NEED FOR DECISION ON APPROACH TO UN BUDGET

C O N F I D E N T I A L USUN NEW YORK 000256

SIPDIS

SIPDIS

PLEASE PASS TO D, P, M, AND IO FROM AMB. KHALILZAD

E.O. 12958: DECL: 03/20/2018
TAGS: KUNR ACABQ AMGT UNGA
SUBJECT: NEED FOR DECISION ON APPROACH TO UN BUDGET

Classified By: Ambassador Zalmay Khalilzad for reasons
1.4 (b) and (d).


1. (C) This is a guidance request - see para 8.


2. (C) Summary: The Secretariat has presented UN Member
States with additional budget items ("add-ons") to the
2008-2009 biennium budget adopted in December 2007. A small
number of these add-ons are expected to be decided by the
membership this month, with decisions on the bulk of the
add-ons likely to be deferred to later this year. Most of
the add-ons are items we support or desire (including
Security Council-mandated Special Political Missions, key
reform initiatives, and exchange rate adjustments). The
total cost for the add-ons presented thus far is about $1.1
billion (which would bring the biennium total to about $5.3
billion -- more than a 25% increase over the last biennium).
In addition to carefully scrubbing the budget add-ons, we
have essentially three options for dealing with the proposed
increases: agree to those programs we support; limit the
increase by postponing consideration of programs that are not
essential; reject the increase and be prepared to deny
funding it. USUN requests urgent response to guidance
request at para 8. End Summary.

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Background: Dealing With A Potential 25%
Increase in the UN Budget
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3. (C) USUN has previously flagged concerns about both the
piecemeal approach by the Secretariat to the UN budget and
the explosive growth of the 2008-2009 biennium budget. In
December USUN raised concerns that the initial budget before
the Fifth Committee of approximately $4.2 billion did not
include some $1.1 billion in additional budgetary add-ons
that would be considered at a later stage in 2008-2009
biennium period. Most of the add-ons are programs that the
U.S. supports. These include Security Council-mandated
Special Political Missions (including Iraq and Afghanistan,
SPM,s total nearly 50% of the add-ons, and represent alone a
16% budget increase) and key reform initiatives (the bulk of
the remainder). USUN raised concerns that unless member
states reviewed the budget in its entirety and prioritized or
identified offsets throughout the entire budget, the final UN
budget would soar to more than $5.2 billion -- a 25% increase
and the largest in history.


4. (C) Despite U.S. opposition, the initial budget of
approximately $4.2 billion was adopted in December. That
budget includes mandates that have been superseded over time
and which the membership has been unable to consolidate or
eliminate through the Mandate Review process (a process which
also could have helped identify possible budgetary offsets to
help fund the add-ons). The GA and the Secretariat continue
to be incapable of prioritizing mandates in a meaningful way
or identifying offsets for new budget initiatives adopted by
the GA. While many member states express surprise and dismay
at the cost of the add-ons, they are unlikely to do much to
oppose them (other than, perhaps, agreeing to postpone some).
Moreover, several of the key major donors have benefited
from the drop in the dollar-denominated UN budget and in real
terms face at most only negligible increases in their
assessed contributions even with the unprecedented rise in
the proposed budget.

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Options
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5. (C) Against this backdrop, the USG needs to decide how to
deal with the proposed budget add-ons. Whichever of the
options (see below) we ultimately choose, we still will need
carefully to scrub the proposed programs to ensure as limited
budgetary impact as possible. To do so, USUN requests that
the Department deploy a team of qualified staff to reinforce
USUN,s efforts to review each major program item being
proposed in the budget to ensure they meet USG criteria for
funding at the lowest reasonable level.


6. (C) In addition to scrutinizing the proposed add-ons to
the budget as described above, we see essentially three
realistic options -- each with advantages and disadvantages
-- that we could pursue:

a) Pay it All: Assuming we are satisfied through the
Department,s review process that the add-ons are necessary,
we could support the proposed budget increases for those
programs - even if they result in the largest budgetary
increase in UN history. We could argue that the bulk of the
add-ons are for continuing SPM,s that the U.S. approved in
the Security Council and which deal with essential peace and
security efforts around the globe. These include core USG
priorities like Iraq and Afghanistan. We could also fund the
reform initiatives that are ready for adoption, including
Information Technology improvements and possibly DPA
expansion.

b) Oppose any Further Increases: In order to defend the
principle of budgetary discipline, we could oppose the
proposed increase by pointing to the exponential growth of
the budget and the flawed UN budgetary process that prevents
a comprehensive look at the entire budget in order to
identify offsets to help fund the proposed increases. (This
approach could also reaffirm our zero-nominal growth policy.)
By insisting on fiscal discipline and a more coherent budget
process, we would also help focus the membership on the need
to tackle organizational inefficiencies, including obsolete
or redundant mandates. (This position could also lead to
eventual decisions to withhold funds in the event the rest of
the membership adopts the budget anyway.) While attractive
politically, there is little likelihood the wider membership
would support this approach -- particularly at a time where
other major donors have seen their own currencies appreciate
vis-a-vis the dollar-denominated UN budget and could easily
absorb the increases being proposed. Moreover, we would be
refusing to fund programs that we need or want, which are the
bulk of the add-ons being considered. This posture could
also limit leverage we would otherwise have in shaping the
content or size of the budget increase that would be adopted
by the wider membership, perhaps ending with a 25% increase
anyway.

c) Defer the Non-Essential (but desirable): We could fund
only essential items (e.g., SPMs, exchange rate losses) and
defer consideration of all non-essential items having
budgetary impact into the next biennium budget and deal with
these as part of a comprehensive budget review. This approach
would create the conditions for the wider membership to
prioritize during the next budget cycle among the
non-essential add-ons while identifying potential offsets
from the broader assessed budget where most of the fat
exists. Deferring consideration of some add-ons until the
next biennium budget discussion in late 2009 would
synchronize discussion in the same year on both the next
biennium budget and the renegotiation of the scale of
assessments -- an important lever for budgetary discipline
among donors whose assessed contribution percentage will
increases. The net result of this approach would be a budget
increase this year of a minimum of 16% for items that must be
funded.

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Other Options
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7. (C) There are other variants to the options described
above that the Department might consider and which may come
up in discussions on how to proceed. However, we believe
these approaches are either unlikely to garner support or
could allow the wider membership to set priorities we would
not share by cutting programs we want in order to fund those
they prefer. Such options include:

a) Limit budget growth by setting a ceiling for the dollar
amount we could accept. This would require opposing or
deferring some of the add-ons -- perhaps even programs we
deem essential depending on the amount of the ceiling. This
approach could also require trade-offs among the add-on
items. Since the majority of the costs associated with the
$1.1 billion in add-ons are for programs the USG generally
favors or which must be funded -- e.g., SC-mandated SPMs or
reform initiatives -- this would require us to choose between
a policy of fiscal restraint or action now on many reform
items -- and perhaps even critical SPMs.

b) Fund all essential items but identify offsets from the
$4.2 billion budget adopted last December for remaining
discretionary programs. While this seems a rational option,
it is not likely to succeed since the majority of the GA is
not prepared to engage in such political tradeoffs involving
the very mandates that the membership has been unwilling to
seriously review and which they just approved a few months
ago. Like option b above, we would need to be prepared to
refuse to fund the budget in the likely event the broader
membership rejects this approach.

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Guidance Request
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8. (C) USUN seeks the dispatch by the Department of a team
of experts to help UN scrub the add-on budget proposals being
examined in New York. We need to do this before these items
are considered so that our own assessment of the proposal can
be factored into the negotiations. USUN also seeks
Department,s guidance on which of the above options, or
combination of options we should pursue. Key donors are
eager to know how the U.S. intends to proceed on the budget.
The PGA has scheduled a meeting in early April to discuss
reform efforts, including the budget process. This meeting
provides an important opportunity for the USG to identify
preferred options, assert leadership on this important issue,
and attain support for our preferred approach. Delays in
identifying the approach the U.S. will take will contribute
to the inertia that typically results in the membership
adopting a budget close to the total the Secretariat has
identified.
KHALILZAD