CORRECTED COPY: IRAQI FINANCE: JABR ON BUDGET,

C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 002795 SIPDIS E.O. 12958: DECL: 10/14/2018 TAGS: ECON POL ETRD EINV EFIN PGOV IZ SUBJECT: CORRECTED COPY: IRAQI FINANCE: JABR ON BUDGET, TRADE, OIL AND THE UPCOMING INVESTMENT CONFERENCE REF: A. BAGHDAD 1388 ¶B. BAGHDAD 2115 ¶C. BAGHDAD 2765 Classified By: A/EMIN John Carwile for reasons 1.4 b and d ¶1. (C) Summary: The Iraqi Council of Ministers (COM, the Cabinet) has set a 2010 Budget ceiling of 67 Billion USD and is continuing internal negotiations regarding ministerial allocations this week in Baghdad, Minister of Finance Jabr told USG officials on October 14. Jabr expected the budget would then go to the Council of Representatives for approval. He also stated that the GOI and the IMF will soon come to agreement on a Stand By Arrangement (SBA). End Summary. ¶2. (SBU) On 14 October, Minister of Finance Baqir Jabr met with Joint Campaign Plan Assessment Team Members Ambassador Charles Ries (retired),former U/S for Economic Affairs Reuben Jeffrey, Treasury Attach and acting EMIN to discuss ongoing developments in the Iraqi budget as well as issues surrounding the upcoming 19 October Dialogue on Economic Cooperation and the 20-21 October U.S. Iraq-Business and Investment Conference, both of which are taking place in Washington. ON THE BUDGET, THE IMF AND THE WORLD BANK -------------- ¶3. (C) Jabr noted that the Council of Ministers (COM, the Cabinet) had agreed to a general budget for FY2010 and had set a spending ceiling of 70 Billion USD. (Note: Media reports place the budget ceiling at 67 Billion USD. End Note) Jabr said the GOI budget priorities for the coming year would be focused on healthcare, education, and services. When asked about security spending (Ministries of Defense and Interior),he said there may be a little increase, and later said it could be 12 to 16 percent above 2009 levels. Additionally, Jabr noted that he expected the Ministries of Electricity and Oil would also be receiving less in the 2010 budget. ¶4. (C) Jabr said some COM members had been resistant to IMF conditions for another SBA in the budget discussions, but believed the GOI and the IMF would come to an agreement soon. He also said if his colleagues at the COM had greater control over the budget, "they would destroy everything." On the World Bank, Jabr mentioned that he might ask PM Maliki to talk with Bank President Zoellick and request another one billion USD soft loan (in addition to the 1 to 2 billion in World Bank loans now being negotiated for budget support). "FINALLY, FINALLY" JABR ON SHAHRISTANI AND OIL -------------- -- ¶5. (C) In the context of the budgetary pressures placed on the GOI by global oil prices, Jabr said "finally, finally, the Minister of Oil is talking with international oil companies (IOC)." Jabr confirmed the MoF is using a 60 USD per barrel of oil price for budget planning purposes, and stated that the belief that Iraq could triple its oil production in six years "is a dream." He considered a modest increase to 2.5 million bpd in exports in three years to be more realistic. (Note: Current Iraqi exports are approximately 2.0 million bpd. End note) When asked if he thought budgetary pressures had caused Minister of Oil Husain Shahristani to change course on his willingness to engage IOCs, Jabr responded. "Yes, of course." In addition to increased revenues from oil exports, Jabr also stated that the GOI expected to raise approximately 1 billion USD a year within a few years from trade tariffs. INVESTMENT CLIMATE, OPIC, HOUSING, ETC QINVESTMENT CLIMATE, OPIC, HOUSING, ETC -------------- ¶6. (C) On the overall investment climate, Jabr said the just passed amendment to the investment law was important, as were engaging the IOCs, being up to date on payments to General Electric, and the improving security situation in the country. Jabr also spoke of his former role as Minister of Housing and Construction and described Iraq's need for 1.5 - 2 million housing units as a major opportunity. "We need to focus on joint ventures in this area," he said. Jabr also raised the importance of OPIC participation in Iraq as a mechanism to help fund construction of residential housing and was reminded of the pending OPIC investor incentive agreement, signed in 2004, currently waiting COR approval. BAGHDAD 00002795 002 OF 002 GRAPPO