VZCZCXRO0264
RR RUEHBC RUEHDE RUEHKUK RUEHROV
DE RUEHGB #3826/01 3420726
ZNY CCCCC ZZH
R 070726Z DEC 08
FM AMEMBASSY BAGHDAD
TO RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHC/SECSTATE WASHDC 0727
RUEATRS/DEPT OF TREASURY WASHDC
INFO RUEHEE/ARAB LEAGUE COLLECTIVE

C O N F I D E N T I A L SECTION 01 OF 03 BAGHDAD 003826 
 
SIPDIS 
 
E.O. 12958: DECL: 11/23/2015 
TAGS: KBCT ETRD PREL EFIN ECON EINV IZ
SUBJECT: ARAB LEAGUE BOYCOTT: MAINTAINING IRAQ'S "UNDER 
REVIEW" STATUS 
 
REF: A. BAGHDAD 2467 
     ¶B. BAGHDAD 764 
     ¶C. BAGHDAD 42 
     ¶D. THOME-VINOGRAD-PHILLIPS E-MAILS NOVEMBER 2008 
 
Classified By: Ambassador Ryan C. Crocker for Reasons 1.4 (b,d). 
 
¶1. (C) SUMMARY: The Embassy continues to make progress on its 
action 
plan concerning the Arab League Boycott (ALB) of Israel.  To 
date in 
2008, U.S. firms have reported five requests from Government 
of Iraq 
(GOI) entities to comply with this foreign boycott, down 
significantly from previous years.  Long isolated from trade 
with 
the U.S., ministerial officials are typically ignorant of ALB 
provisions' negative impact on U.S. firms; this makes raising 
their 
awareness our biggest challenge.  Once they learn about the 
issue 
and understand that our intentions are apolitical, GOI 
officials 
typically agree to replace ALB provisions with contractual 
language 
that is acceptable under U.S. law.  Post recommends 
maintaining 
Iraq's "Under Review" status until June 30, 2009, so that we 
may 
continue to implement our action plan in an atmosphere of 
good faith 
and move toward our wider goal of encouraging U.S.-Iraqi 
business as 
a means of expanding Iraq's economic development.  END 
SUMMARY. 
 
Action Plan Progress Report 
--------------------------- 
¶2. (SBU) In 2006, U.S. companies, individuals and other 
entities 
("U.S. persons") reported (in accordance with regulations 
under 15 
C.F.R. Parts 730-774 of 2003) to the U.S. Department of 
Commerce 
(USDOC) 35 cases in which Iraqi government entities had 
requested 
them to include Arab League Boycott of Israel language in 
contracts, 
business registration requests, and/or patent or trademark 
applications.  In 2007, U.S. persons reported 23 such boycott 
requests to USDOC.  Nearly all of these cases originated with 
three 
GOI entities: the Patent and Trademark Office (PTO), the 
Ministry of 
Health (MOH), and the South Oil Company (SOC).  In response, 
Post 
began engagement with the GOI and devised an action plan 
aimed at 
(1) finding a way, over the near term, to permit U.S. firms 
to do 
business legally in Iraq, thereby contributing to the 
country's 
reconstruction and economic development; and (2) over the 
longer 
term, moving the GOI toward ALB non-implementation (Reftel B). 
 
¶3. (SBU) We have had success -- albeit to different degrees 
-- in 
implementing our action plan.  In February and March, we 
succeeded 
in convincing the Trademark Office to cease requesting ALB 
certifications from U.S. persons as part of trademark 
applications 
(Refs B, C) -- a step we consider to be an actual move in the 
direction of de facto ALB non-implementation.  In August, MOH 
officials agreed to remove ALB language from standard 
procurement 
contracts with U.S. persons and replace it with alternate 
contracting language that is acceptable under U.S. law (Ref 
A). 
While this is not actual ALB non-implementation, it is a step 
that 
will permit U.S. firms to supply badly needed quality 
medication and 
technology to the Iraqi health sector. 
 
¶4. (C) Thus far, we have had less success with Basrah-based 
SOC, 
mainly because the company had refused to engage with us. 
However, 
 
BAGHDAD 00003826  002 OF 003 
 
 
Economic Minister Counselor (EMIN) and EconCouns visited 
South Oil 
on November 12 -- the first U.S. officials to do so in 
decades. 
EMIN followed up with a letter to SOC officials detailing our 
concerns (Ref D).  We have explained the problem to Ministry 
of Oil 
(MOO) officials in the capital and have briefed our Basrah 
Regional 
Embassy Office (REO).  SOC will be a difficult entity with 
which to 
negotiate; nevertheless, we are confident that with time we 
will 
ultimately be able to convince officials there to follow the 
lead of 
their counterparts at the MOH and the Trademark Office. 
Thanks to 
our efforts, in part, USDOC has only received five reports of 
prohibited ALB request reports through the first three 
quarters of 
CY 2008. 
 
Identifying the Problems and Raising Awareness 
--------------------------------------------- - 
¶4. (SBU) Aside from SOC, our major challenge at this stage is 
to 
discover which GOI entities enforce ALB provisions and which 
do not. 
Some ministries have upgraded or redrafted their standard 
operating 
procedures since 2003, but many still operate under 
regulations or 
use standard contracting language from the Saddam era, which 
typically include ALB provisions.  Many officials are 
completely 
unfamiliar with the ALB -- or at least with the impact it has 
under 
U.S. law for U.S. businesses.  This makes discovering which 
entities 
use ALB provisions "step one," and then directly negotiating 
with 
ministerial officials, contracting officers, lawyers and 
often even 
the minister to raise their awareness "step two." 
 
¶5. (SBU) The process is painstaking, but it has yielded 
results in 
addition to those noted above.  For example, in studying the 
Ministry of Trade's (MOT) procedures for registering foreign 
firms, 
we discovered requirements that companies submit paperwork 
declaring 
that they honor the ALB.  We raised the problem with the 
Minister 
and with the appropriate Director General, asking that the 
requirement be removed and explaining the negative impact it 
had on 
U.S.-Iraqi trade.  They could not immediately agree to our 
request 
(doing so requires promulgation of new regulations -- a 
painfully 
slow process in Iraq), but they did reassure us that the 
requirement 
will not, in practice, be applied to U.S. persons.  In 
another case, 
a U.S. supplier to the Ministry of Agriculture discovered ALB 
language in a procurement contract.  The U.S. firm devised 
its own 
expedient solution by having a European subsidiary sign the 
contract, but the case served to make the problem known to 
us, so 
that we could begin to engage.  Both these cases demonstrate 
the 
long road we must travel to achieve our ultimate goal of 
complete 
ALB non-implementation.  However, both also show the 
willingness of 
Iraqi officials to make accommodations that contribute to our 
wider 
goal of encouraging U.S.-Iraqi business. 
 
Maintaining an Atmosphere of Good Faith 
--------------------------------------- 
¶6. (C) Indeed, GOI officials have impressed us with how 
willing they 
are -- once aware of the problem -- to replace ALB provisions 
with 
alternate language that does not violate U.S. law.  However, 
this 
requires establishing an atmosphere of good will.  We are 
 
BAGHDAD 00003826  003 OF 003 
 
 
quick to 
point out that, in this context, the USG regards the ALB as 
principally a trade issue, rather than as a political issue. 
Politically, the USG fully supports the GOI's rapprochement 
with its 
Arab League partners and we do not want the ALB issue to get 
in the 
middle of that process.  And while our ultimate goal is full 
Iraqi 
non-implementation of the ALB, our main focus is not to use 
this 
issue to influence Iraq's foreign policy toward Israel.  We 
are 
mainly focused on increasing U.S.-Iraqi trade, on giving 
Iraqi 
ministries access to high quality competitive U.S. goods and 
services; and on improving Iraq's overall business climate -- 
all 
goals our interlocutors typically share.  Once this measure 
of good 
faith is established, we find we can move forward. 
 
Recommendations 
--------------- 
¶7. (SBU) Maintaining good faith will be the key to continued 
implementation of our ALB action plan and to moving GOI 
officials 
beyond a spirit of willingness to resolve ALB cases on a 
case-by- 
case basis in order to promote Iraqi development through 
trade, and 
toward an eventual policy of non-ALB implementation.  Based 
on this 
and on our success thus far, Post recommends maintaining 
Iraq's 
"Under Review" status until June 30, 2009, at which time we 
will 
again reevaluate our progress and the road ahead. 
CROCKER