VZCZCXRO3297
RR RUEHBC RUEHDE RUEHIHL RUEHKUK
DE RUEHGB #4690/01 3581156
ZNY CCCCC ZZH
R 241156Z DEC 06
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 8696
INFO RUCNRAQ/IRAQ COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RHEHAAA/WHITE HOUSE WASHINGTON DC//NSC//
RUCPDOC/DEPT OF COMMERCE WASHDC

C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 004690 
 
SIPDIS 
 
SIPDIS 
 
PLEASE PASS TO USTR 
 
E.O. 12958: DECL: 12/19/2016 
TAGS: ECON EINV KBCT PGOV PREL IZ
SUBJECT: ARAB LEAGUE BOYCOTT AND IRAQ 
 
REF: A) BAGHDAD 2080 B) BAGHDAD 2150 C) BAGHDAD 2383 
     D) USDOC 6445 E) BAGHDAD 4147 F) BAGHDAD 
     4067 G) BAGHDAD 1921 H) BAGHDAD 4115 I) 
     BAGHDAD 3303 J) BAGHDAD SBU O-I:11/25/05 K) 
     BAGHDAD 3979 
 
Classified By: Ambassador Zalmay Khalilzad for reasons 1.4 (b) and (d) 
 
¶1. (SBU) Action request, see para 11. 
 
¶2. (C) Summary.  Post has been working actively to engage the 
GOI on enforcement of the Arab League Boycott (ALB), since 
Iraq's status was changed to "under review" in June 2006. 
Post has discussed with the GOI the particular problems four 
U.S. companies (Pepsi, ABRO, Eli Lilly, and Wyeth 
Pharmaceuticals) face in doing or trying to do business in 
Iraq because of GOI official requests for assurances that the 
firms are complying with the ALB restrictions on trade with 
Israel.  Because of the precarious political and security 
situation in Iraq and based on conversations with GOI 
officials, Post believes that these issues can be resolved on 
a case-by-case basis.  Public steps, such as Treasury listing 
Iraq in the Federal Register, in accordance with Section 
999(a)(3) of the International Revenue Code of 1986, or 
naming Iraq in USTR's annual National Trade Estimate (NTE) 
report will prove counterproductive when such listings hurl 
the issue into the political arena here.  Post strongly 
believes that continued quiet diplomacy, focusing on 
individual cases, is the best approach to help U.S. firms do 
business.  Post requests information on all cases brought to 
the attention of Washington agencies, so that we can seek 
resolution through appropriate GOI officials.  End summary. 
 
--------------------------------------------- 
REVIEW OF PAST ENGAGEMENT WITH THE GOI ON ALB 
--------------------------------------------- 
 
¶3. (C) Post has vigorously protested to high-level GOI 
officials' enforcement of the ALB on more than a dozen 
occasions since the new government formed in May 2006.  The 
Ambassador raised the issue of GOI enforcement of the ALB 
involving U.S. companies (Pepsi, ABRO, Eli Lilly and Wyeth 
Pharmaceuticals) with Prime Minister Maliki in June (ref A). 
Further, the Economic Minister-Counselor raised the ALB issue 
with Deputy Prime Minister (DPM) for Economic Affairs Barham 
Salih in June 2006.  DPM Salih said that the GOI would review 
the broad issue of ALB enforcement on a case-by-case basis 
(ref B).  During his visit in July 2006, Commerce Secretary 
Gutierrez also raised the problems created by the ALB with 
DPM Salih, as well as with the Minister of Industry and 
Minerals (Fawzi Hariri) and Minister of Trade (Abd al-Falah 
al-Soudani). 
 
¶4. (C) While the Ministry of Trade does not enforce ALB in 
its company registration process, Post raised the ALB 
problems with Minister al-Soudani to gain support from him on 
this issue.  In a meeting July 2006, he said he is "ready to 
assist" to solve the issue, but that he cannot go it alone. 
He understood that enforcement of the ALB is a big deterrent 
for foreign investors.  Al-Soudani, however, was reluctant to 
play a lead role on what is potentially a politically charged 
issue (ref C).  Commerce Secretary Gutierrez also pressed 
this issue with al-Soudani later in July 2006.  Other 
officials in the Department of Commerce also raised ALB with 
al-Soudani again in November 2006.  The Minister reconfirmed 
that the MoT does not include ALB language in its 
registration procedures or enforce the ALB.  He also agreed 
to raise the ALB issue with Deputy Prime Minister Barham 
Salih (ref D). 
 
¶5. (C) In a November 2, 2006 meeting, when Deputy Economic 
Minister raised the problem, Deputy Minister of Industry and 
Minerals (MIM) Dr. Sami Araji said that he requested that the 
Deputy Prime Minister's Ministerial Economic Committee 
resolve the issue (ref E).  He said that the GOI is fully 
aware of the seriousness of the problem and the negative 
impact on potential U.S. investment. 
 
¶6. (C) On October 29, Post met with Dr. Yassin, the Director 
General (DG) of Kimadia (the procurement arm for the Ministry 
of Health), regarding the problems of two U.S. pharmaceutical 
companies, Eli Lilly and Wyeth Pharmaceuticals.  These two 
companies were barred from tenders by Kimadia, because they 
do business with Israel.  When pressed on the issue, Dr. 
Yassin said that he was open to removing this requirement, 
but suggested that U.S. companies could also "donate" medical 
equipment and other supplies to Iraq (ref F).  (Dr. Yassin 
was "dismissed" by the Minister of Health October 30 and 
 
BAGHDAD 00004690  002 OF 002 
 
 
replaced with a Sadrist DG, Dr. Ammar). 
 
¶7. (C) Post pressed the ALB issue with the Ministry of 
Foreign Affairs on at least three different occasions in the 
last six months.  Post raised ALB with Foreign Minister 
Hoshyiar Zebari in May 2006 after the new government formed 
(ref G).  The Minister noted that the question is very 
sensitive and that "we need to find a politically clever way 
to handle this issue."  In a November 2006 meeting, Deputy 
Foreign Minister Labeed Abbawi said that letters to the MFA 
received from the Central Boycott Office (CBO) in Damascus 
are "ridiculous" and that the GOI does not take much interest 
in them (ref H).  Deputy Foreign Minister Mohammed Hamoud 
Bidan also told us that the Boycott Office within the 
Ministry of Foreign Affairs is "dead of activity" (ref I). 
 
------------- 
PROGRESS MADE 
------------- 
 
¶8. (SBU)  Patience has brought success in the past.  In 2005, 
the Ministry of Oil resolved an ALB enforcement problem with 
General Electric and a supply contract.  Although the 
Ministry of Oil initially insisted on including ALB language 
in the contract, the ministry later agreed to remove the 
language (ref J). 
 
¶9. (C) During the debate on the investment law on the floor 
of the Council of Representatives (CoR) in October 2006, some 
members proposed adding language prohibiting investment from 
"an enemy state" (a characterization of Israel by a few Shia 
members of the CoR) (ref K).  Post quietly engaged the CoR 
economic leadership as well as other members who understand 
U.S. concerns and the problematic language was dropped. 
 
----------- 
WAY FORWARD 
----------- 
 
¶10. (C) Post strongly believes that continuing our quiet 
diplomacy will be the most effective way to remove ALB 
related roadblocks to U.S. firms here.  We do have allies and 
need to avoid public actions that will make it more difficult 
for them to cooperate without losing sight of our goal of 
Iraq's formal withdraw from the ALB at an appropriate time. 
In a December 13 meeting, DPM Salih's Chief of Staff asked 
Acting Economic Minister Counselor to bring to his attention 
the particulars of ALB related problems.  We requested copies 
of offending documents such as copies of the certifications 
that U.S. companies were asked to sign at the Ministry of 
Industry and Minerals Trademark Office or similar documents 
demanded by the Ministry of Health/Kimadia.  DPM Salih's 
Chief of Staff noted that the issue was politically sensitive 
and that ministers would be reluctant to seek a formal 
solution.  He emphasized that if the issue is made a public 
political issue, it would be counterproductive to resolving 
particular cases of ALB enforcement. 
 
¶11. (SBU) Action request:  In order to provide the 
information requested by the DPM's Office, Post requests that 
Washington agencies, including the Department of Commerce's 
(DOC's) Office of Anti-Boycott Compliance, provide us with 
the list of twenty-two additional companies that have 
contacted the DOC regarding ALB enforcement complaints and 
provide details in appropriate form for us to share with GOI 
officials regarding the specific issues and the ministries 
involved.  Post also recommends that we use the U.S.-Iraq 
Business Dialogue as an additional opportunity for gaining 
Iraqi allies in our effort to ensure that the ALB is not a 
barrier to the growth of trade and investment in Iraq by U.S. 
firms. 
KHALILZAD