VZCZCXYZ1298
RR RUEHWEB

DE RUEHGB #0610/01 0620251
ZNY SSSSS ZZH
R 020251Z MAR 08
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 5996
INFO RUCNRAQ/IRAQ COLLECTIVE
RUEKJCS/SECDEF WASHINGTON DC
RHEBAAA/USDOE WASHDC
RHEHAAA/WHITE HOUSE WASHINGTON DC//NSC//

S E C R E T BAGHDAD 000610 
 
SIPDIS 
 
SIPDIS 
 
NEA/I: RSCHMIERER, TBETTS 
ISN/RA:KKESSLER 
S/I:KNUTT 
L/NPV:THISCH 
DOE: AHEPBERG 
JS: SNORWOOD 
OSD: TBENNET 
 
E.O. 12958: DECL: 02/26/2018 
TAGS: PREL EPET ECON ENRG PGOV IZ
SUBJECT: DPM ON OIL, SOFA AND TUWAITHA 
 
Classified By: Ambassador Ryan Crocker for Reasons 1.4 (b), (d) and (h) 
 
¶1.  (S) SUMMARY:  DPM Barham Salih on February 25 urged Under 
Secretary Jeffrey to sustain USG engagement to help Iraq pass 
 
SIPDIS 
the hydrocarbon framework legislation, and while he agreed 
with Ambassador Loftis on the need to move quickly on a new 
strategic relationship and status of forces agreement, warned 
that Iran may hope to engineer an "October surprise" to 
impact the U.S. elections.  Ambassador Ries provided the DPM 
an update on the Tuwaitha nuclear material sale.  END SUMMARY. 
 
Hydrocarbon Framework Law - various scenarios 
--------------------------------------------- 
¶2.  (C) In a meeting on February 25 with U/S Reuben Jeffrey, 
Ambassador Bob Loftis and Ambassador Crocker, Deputy Prime 
Minister Barham Salih "on behalf of President Talabani" urged 
sustained USG involvement to nudge the differing parties to 
agreement on the hydrocarbon legislation.  He said 2-3 
different scenarios are possible, arguing that the revenue 
sharing portion is key and, if dealt with first, might break 
the impasse on the hydrocarbon framework law, with the 
February 2007 draft as the basis for agreement (COMMENT: This 
conflicts with his assertion in February 2008 that the laws 
must be passed together. END COMMENT).  He said that he is 
getting mixed signals from KRG officials about how to deal 
with the new contracts the KRG has signed with international 
oil companies, but the February draft can be moved 
politically.  He added that Oil Minister Shahristani 
continues to be an obstacle because he does not like the oil 
law and thinks he can use existing laws.  The technical 
services contracts sought by the Oil Minister are very 
limited in scope, and the Minister's development plan at best 
is no better than the buybacks that the Iranians use. 
 
¶3.  (C) The DPM evaded a question about PM Maliki's position, 
noting the PM is his boss, but observed that Maliki listens 
to Shahristani but understands the fight over oil is a 
political struggle.  Under Secretary Jeffrey asked about 
linkages between the oil and Article 140 issues.  Salih said 
no linkage could be explicit, because the two were separate 
matters and had to stand on their own merits.  The 140 
process was under way, with UN assistance, and should not be 
tampered with.  That said, Salih acknowledged that, in the 
context of senior leadership contacts, there could very well 
be informal discussions (Comment: his point appeared to be 
that, even if there was no explicit linkage, it would not be 
politically practical for some parties to always prevail, and 
others to always lose, on the issues of greatest importance 
to them.  End Comment.) 
 
¶4.  (C) Another scenario that the DPM floated would be to 
have the issue elevated to the Executive Council, because VP 
Tariq Hashimi needs to be involved, but warned that the 
political climate generally is poisonous.  On timing, the DPM 
asserted that doing the revenue sharing law first would not 
be perceived as letting everyone off the hook on the 
framework law.  He acknowledged that the law to re-establish 
the Iraq National Oil Company would have to be part of the 
equation to transform the industry from state-run to private 
sector, and Iraq will not attract much foreign investment 
without the framework law.  He added that Iraq's priority now 
is to deal with the Turkish border incursion, and asked the 
Ambassador for any updates about Turkish intentions.  When PM 
Nechirvan Barzani returns to Baghdad, the Executive Council 
scenario can begin, he suggested. He added that Nechirvan is 
waiting for Maliki to return to Iraq. 
 
Strategic Relationship 
---------------------- 
¶5.  (S) Ambassador Loftis explained the two components of 
normalizing USG-Iraqi relations: a Strategic Framework 
document based on the Declaration of Principles (with 
political/economic/security/cultural elements) and a Status 
of Forces Agreement (SOFA) that includes temporary provisions 
for ongoing military operations.  The DPM said US-Iraq 
relations are crucial, but aligning the political blocs will 
be treacherous.  Some in the GOI want something more than a 
traditional SOFA, but the blocs will make achieving that 
difficult even though key players recognize it is needed. 
The GOI wants to be helpful to the USG, because Iraq 
officials are following the debate in the U.S. and recognize 
it is an issue for us as well.  He agreed on the need to move 
quickly, and although it will not be a treaty, the PM has 
already made a political commitment for Iraq to seek approval 
from the Council of Representatives. 
 
¶6.  (S) The DPM remarked that Iran is very concerned about 
the SOFA, and is already raising arguments of the legality of 
Iraq entering into such an agreement with the U.S. in light 
of UN Chapter VII.  He expects Iran will try to extract some 
political benefit from it, and warned that Iran may try to 
engage in an "October surprise" to impact the U.S. elections. 
 In a not-so-subtle aside, he inquired about USG analysis of 
the multiple rockets that had struck the IZ a few days ago. 
 
¶7.  (C) The DPM asked about the economic component of the 
Strategic Relationship, noting it might make the package more 
attractive.  Ambassador Ries remarked the Dialogue on 
Economic Cooperation, occurring February 27-28, would go a 
long way to define the future USG role in Iraq.  The DPM said 
he might have to miss the latter part of the DEC, but agreed 
on the urgency to conclude agreements quickly. 
 
Tuwaitha Nuclear Material 
------------------------- 
¶8.  (S) Ambassador Ries reported that two bids had been made 
for the purchase of Iraqi Uranium yellowcake, and the higher 
offer is from the Canadian bidder.  He said Minister of 
Science and Technology Minister Fahmi would propose accepting 
the Canadian offer at the next Council of Ministers meeting. 
The USG is asking for  at least USD 14 million for 
cost-sharing, USG packaging and transportation expenses. 
Ambassador Crocker urged the DPM to convince the Cabinet to 
accept the Canadian offer, since AREVA has indicated if it 
makes an offer, it will not do so until mid-March, the price 
of the Canadian offer expires on February 29, and the market 
price is steadily going down. 
 
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