actual receipts) might give
the TS more flexibility and offset the effect of late
payments. Nelson said that the under-spend in 2007
was not due at all to late payments. And, while the
TS has used its Working Capital Fund only once,
Nelson admitted that the TS regularly uses the
previous year's surplus to cover current year
expenses on the assumption that it will be refunded
before the end of the year with late payments for
assessments.


20. (U) A number of delegations also asked for
clarification on the special accounts, especially the
Equipment Special Account. Nelson promised to
circulate a paper explaining the basis for the
special accounts. In response to Delrep's request
for an update on the OPCW's asset management system,
Nelson said that the TS's current SmartStream system
has an asset management capability. The TS is
consulting with SmartStream's developers to see what
changes will need to be made to the TS's system.

--------------
BUDGET: INSPECTORATE
--------------


21. (U) On September 11, budget facilitator Martin
Strub (Switzerland) chaired the next planned
consultation on the Inspectorate Division's budget.
Jose Carvalho (Head, Inspectorate Management Branch)
gave an overview of the Inspectorate's new
initiatives for 2009, including: expanding training
to accommodate the larger batches of new inspectors,
automation of mission planning procedures, and
transfer of the Equipment Store from Verification.
While delegations raised some technical questions,
most of the discussion was focused on the number of
OCPF inspections and inclusion of "non-proliferation"
in the budget document.


22. (U) India, China, Cuba, Iran, South Africa, and
Brazil all, to varying degrees, questioned the
proposed increase in OCPF inspections; most contended
that OCPF inspections should remain static while a
full discussion of OCPF-related issues is ongoing.
Iran even claimed that OCPF declarations have been
decreasing, so OCPF inspections should follow suit.
The DDG repeatedly noted the Director-General's
(DG's) obligation to propose a number for all
inspection types and stated that the 2009 proposal
reflects his personal view on what is necessary.


23. (U) The UK was the first WEOG delegation to speak
on OCPF inspections. As expected, the UK delegate
cited receiving instructions from London that 10
additional inspections would be insufficient and that
20-30 would be more appropriate. The UK delegate
noted the difference between inspection numbers and
frequency, arguing that inspections numbers should
increase while concomitantly discussing the frequency
of inspections (as called for in the RevCon report).
Delrep, France, Italy, Ireland, and New Zealand all
spoke in favor of increasing OCPF inspections while
concurrently discussing OCPF-related issues.


24. (U) Returning to its comments during the first
budget consultation on September 8, Iran again
insisted that all references to "non-proliferation"
should be removed throughout the budget document.
Claiming to have approved last year's budget --
including the use of the term "non-proliferation"
throughout last year's budget document -- only for
the sake of compromise, Iran explained that it was
not "allergic" to non-proliferation but rather to any
departure from the Convention and "Convention
language." At one point, Iran even described the
TS's use of "non-proliferation" in the budget as
deviating from the Convention.


25. (SBU) Japan, the UK, France, Italy, Ireland, and
Sweden all spoke in favor of keeping "non-
proliferation" in the budget document, with Ireland,
France, and Sweden all citing references to non-
proliferation in the Convention and the RevCon
report. The DDG strongly defended the TS's use of
"non-proliferation," appearing to take issue
personally and rejecting Iran's portrayal of the TS
as "deviant." Facilitator Strub curtailed further
discussion on this point, noting the purpose of the
budget consultation was to discuss the "figures" not
the choice of language.

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WEOG PLUS: SHCHUCHYE VISIT DEBRIEF
--------------


26. (SBU) On September 11, ISN/CB Office Director
Robert Mikulak and German Ambassador to the OPCW
Werner Burkart briefed the "WEOG Plus" (WEOG, non-
WEOG EU members, Japan, and Korea) on their
impressions upon returning from the Executive Council
(EC) visit to Shchuchye that morning. EC Chair Amb.
Oksana Tomova (Slovakia) also attended in her
national capacity and shared her impressions of the
visit.


27. (SBU) Tomova gave the group an overview of the
visit, which included interactions with the Ministry
of Foreign Affairs, the Ministry of Defense, the
Ministry of Industry, and local authorities. She
noted that she was particularly struck by the
impression of Russian preparedness to fulfill treaty
obligations, Gen. Kholstov's personal responsibility
and involvement, and the positive impact of the
chemical weapons destruction facility on the
surrounding community. Tomova also reported that the
visiting delegation had asked questions not only
specific to Shchuchye, but also related to the
Russian CW destruction program as a whole,
particularly the construction and future operations
of Pochep and Kizner.


28. (SBU) Mikulak then gave a more detailed
explanation of the visit, beginning with his
impression that the commitment of the Russian
Federation to its 45% and 100% deadlines was very
evident, as was the impact of Kholstov's dedicated
leadership and an improved Russian economy. In
Mikulak's view, Russia's 45% deadline is achievable
if the first and second trains at Shchuchye go into
operation as scheduled. In Building 1A, testing with
simulants should begin in November, followed by
initial operations in December. Mikulak did note,
however, that the processing rates described in the
Russian pamphlet for Pochep and Kizner do not achieve
100% destruction by 2012. During the visit, Mikulak
also inquired as to what risks or challenges Russia
foresaw in its destruction schedule. Kholstov
replied that Russia does not anticipate technical
difficulties, but could foresee problems with
unpredictable donor assistance, a typical remark
given Russia's history of implying donor
responsibility for program delays.


29. (SBU) Burkart agreed that a huge effort is
clearly being made in Russia, and described the tone
of the visit as fairly collegial. He noted that
Kholstov was rather vague in his replies to questions
on the end point of destruction and the capacities
and operational timelines for Pochep and Kizner. He
expressed some reservations that the current
timelines seem to leave very little room for
unforeseen technical problems. He also noted,
however, that Kholstov did acknowledge that Russia
does intend to host future visits; Mikulak added that
Kholstov even said that such visits also help Russia.


30. (SBU) Burkart then opened the meeting for
questions. Irish Ambassador Richard Ryan expressed
appreciation for the delegation's willingness to
brief "WEOG Plus" within hours of returning from a
long day of travel. He noted that Ireland had always
hoped that the first two EC visits to destruction
facilities would be successful and would provide for:
interactions with senior State Party officials, the
opportunity to ask objective and pointed questions,
and the opportunity to visit each State Party once a
year. Ryan also underscored the importance of having
this "record of commitment" in years to come. The
French delegation asked whether the Council could be
sure of Russia's financial commitment; Burkart
replied that it was difficult to be absolutely
certain, although the commitment was quite evident
now, and noted that Kholstov had explained the
difficulties Russia faces in moving money within the
federal budget when donor funds do not appear on
time. In closing, Amb. Javits also expressed
appreciation for the delegation's work, and noted
that Russia may be learning from the example of
transparency set by the United States.

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MEETING WITH DIRECTOR-GENERAL
--------------


31. (SBU) On September 12, Amb. Javits met with DG
Pfirter to discuss a number of issues. Amb. Javits
raised the Industry Cluster, noting the need to hold
a meeting before EC-54 (ref A). The DG explained
that his preference was to postpone the Industry
Cluster meeting until after EC-54 when a number of TS
papers on industry issues would be ready for
circulation. Amb. Javits assured the DG that any
discussions on S&A or OCPFs would be preliminary and
would lay the ground for further deliberation after
the TS papers are released. Amb. Javits also pointed
out the need to appoint facilitators and move on the
industry issues that have been suspended since the
last Industry Cluster meeting in March and the RevCon
in April.


32. (U) NOTE: The next Industry Cluster meeting was
subsequently scheduled for the afternoon of Monday,
September 29, two weeks before EC-54. END NOTE.

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PREPARATIONS FOR FLORENCE SEMINAR ON INDUSTRY ISSUES
-------------- --------------


33. (U) On September 11, Amb. Javits and DelReps met
with Italian Ambassador Gaetano Cortese, Italian
delegate Giuseppe Cornacchia, and German Ambassador
Werner Burkart to discuss the upcoming Italian-
sponsored workshop in Florence on industry issues.
Cornacchia outlined the proposed agenda for the 2-day
workshop and explained to Amb. Javits and Amb.
Burkart their roles as facilitators for discussions
on low concentrations and OCPFs, respectively.


34. (U) TS representatives Steve Wade (Head,
Declarations) and Bill Kane (Head, Industry
Verification) will set the stage with historical
overviews of both issues before moving into
discussions. Amb. Javits and Burkart both suggested
that Kane and Wade, in conjunction with the Italian
organizers, suggest a list of questions to be
addressed to better focus the discussions on both
issues. Cornacchia stated that Italy is open to
suggestions to obtain a useful result. Although they
have no "preconceived outcome" in mind, they would
like to see the workshop conclude with a working
paper with possible solutions, or ideas for a way
forward, on both issues. The group agreed that a
discussion paper to bring back to the OPCW
consultative process would be a useful result.

-------------- --------------
VISIT OF ISN DEPUTY EXECUTIVE DIRECTOR BILL AMOROSO
-------------- --------------


35. (U) ISN Deputy Executive Director Bill Amoroso
visited The Hague September 11-13. He met with Amb.
Javits and Del members with whom he discussed
transition issues anticipated with the departure of
the Ambassador. At the OPCW, Amoroso met with
Administration Director Ron Nelson and discussed some
upcoming personnel issues at OPCW.


36. (U) At the Embassy, Amoroso met with Financial
Management Specialist John Vis for an overview of the
Del's current budget and discussed plans for the new
fiscal year. During a meeting with Management
Counselor Sarah Solberg, the question of why Del
residential and offices leases were not covered under
the OBO umbrella was discussed. Education allowances
could also be paid out of a central fund, Solberg
thought. Amoroso said he would investigate and
follow up.


37. (U) FBI Assistant Legal Attache Tim Wallach had
expressed an interest in sharing office space at the
Del, and said the FBI was ready to move ahead. Both
Amoroso and Amb. Javits were in favor of pursuing a
sub-lease arrangement with the FBI. Wallach will
look into security issues and confirm personnel
status. Further discussion will be needed regarding
financial terms and a Memorandum of Understanding.


38. (U) Javits sends.
Culbertson