DEMARCHE REQUEST: URGING IRAQ TO NEGOTIATE WITH

UNCLAS STATE 029254 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: IZ KU UNCC UNSC EFIN ECIN ECON PREL SUBJECT: DEMARCHE REQUEST: URGING IRAQ TO NEGOTIATE WITH KUWAIT AT APRIL 28-29 UN COMPENSATION COMMISSION (UNCC) MEETING IN GENEVA REF: A. NEWMAN-SWINEY EMAIL 24MAR09 ¶B. BAGHDAD 766 ¶1. (U) This is an action request for Embassy Baghdad; see paragraphs 4 and 5. Background -------------- ¶2. (U) The UNCC was established in 1991 to process and pay claims for damages resulting from Iraq's invasion of Kuwait. The UNCC issued awards (entitlements for claims payments) totaling more than USD 52 billion. Kuwait or Kuwaiti nationals were awarded USD 41 billion. Kuwait and Kuwaiti nationals have received more than USD 15 billion in claims payments from the UNCC Compensation Fund. Other countries and their nationals have received about USD 11 billion in claims payments. The award amounts remaining to be paid include USD 1.5 billion in environmental remediation awards and USD 24 billion in awards for Kuwait's oil sector. The UNCC Governing Council (UNCC-GC) and Secretariat, starting in April 2008, have urged the Government of Iraq (GOI) to engage in settlement negotiations with regard to the USD 24 billion in oil sector awards. Despite readiness on the part of the UNCC Secretariat and the Government of Kuwait (GOK) to commence such negotiations, GOI has consistently been unavailable on the proffered dates. On February 9, 2009, the Secretariat sent a letter to GOI Prime Minister Maliki requesting assistance in expediting the negotiations (see reference). ¶3. (U) Pursuant to UNSCR 1483, UNCC claims are paid from a 5 percent deduction from all Iraqi export sales of petroleum, petroleum products, and natural gas. GOI has requested on numerous occasions, most recently in a March 10, 2009 letter to the President of the Security Council, that the deduction be lowered to one percent. The UNCC-GC has insisted that GOI must negotiate in good faith with Kuwait with regard to the USD 24 billion in oil sector awards (and fully pay the environmental remediation awards) before a reduction in the deduction can be considered. GOI also took the position in its March letter that because it has paid a high proportion of its compensation claims, the remaining claims should be annulled. Kuwait submitted its reply, which likely rejected the GOI position, to the Security Council on March 24, 2009. Action Request -------------- ¶4. (SBU) Embassy is requested to deliver a demarche to PM Maliki's legal adviser, Dr. Fadel Jawad Khadum, along the following lines: - Stress the importance the USG attaches to Iraq sending appropriate level representation, with proper authority to engage in negotiations regarding the settlement of the USD 24 billion in UNCC oil sector awards, to the April 28-29 UNCC-GC Meeting in Geneva. - Discuss how these negotiations will demonstrate that GOI is ready to resolve fully the issues of the past, terminate the relevant Chapter VII UNSCR and restore its position as a member in good standing of the international community. - Note that GOI Minister of Finance Jabr favors sending a high-level delegation, and that sending a low-level delegation might signal a lack of seriousness of purpose. - Emphasize that the USG and the UNCC-GC expect good faith efforts by Iraq to enter into settlement discussions under UNCC auspices before the UNCC can consider Iraq's proposal to reduce the 5 percent deduction from GOI oil export revenues. - Note that the Embassy is prepared to discuss the issue directly with PM Maliki, but first wants to hear Dr. Fadel's views and confirm his support. ¶5. (U) The Department appreciates the Embassy's assistance in this matter. CLINTON