Identifier
Created
Classification
Origin
09BAGHDAD911
2009-04-02 07:43:00
CONFIDENTIAL
Embassy Baghdad
Cable title:  

FINANCE MINISTER ON GE PAYMENTS, SONS OF IRAQ,

Tags:  EFIN ECON PREL IZ 
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DE RUEHGB #0911/01 0920743
ZNY CCCCC ZZH
O 020743Z APR 09 ZDK
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC IMMEDIATE 2520
INFO RUCNRAQ/IRAQ COLLECTIVE IMMEDIATE
RHMFISS/HQ USCENTCOM MACDILL AFB FL IMMEDIATE
RHMFISS/HQ USEUCOM VAIHINGEN GE IMMEDIATE
C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 000911 

SIPDIS

E.O. 12958: DECL: 03/28/2014
TAGS: EFIN ECON PREL IZ
SUBJECT: FINANCE MINISTER ON GE PAYMENTS, SONS OF IRAQ,
BUDGET

REF: BAGHDAD 766

Classified By: EconMin Marc Wall for Reason 1.4 (b).

C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 000911

SIPDIS

E.O. 12958: DECL: 03/28/2014
TAGS: EFIN ECON PREL IZ
SUBJECT: FINANCE MINISTER ON GE PAYMENTS, SONS OF IRAQ,
BUDGET

REF: BAGHDAD 766

Classified By: EconMin Marc Wall for Reason 1.4 (b).


1. (C) Summary. Finance Minister Bayan Jabr told EMIN on
March 30 that he had directed Trade Bank of Iraq (TBI) to
make $400 million in loan proceeds available to the
Minister of Electricity to pay some of the $580M
arrearage due to General Electric (GE) on March 29 Jabr
further discussed his payment to fund the salaries of the
Sons of Iraq (see CJ9 update to Charge,),the unusual
arrangements with
the Council of Representatives (CoR) and Presidency Council
for expediting the
finalization of the 2009 budget law, as well as the looming
prospect of a rescission budget in June or July if oil
prices and production fail to climb. End Summary.

GE Gets Half a Loaf
--------------


2. (C) During a meeting in his Adnon Palace office with
EMIN on March 30, Minister of Finance, Bayan Jabr,
explained how, despite the absence of a national budget and
against the advice of his advisors, he sought Cabinet
approval for a $400 million loan from TBI to pay part of
the delinquent installment due to GE under the
December 2008 gas-turbine purchase and another $34 million
to pay the salaries of the Sons of Iraq. The Cabinet
approved the loans on March 29. Although, not yet received by
GE, Post was told by GE on April 1, that it was satisfied
that payment had been transmitted. Also participating were
Treasury Attache, James Wallar and CJ9 CO MG David
Perkins.


3. (C) Jabr acknowledged receiving calls from the office
of the Centcom commander urging him to pay GE the delinquent
first
installment payment (396 Million Euros/$580 million) of the
"Mega Deal" gas-turbine purchase. This payment had just
been renegotiated March 19-20 in Washington by the Minister
of Electricity (ME),who had agreed to pay GE no later
than March 29. In response, Jabr received Cabinet approval
and instructed the President of TBI to work out the details
with the ME. Jabr told EMIN that he heard there was some
confusion over the method of
payment, but that as far as he was concerned "the money is
available."

How Much? How Fast?
--------------


4. (SBU) According to Jabr, there are two methods for

Getting the funds to GE: a wire transfer through the SWIFT
process, which requires a letter of guaranty from GE, or by
opening
a Letter of Credit (LOC). Jabr said the ME insisted that the
GE contract required an LOC which, curiously to Jabr, the
ME only wanted to fund up to $250 million, $150M less than
the
authorized amount and well short of the full arrearage.
Subsequent to this meeting, Embassy Baghdad confirmed that
the ME had requested only a $400 million loan to fund both
the GE and the Siemens gas-turbine purchases, which may have
accounted for the ME,s wish to open the GE LOC for only
$250 million. By COB March 30, however, the Minister informed
the
Embassy that, before leaving for several days in Jordan, he
had directed his DG of Accounts to make the entire $400
million available to GE in the manner most convenient to
GE. If GE provided the guaranty, the SWIFT transfer could
take place almost immediately. The ME claimed even an LOC
would make funds available at JP Morgan Chase in "just a
couple of days."


5. (SBU) Jabr said that, after the final enactment of a
budget, he would be able to add $1.3 billion (1.7 trillion
ID) to the Ministry of Electricity's capital budget based
upon the budget passed by the CoR or by cutting the
Qupon the budget passed by the CoR or by cutting the
investment budgets of other ministries by around 14%.

Money for SOI to Avert A Crisis
--------------


6. (C) Jabr further stated that he had directed the
deposit of 31.5 billion IQD (approximately $34 million, or
one month's pay) for the Ministry of the Interior's
disbursement to the Sons of Iraq. This he said he did over
the unanimous objections of his financial advisors, who
argued that, because there was no budget it might be held

BAGHDAD 00000911 002 OF 002


by the auditors to have been an illegal transfer of funds.
To that, Jabr said, "Iraq is in a crisis and I have to act to
relieve the crisis." While MOF Directors General would not
assume responsibility for the allocation of funds to make
this salary payment for fear of an audit, Jabr boldly
stated, "I put this on my shoulders."

Jabr Offers CoR a Prix Fixe Menu of Budget Options
--------------


7. (SBU) Jabr explained to EMIN that, contrary to our
belief that a budget could not be passed until the CoR
returned on April 14, the budget law has already been
passed and signed by the Presidency Council. What remains
to be finalized is the schedule of funds allocations among
GOI receiving and granting entities. According to Jabr, the
budget law was already passed and signed, but without an
acceptable
schedule of allocations. All that is needed to publish the
budget is
to attach the tables after the available CoR Finance
Committee members approve.

More Budget Peculiarities
--------------


8. (SBU) Jabr said that his staff is still revising
schedules based on feedback from CoR Finance Committee
members. These parliamentarians said that the "original
budget," that had no cuts in it should be attached to the
CoR passed bill, a position with which Jabr disagrees. Jabr
insisted that a schedule that contained across-the-board
cuts of 28%, including cuts to the CoR,s budget is proper.
The Finance Committee objects and now they and Jabr are in
a stand-off, with Jabr arguing that the budget law clearly
mandates that he cut all GOI entities,
including the CoR. Jabr told EMIN that, rather than
prolong the fight, he was sending the Finance Committee
Chairman a copy of the budget law and three separate
schedules: the original schedule, a schedule reflecting an
across-the-board cut and one with the CoR exempted from
cuts; all with a letter telling him to "choose one." Jabr
asserted that the Finance Committee Chair can, without
waiting for the return of the full CoR, choose a schedule,
and send it to
the Presidency Council for review and publication in the
official Gazette. According to Jabr, GOI could have a
budget in 10-14 days.

Possible Budget Reductions
--------------


9. (SBU) Prompted by the EMIN, Jabr also offered that, by
June or July, he would likely be presenting a supplemental
"reduction" or rescission budget because of declining oil
production and low oil prices. Jabr did not expressly
respond to a question whether he would consider salary cuts
as a means of reducing expenditures. He was more focused
upon revenue enhancements, suggesting that tax
and fee increases and tariff hikes might be considered, but
not until next year. He said one idea that the Minister of
Planning had mentioned was to have oil companies make "down
payments" on investments. Other possibilities could be
loans from the IMF or World Bank. According to Jabr, Iraq's
budget woes derive from the mistakes of the Ministry of Oil.


10. (SBU) In response to a question about issuing Treasury
bills, Jabr agreed that this is an option to be explored.
He revealed that he had received a proposal from the
Governor of CBI which he felt was too restrictive. However
he pointed out that the budget law, which requires the MOF
to seek authorization for each Treasury bill, was also
unacceptable. He is hopeful of getting more flexibility, such
as a debt
ceiling under which the MOF can issue Treasury bills as
Qceiling under which the MOF can issue Treasury bills as
necessary.


BUTENIS