IRAQI FY09 BUDGET AS A TOOL FOR PARLIMENTARY

C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 000585

SIPDIS

E.O. 12958: DECL: 03/06/2019
TAGS: PGOV PREL ECON EFIN IZ
SUBJECT: IRAQI FY09 BUDGET AS A TOOL FOR PARLIMENTARY
INDEPENDENCE OR ELECTION CAMPAIGN

Classified By: POLCONS Robert S. Ford. Reasons 1.4 (b) and (d).


1. (C) SUMMARY: After more than two months of difficult
negotiations and multiple draft laws, Iraq's parliament
approved on March 5 a 2009 budget that both spends less
money than the government requested and allocates spending on
COR priorities that differ from those of the government.
There was also a great deal of politics in this budget debate
and vote. Significantly, Parliament has used this budget to
attempt to constrain the power of the Prime Minister by
transferring budget allocations from the Prime Minister's
Office to other ministries, including the Sons of Iraq
program and the controversial Tribal Support Councils. A
high level Shi'a MP told poloff that the opposition does not
want Maliki to have sufficient investment (capital
expenditure) funds to rebuild critical infrastructure - an
attempt to discredit Maliki's policies before national
elections. Parliament's actions represent a significant step
in its development as a political institution, demonstrating
that it has the ability to challenge executive power. Final
budget figures are not yet available and will be reported
septel. Analysis of the political effects on various
programs, including the Sons of Iraq/Sahwa program will be
clearer following the final budget figures. END SUMMARY

Transfer of Moneys or Transfer of Power
--------------


2. (C) During the complicated Council of Representatives
(CoR) proceedings that resulted in the March 5 approval of
Iraq's 2009 budget, one of the most notable developments was
the introduction, during floor debate, of a series of
amendments that transferred 15 budget allocations from
certain GOI offices or agencies to other GOI agencies. The
debate was often rancorous and confused, and we are still
reviewing the final text of the amendments. However, it is
clear that parliament transferred at least 11 programs
(amounting to more than USD 200 million) from the Prime
Minister's Office, National Security Committee, or the
"Commander in Chief Headquarters" to ministries or offices
headed by individuals from competing parties.


3. (C) Parliament also transferred some of allocations from
the Prime Minister's control to regions. For example, Najaf
and Karbala will have responsibility for pilgrims' expenses,
and Salah ad-Din will have authority to disburse compensation
for damages resulting from terrorism and military operations.
In addition, Parliament passed an amendment that prohibits
the GOI from issuing bonds without CoR approval.

Parliamentary Independence
--------------


4. (C) Both Shi'a and Sunni Iraqi political leaders told
poloff that it was "the right and the duty" of parliament to
review the budget. While Shi'a opposed the GOI's basis for
the budget (price per barrel of oil and daily production
rates),which they thought was unrealistic and would lead to
disastrous deficit spending, Sunni opposition centered on the
GOI's funding of extra-constitutional or un-legislated
activities. Many criticized the activities of National
Security Council head, Muwaffuq Rubaie, as constitutionally
objectionable. Sunni MPs also criticized the Ministry of
State for Security Affairs, the Counter Terrorism Bureau, and
the National Security Council. For each of these agencies,
the CoR either cut the budget, de-funded it, or transferred
its allocation to another ministry's (usually non-Da'wa led)
control. The Sons of Iraq (SOI)/Sahwa program was threatened
with de-funding, since the program is operated out of the
Qwith de-funding, since the program is operated out of the
prime minister's office. Similarly, the controversial Tribal
Support Councils program (which Maliki opponents claim have
been used by the PM to generate support for the Dawa party),
appears to have been transferred outside of the PM's direct
control. Like similar programs, the SOI funding allocation -
and presumably the program - was transferred to the Ministry
of Interior.

National Elections
--------------


5. (C) Some transfers appear linked to national election
politics. The 2009 budget requires the government to finance
Ministry of Electricity contracts for GE and Siemens turbines
from its own USD 1.42 billion budget. A high level Shi'a MP
told poloff that the opposition does not want Maliki to have
sufficient investment (capital expenditure) funds to rebuild
critical infrastructure - an attempt to discredit Maliki's
policies before national elections. Moreover, funding for
Support Councils, a Maliki program that Sunni Arab and Shia
Islamist opponents of Maliki claimed was used to funnel
government funds to influence recent provincial elections,
was transferred away from the PMO to another ministry.

BAGHDAD 00000585 002 OF 002


Preliminary analysis of the floor debate suggests that many
of the budget cuts or budget re-allocations will financially
limit Maliki's operating space in the upcoming election year.

Comment
--------------


6. (SBU) Floor debate was highly chaotic, over multiple
amendments on the same article. Final budget numbers are not
yet available as the CoR and Ministry of Finance have not
reconciled the often vaguely worded and contradictory
amendments that were passed March 5. Actual numbers and an
analysis of the budget will be reported septel.


7. (C) The "Battle of the Budget" should also be considered
in light of the continuing impasse over the election of a new
CoR speaker. Ayad al-Samarraie, CoR leader of the Iraqi
Islamic Party (IIP) and Chair of the Committee on Financial
Affairs, has been the leading candidate for Speaker, but is
opposed by Maliki and the PM's allies. On the budget,
Samarraie played a major role in attempting to block progress
on the budget pending a favorable outcome of the election of
speaker. After acting Speaker Attiyah succeeded in putting
the budget on the agenda, Samarraie strengthened his own
political position by shrewdly using Parliament's budget
power to restrict the Prime Minister's authority, a move that
tapped into concerns many MPs have regarding Maliki's
attempts to consolidate power. In doing so, Parliament took
a major step yesterday in asserting itself as an institution
and player. Samarraie also demonstrated his ability to be
the strong CoR Speaker that Maliki fears might turn the CoR
into a significant opposition force in Iraqi politics.


BUTENIS