IRAQ: ASSET TRANSFER PROCESS WELL UNDER WAY

UNCLAS BAGHDAD 001441

SIPDIS

E.O. 12958: N/A
TAGS: ECON EINV EFIN PREL IZ

SUBJECT: IRAQ: ASSET TRANSFER PROCESS WELL UNDER WAY


1. SUMMARY: The United States and Iraq have agreed upon, and are
implementing, a comprehensive asset transfer process. The process
includes commitments by the Government of Iraq to maintain
U.S.-funded infrastructure in Iraq. End Summary.


2. Since 2008, Embassy representatives have been working with the
Government of Iraq (GOI) to develop an asset transfer process. This
process is designed to provide a single, comprehensive method for
transferring assistance project assets to the GOI, regardless of the
USG agency involved. The USG and Iraq reached agreement on this
process in recent months, and are now in the process of implementing
that agreement.



3. The first step in the asset transfer process was for the GOI to
accept USG-funded assets. On December 16, 2008, Iraq's Council of
Ministers issued Decision Number 444. In a May 18, 2009 note, the
GOI formally informed the USG of Decision 444, specifically
emphasizing that no financial obligations could arise from these
assets and that Iraqi ministries are responsible for their operation
and maintenance. The GOI requested the Embassy to "confirm that
this decision, if acceptable, delineates the principles accepted by
our two governments for working together in order to complete
handing over the projects donated by the people of the United States
to the people of Iraq." The Embassy confirmed this understanding in
a June 1, 2009 diplomatic note. With this exchange of notes, the
USG and GOI finalized agreement on the asset transfer process.


4. Decision 444 and the exchange of notes between our countries
call for a Memorandum of Understanding (MOU) to set out how the
asset-transfer process will operate at the working level. EmbOffs
are in final discussions with Iraq's Ministry of Planning and
Development regarding this MOU.

Comment:


5. Many USG funded assets have already been transferred and are
being operated by Iraqi authorities. For example, all power
stations built with USG funding, as well as other projects in the
electricity sector, have been transferred and are owned, operated
and fully maintained by the GOI. The GOI has assumed the
Operations-Maintenance-Sustainment (OMS) contract initially funded
by the USG. Additionally, large-scale projects in the water sector
have been transferred and are maintained by the GOI. The situation
for the Nasiriyah water project is improving. The GOI has recently
purchased $2 million in spare parts for this project, showing some
commitment to sustainment of these assets. There is no lack of will
to move forward; however, there is still a long way to go before the
skill level and culture of maintenance approaches the level of our
own.

HILL