AMERICAN SCHOOL CRISIS ABATES, TIME FOR

C O N F I D E N T I A L SECTION 01 OF 03 TUNIS 000237

SIPDIS

DEPT FOR NEA/FO (FELTMAN/HUDSON),NEA/MAG (NARDI/WILLIAMS),
NEA/EX (HOHE),A/OPR/OS (CAMERON),OFM (BARTON),L/DL
(BENDA)

E.O. 12958: DECL: 04/16/2019
TAGS: ASCH AFDB PGOV PREL TS
SUBJECT: AMERICAN SCHOOL CRISIS ABATES, TIME FOR
NEGOTIATIONS

REF: A. SECSTATE 36413

B. TUNIS 223

C. TUNIS 222 AND PREVIOUS

Classified By: Ambassador Robert F. Godec, Reason 1.5 (b) and (d)

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SUMMARY
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1. (C) Under mounting US and international pressure, the
Tunisian authorities have offered public and private
assurances of their commitment to keep the American
Cooperative School of Tunis (ACST) open and their willingness
to negotiate a settlement to the current tax crisis. These
gestures included a rare briefing of members of the
diplomatic corps by the Foreign and Finance Ministers,
personal commitments by the Prime and Foreign Ministers and
public statements by the Finance Minister in the Tunisian
press. With the school no longer in imminent danger of
closing, post requests that a Department delegation be sent
to Tunis as soon as possible to negotiate ACST,s status and
fiscal obligations now and in the future. (See action
request paragraph 11.) End summary.

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MINISTER OF FINANCE GOES PUBLIC
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2. (C) On the morning of April 15, the same day Special
Envoy for Middle East Peace George Mitchell met with the
Tunisian Prime Minister (septel),the major daily papers
reported a press conference given by Finance Minister
Kechiche the previous day on economic issues, including fuel
prices and taxation. In a topic highlighted by many papers
with a teaser headline or highlight box, the Minister
responded to a question on a rumored audit and possible
closing of the American school. FM Kechiche emphasize that
all legal entities in Tunisia are subject to taxation and
audits are routine, but dismissed any suggestion that the
school would be closed. In fact, he expounded at length on
the high value that Tunisians place on education, the role of
the school in promoting good relations with many nations, and
the importance of foreign residents being able to choose
appropriate education for their children. He stated clearly
that schools would not be closed because of tax issues. In
response to a follow up question asking, "Why now?", he again
emphasized the routine nature of the proceedings.

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REASSURING THE DIPLOMATIC COMMUNITY
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3. (C) After repeated inquiries by Ambassadors and other
diplomatic community representatives to the GOT, including a
demarche on the Tunisian Ambassador in Berlin, Foreign
Minister Abdallah and Finance Minister Kechiche (joined by
External Communications Director Romdhani) conducted an
almost unheard of joint briefing. Speaking to a group that
included African Development Bank President Kaberuka and the
Ambassadors of the UK, France, Spain, Italy, Germany,
Switzerland, Egypt, Kuwait, Belgium, Nigeria, Indonesia,
Algeria and the European Commission (but not the US Embassy
or ACST) the Tunisian officials said they wanted to set right
the "rumors and misunderstandings" concerning the school.
They emphasized the routine, non-political nature of tax
issue, that a delegation from Washington would be coming to
negotiate a solution and asserted that the school would not
be closed, period. Foreign Minister Abdallah also emphasized
that the case itself would take years in courts, although he
did not make clear which side would bring the matter before
the courts.


4. (C) The UK Ambassador, who provided a readout, said that
there was considerable "relief" in the room that the school
will not be closed and the generally positive tenor of the
meeting. While stinging in his criticism of Tunisian
behavior on the issue, including the assertion that the
meeting was part of "regular" consultations between the GOT
and the diplomatic community, the Swiss Ambassador assessed
the Tunisians had made a clear commitment to keep the school
open. Other Ambassadors have also been critical of the GOT
for its actions on ACST and of the briefing provided by the
ministers, but they have welcomed the new commitments
regarding the school.

TUNIS 00000237 002 OF 003



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THE OTHER NEGOTIATIONS...WITH ACST,S BANK
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5. (SBU) ACST,s Board and Administration received on April
14 a notice from their US creditor PNC BANK that, in light of
the material change for the worse in the school,s financial
outlook and the fact of being in default on an obligation to
a government, the school had been formally declared in
default on the balance of its construction loan despite never
having missed a payment. The bank had placed a $2 million
hold on the school,s accounts which, while not having an
immediate effect on day-to-day operations, could have forced
the school to shut down sometime after the end of the school
year. Subsequent negotiations between ACST and PNC
representatives have resulted in a change in the bank,s
tone, and the PNC Account Manager and Vice-President have
recommended, subject to internal review, that the hold be
reduced to $1 million and a renewable forbearance agreement
be put in place to allow the school to continue operations.

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AMBASSADOR BRIEFS HIS COLLEAGUES
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6. (SBU) After assessing the latest developments and
exchanging e-mails with Washington, the Ambassador spoke
April 16 with each of the ambassadors involved in the ACST
issue. These included the ambassadors of Germany, the UK,
the Netherlands, Canada, Italy, Romania, Belgium, Poland,
Spain, Switzerland, India, the European Commission and
others. He also updated AfDB President Kaberuka through the
USED at the bank. The Ambassador:
--noted the new commitments and statements the GOT has made
in recent days regarding the school;
--said the US would respond positively by sending a
negotiating team that would focus on both the status and tax
issues;
--informed them the ACST school board would send a positive
letter to parents to keep them informed (see below);
--suggested a period of "quiet" to allow negotiations to
work, but added that difficult issues remain ahead;
--thanked them for their help, saying it was key to the
progress that has been made, and promising to keep them
informed.


7. (SBU) All of the ambassadors responded positively,
expressing their strong support and ongoing commitment to
work with us to reach a solution. Some of the ambassadors
expressed the view that the combined international pressure
had clearly pushed the Tunisians to change direction. The
Ambassador also provided a copy of the ACST letter to MFA
chief of staff Khemiri, noting it was intended as a signal
that we want to reach to reach an equitable, negotiated
solution on all issues regarding the school.

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ACST ACTIONS
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8. (SBU) On the basis of the progress in the Tunisian
position, and to reassure the ACST community in advance of
the scheduled April 17 Annual General Meeting to elect new
Board members and conduct other businees, ACST Board
President Matthew Long on April 16 sent a letter to all
parents and staff detailing new developments. The letter
made clear that there would be negotiations regarding the
school,s status and tax matters that could have significant
implications, but expressed optimism for a successful
outcome. The letter has been e-mailed to NEA/MAG. ACST has
stood down immediate preparations for a possible school
shutdown, though prudent contingency planning continues with
reduced urgency.

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COMMENT
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9. (C) Under growing US and international pressure, the GOT
has, for the first time, agreed to negotiate seriously
regarding the future of ACST. They have also clearly
acknowledged the importance of the school and promised they
will not close it over tax matters. In light of the
substantial improvement in the tone and substance of the

TUNIS 00000237 003 OF 003


Tunisian position, including public and private assurances
that seem to put the school out of immediate danger, we
recommend proceeding directly to negotiations on the
school,s status and fiscal obligations without insisting
that the tax decree be formally rescinded in advance.


10. (C) Despite recent positive developments, there is still
tough work ahead. The talks are likely, in our view, to be
difficult and protracted. We will need to do considerable
preparatory work, and we must insist that the status issue be
the first one negotiated, so that any tax requirements
resulting from the status agreement are clear for the future.
End comment.

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ACTION REQUEST
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11. (C) In light of the new developments, we ask the
Department to send a delegation to Tunis to begin
negotiations as soon as possible, but in any case before May

23. If, after decades of reticence, the Tunisians are now
ready to negotiate a clear and definitive status for ACST,
there is no time to waste. End action request.
Godec