FINANCE MINISTER JABR ON BUDGET, SONS OF IRAQ, AND

C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 000766

SIPDIS

E.O. 12958: DECL: 03/19/2024
TAGS: EFIN ECON PGOV EAIR ETRD IZ
SUBJECT: FINANCE MINISTER JABR ON BUDGET, SONS OF IRAQ, AND
IRAQI DEBT WITH KUWAIT

REF: A. BAGHDAD 751

B. BAGHDAD 756

C. BAGHDAD 643

Classified By: Economic Minister Counselor Marc Wall for reasons 1.4(b)
and (d)


1. (C) Summary: Minister of Finance Bayan Jabr on March 19
told EMIN that the government has not yet decided whether to
acquiesce with the changes that parliament included in the
2009 budget or to insist that the Council of Representatives
(CoR) approve additional expenditures. The Council of
Ministers, Jabr said, decided on March 17 to allocate around
USD 100 million to the Sons of Iraq (SoI) security program
and authorized the Ministry of Interior to pay SoI salaries
for four months. The CoR and CoM will discuss alternate
sources for funding SoI salaries for the remainder of the
year. Jabr said that he heard that USD 14 million was
approved for renewal of air traffic control contracts. Jabr
will urge the Foreign Minister to send a high-level
delegation to the UNCC Governing Council meeting in April.
End Summary.


2009 Budget
--------------


2. (C) EMIN met with Minister of Finance(MoF) Bayan Jabr on
March 19 to discuss decisions reached by the Council of
Ministers during their session on March 17 that was devoted
largely to assessing the amendments that the parliament had
made to the 2009 budget (refs). Jabr reported that the CoM
established a subcommittee to resolve outstanding budget
issues; the subcommittee will consist of Jabr, the Secretary
General of the CoM Ali al-Alaq, the PM's Legal Advisor Dr.
Fadl, and the Finance Ministry's Budget and Legal
Directors-General. Jabr said that the subcommittee had met
on March 18 and discussed contentious budget issues for three
hours. (Note: According to another minister present at the
March 17 CoM meeting, PM Maliki complained bitterly about the
budget the CoR had approved, condemning it as a political
attack on the PM and his Da'wa Party without regard to the
national interest. The CoR's draft stripped the PM's office
of significant discretionary funding. Cabinet members were
also unhappy, as the budget is significantly leaner than they
were hoping, reflecting reduced revenues from falling oil
prices. End note.)


3. (C) Jabr stated that ultimately the government is faced
with only two options on the budget: either accept the budget
as approved by the CoR on March 5, implementing the required
transfers and the USD 4 billion reduction in the budget; or
find a way to reject the CoR's budget and send it back.
(Note: According to CoR staff, the bill was formally sent to
the Presidency Council for ratification on March 10, but
returned to the CoR the following day with a formal request
that the CoR include a detailed table showing where the USD 4
billion in cuts would be made. The bill still sits at the
CoR, which is out of session until April 14. End note.) The
Ministry of Finance has already prepared budget figures for
the CoR's budget, including a USD 4 billion reduction in
overall expenses and transfers from the capital budget worth
USD 1.4 billion to finance the GE and Siemens contracts. The
CoM will meet again on March 22 to discuss the budget and the
work of the subcommittee. If they decide not to fight, the
Finance Ministry will provide the necessary data to the CoR
and the bill will once again be sent to the Presidency
Council for ratification (note: the Presidency Council has
ten days to take action on the bill, after which it
automatically becomes law). Alternatively, according to
Jabr, the CoM might seek a way to essentially send the budget
back to the CoR and request an additional USD 1.4 billion in
Qback to the CoR and request an additional USD 1.4 billion in
funding for the electricity contracts; Jabr did not specify
how this legal maneuver would be accomplished. In this
scenario the CoR would be asked to increase the size of the
capital budget, rather than transferring funds from other
accounts, resulting in an increased deficit. This
alternative option would mean waiting for action on the
budget until the CoR reconvenes on April 14. Jabr commented
that the budget decision would then be delayed until May at
the earliest.

Sons of Iraq
--------------


4. (C) The CoM, Jabr said, decided on March 17 to allocate
around USD 100 million to the Sons of Iraq (SoI)(the armed
neighborhood watch program identified with significant
improvements in Iraq's security since 2007) and authorized
the Ministry of Interior (MoI) to pay SoI salaries for four
months. The funding for the SoI salaries will come out of
the MoI's employee compensation budget which is large enough

BAGHDAD 00000766 002 OF 002


to cover both MoI and SoI salaries for the four months. Jabr
said that "security is a priority," and added that during
these four months, the Cabinet and CoR will discuss alternate
sources for funding SoI salaries for the remainder of the
year and will "reimburse" the MoI's salary budget. (Comment:
MoI still has questions on how they will execute the SoI
salary payments. End comment.) Jabr suggested that the MoI
seek counsel from the Minister of Finance's (MoF's) legal and
budget divisions on processing the payments.

Air Traffic Control Contracts
--------------


5. (C) On the funding for renewal of air traffic control
contracts, Jabr said that he did not partake of the full
discussion of this issue, but he did hear that the USD 14
million was approved. He said that the Ministry of
Transport, along with the Prime Minister's Legal Advisor Dr.
Fadl, would be responsible for renegotiating and executing
the contracts.

UNCC Negotiations and Morocco Debt
--------------


6. (C) Jabr said he supported the GoI sending a senior
delegation to the United Nations Compensation Commission
(UNCC) in April to address reducing from five percent to one
percent the amount of Iraqi oil revenues automatically paid
to Kuwait under the UNCC as compensation for damages from the
1990 invasion. Jabr said he will raise this with the Foreign
Minister and add an MOF official to the delegation attending
the UNCC. He asked EMIN to engage the MFA and assist on this
issue. Jabr added that he received a letter yesterday from
Morocco's Ministry of Finance inviting Iraq to send its legal
and financial advisors to Morocco to finalize their bilateral
debt agreement.
BUTENIS