LEBANON: FINMIN CHATAH PROMOTES 1949 ARMISTICE AS

C O N F I D E N T I A L SECTION 01 OF 03 BEIRUT 000421

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E.O. 12958: DECL: 04/08/2019
TAGS: PREL PGOV PTER ECON EFIN LE IS
SUBJECT: LEBANON: FINMIN CHATAH PROMOTES 1949 ARMISTICE AS
WAY TO COUNTER HIZBALLAH; FINDS BUDGET COMPROMISE

REF: A. BEIRUT 321

B. BEIRUT 222

C. BEIRUT 172

D. BEIRUT 141

E. 08 STATE 110753

Classified By: Ambassador Michele J. Sison for reasons 1.4 (b) and (d).

SUMMARY
--------------


1. (C) In an April 7 meeting with the Ambassador, Finance
Minister Mohammad Chatah said the principles of March 14 are
still championed by the majority of Lebanese, but the
inability of the March 14 moderate coalition to create
institutions that represent those principles has been a
"major failure." He suggested the U.S. could assist Lebanese
moderates by calling for the implementation of Lebanon's 1949
armistice agreement with Israel, providing a vision of a way
to protect Lebanon and countering Hizballah's vision of a
resistance to defend Lebanon. He predicted the cabinet and
parliament would be ineffective in the final weeks before the
June 7 elections. Chatah believed he had found a solution to
the budget impasse over the Council for the South, and
expected the budget to move forward in cabinet in the coming
week. End summary.

MARCH 14 PRINCIPLES IN TACT
BUT LACK OF COHESION A "MAJOR FAILURE"
--------------


2. (C) The Ambassador, accompanied by EconOff, called on
Finance Minister Chatah in his Ministry office in downtown
Beirut April 7. Chatah advisor Huda Saigh also attended the
meeting. Chatah, PM Siniora's closest advisor before taking
on the Finance portfolio and still a strong March 14 figure,
said he was still cautiously optimistic about March 14's
chances in the June 7 parliamentary elections, because the
principles behind the movement -- sovereignty, security,
economic development -- are espoused by a majority of
Lebanese. (Note: Like Siniora, Chatah supports Saad Hariri's
Future Movement. End note.)


3. (C) Regardless of the election results, Chatah said he
hoped and expected that in the next phase of Lebanese
politics, March 14 would "expand the circle" beyond the four
principal political leaders (Future Movement's Saad Hariri,
Lebanese Forces' Samir Geagea, Kataeb's Amine Gemayel, and
Progressive Socialist Party's Walid Jumblatt) to include
those individuals or independents who champion the same
principles, but who wield less direct political influence.
He noted that many of these figures were frustrated by the
political horse-trading among the major parties during the
candidate selection process in advance of the elections, and
he lamented the alliance's unwillingness to come together for
the sake of the whole. "If there is a failure, it is the
inability of March 14 to create institutions that respect its
principles," he said.

NOT A RESISTANCE TO DEFEND,
BUT AN ARMISTICE TO PROTECT
--------------


4. (C) Chatah judged that a "too active" USG presence in
advance of the June 7 elections could backfire and look like
interference and hurt the cause of moderates in Lebanon. The
best path for the United States, he claimed, would be to
advocate a viable interim solution for Lebanon until a
comprehensive Middle East peace can be forged. He said this
solution should be based on the Lebanese-Israeli Armistice of
1949, the outlines of which are echoed in documents such as
the Taef Agreement and UNSCR 1701. He noted the domestic

BEIRUT 00000421 002 OF 003


resonance of the Arabic equivalent for armistice -- "hudna"
-- and said the U.S. could build credibility in Lebanon and
the region by using it. "A strategic policy of this sort
would be good for Lebanon and good for your Lebanon policy,"
he stated.


5. (C) Chatah believed it was important to present a credible
vision to counter the Hizballah model of "resistance," i.e.
the ability to retaliate against Israel, by presenting the
armistice as a way to protect Lebanon from having to
retaliate. He stressed that the international community,
particularly the United Nations, but also western and
regional powers, should participate in this vision. He
believed Egypt and Saudi Arabia, especially, could play
constructive roles in the region. Syria, with U.S.
engagement, could also have a positive influence, he assessed.

POLITICIANS FOCUSED ON ELECTIONS
NOT ON GOVERNING
--------------


6. (C) Despite continuing weekly parliament and cabinet
sessions, Chatah did not expect either body to accomplish
much in the two months before the elections. He noted that
the April 7 parliamentary session lacked a quorum, and said
that in any event, the legislative docket was packed with
"election-time laws," i.e. popular initiatives meant to curry
votes, regardless of their potential negative effects on the
Lebanese economy (Ref A). He continued to be frustrated by
several hours-long cabinet meetings that result in little
consensus.

BUDGET COMPROMISE FOUND?
--------------


7. (SBU) Chatah did believe there was progress on the
long-stalled 2009 budget, as he had devised a proposal to
provide funding to the Council for the South (a subject of
dispute between PM Siniora and Speaker Berri) (reftels),
while preparing the way for its eventual closure, as outlined
in the government ministerial statement. In Chatah's plan,
the Council would receive the money Berri requested for it,
but would lose responsibility for functions that should be
carried out by the state, such as pensions and healthcare.
Chatah said President Sleiman wanted to ensure there was
consensus on all sides before the proposal went back to
cabinet, but the minister expected it would be discussed very
soon.


8. (SBU) Even if parliament and cabinet were not active in
their final weeks, Chatah said that after Lebanon's recently
completed and highly successful debt exchange, he and his
ministry would continue work on new initiatives to boost
employment, such as a waiver on social security payments for
employers hiring summer workers and tax breaks for those who
hire additional Lebanese workers in 2009 and 2010.
Meanwhile, he assessed that fears of large numbers of
expatriate workers returning to Lebanon from the Gulf in the
wake of the international financial crisis had so far not
materialized.

COMMENT
--------------


9. (C) Chatah's long-term strategy to counter Hizballah is
refreshing, particularly in light of the current short-term
focus of most March 14 leaders on winning the upcoming
elections. (Note: A Sunni from Tripoli, Chatah is a former
IMF official and a former Lebanese Ambassador to the United
States. However, he is not a candidate for parliament
himself. End note.) The idea of using the 1949 armistice as
the basis for a achieving a viable interim peace between

BEIRUT 00000421 003 OF 003


Lebanon and Israel, pending a comprehensive Middle East
peace, may have merit as a means of discrediting Hizballah's
model of armed resistance in the domestic and international
context.


10. (C) Chatah refused to label his budget proposal for the
Council for the South, Nabih Berri's patronage instrument
(Ref B),as a "compromise," insisting that the proposal would
bring back executive power to state institutions, a fair
trade-off for the government. Nonetheless, in the
short-term, Berri will certainly claim victory in the dispute
just before the elections, because the proposal gives Berri
almost the exact dollar amount he asked for ($40 million) in
his original request for the Council. End comment.
SISON