This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 05 BRUSSELS 000791 
 
SIPDIS 
 
SENSITIVE 
 
DEPT FOR S/P KRASNER, S/CRS WONG, A/S EB WAYNE, A/S DRL 
LOWENKRON, EUR/ACE ADAMS, EUR/ERA CHASE 
PASS USAID FOR A/AID SCHIECK, AA/PPC MENARCHIK, AA/ANE 
KUNDER, AA/AFR PIERSON 
PASS MCC FOR AMBASSADOR DANILOVICH 
PASS TREASURY FOR A/S LOWERY 
OECD FOR REID AND CARNER 
NSC FOR SIMON AND MCKIBBEN 
 
E.O. 12958: N/A 
TAGS: EAID ECON KDEM PREF PREL KMCA EUN UN USEU BRUSSELS
SUBJECT: LEVERAGING EU ASSISTANCE FOR US FOREIGN POLICY 
GOALS 
 
REF: BRUSSELS (04) 005521 
 
¶1.  (SBU) SUMMARY:  President Bush's historic visit to 
Brussels in February 2005 has been followed by increased 
US-European cooperation on a range of political and security 
issues. An important component of that cooperation is greater 
synergy between US and EU approaches to development and 
humanitarian assistance in critical parts of the globe.  In 
the past twelve months, the EU and the US have coordinated 
approaches to the next phase of assistance to Afghanistan, 
support for the Palestinian territories, election planning 
and longer-term development in the DRC, humanitarian aid in 
Darfur, and targeted help for elections and capacity building 
in Iraq.  In addition, the new Development Commissioner has 
produced a revamped Development Strategy for the EU, which is 
likely to also influence member state practices, promoting a 
much harder-edged, results-driven approach to development in 
the field.  The long-held view of the EU as a checkbook 
unattached to clear-cut foreign policy or development goals 
and bedeviled by endless pipeline blockages no longer 
reflects reality. 
 
¶2.  (SBU) Summary continued.  This cable provides an update 
on Reftel on how the European Union (European Commission plus 
25 member states) are working together, and with the US, in 
meeting the challenges around the globe.  The 25 member 
states have a GDP roughly equal to the United States, but 
spend twice as much on development assistance ($43 billion 
for the 15 EU member states according to 2004 OECD DAC data). 
 One fifth of EU assistance is channeled through the European 
Commission (EC), making the Commission the third largest 
single donor in the world, an important catalyst for the EU 
as a whole, and a critical partner in U.S. efforts to 
coordinate assistance priorities.  The EU Africa Strategy and 
EU Consensus On Development agreed in December 2005 provide 
the framework for assistance from the EC and member states 
for the next decade.  The EU, long pre-occupied with 
increasing ODA, is now placing more emphasis on aid 
effectiveness, policy coherence, reduction in transactions 
costs and increased visibility for EU assistance.  The 
benefits of coordinating with the Commission for US strategic 
interests can only increase in the coming years.  END SUMMARY. 
 
The Barroso Commission 
---------------------- 
¶3. (U) The European Commission directly manages 7 billion 
euros in assistance each year. Three Commissioners share 
geographic responsibility for assistance policy: Benita 
Ferrero-Waldner, the Commissioner for External Relations and 
European Neighbourhood Policy (Middle East,South 
Mediterranean, Central Asia, Caucasus, Eurasia, Asia and 
Latin America); Louis Michel, the Commissioner for 
Development and Humanitarian Assistance (the seventy eight 
African, Caribbean and Pacific countries tied to the EU 
through the  Cotonou Treaty); and Olli Rehn, the Commissioner 
for Enlargement (Romania, Bulgaria and the Western Balkans). 
 Koos Richelle, the Director General of the Directorate 
General for Europe Aid Cooperation (DG AIDCO)is responsible 
for implementation of assistance policies for all three DGs, 
as well as for DG TRADE and DG AGRI.  As a former Development 
Minister in the Portugese Government, EC President Barroso 
retains a particular interest in development issues and has a 
Member of his Cabinet designated to ensure internal coherence 
on development and trade issues. 
 
¶4. (U) Commissioner Michel has an additional source of 
funding for the extensive assistance to Africa, Caribbean and 
Pacific countries. The European Development Fund is the main 
financial instrument used by the European Commission for 
cooperation between the EU and the Group of 78 African, 
Caribbean and Pacific states.  The financing does not come 
from the Community budget, but is derived from five-yearly 
"ad hoc" contributions from the Union member states at the 
inter-governmental level.  The current 9th EDF of euros 13.5 
billion consists primarily of grant assistance (some eighty 
percent), long-term financing, flexibility to give priority 
and incentives to ACP countries' performance, as well as 
sanctioning poor results.  There is an emphasis on good 
governance with specific measures to avoid serious cases of 
corruption.  Country allocations are no longer automatic and 
performance is assessed on the basis of implementation of 
institutional reforms, use of resources, project success, 
poverty alleviation and sustainable development.  The 
Investment Facility is currently funded at euros 2.2 billion 
and managed as "risk capital" to support private sector 
development. 
 
High Representative for CFSP 
---------------------------- 
¶5. (U) High Rep Solana coordinates the Common Foreign and 
Security Policy but, in stark contrast to the Commission, has 
very limited financial resources at his disposal.  He is 
seeking to increase his resources to euros 160 million in the 
2007-13 budget in order to have greater flexibility.  Had the 
Constitution been agreed and one Foreign Minister been 
appointed, that person would have controlled the Commission 
resources. Even in the absence of the Constitutional Treaty, 
there are moves under way aimed at bringing the Commission,s 
resources to bear in support of Member States, political 
aims. The yet-to-be agreed Stability Instrument would provide 
as much as 500 million euros a year that could be used to 
fund programs that would support the Council,s policy aims. 
The fate of the Instrument is unclear, as is the price the 
Commission will demand in regard to a stronger role in 
foreign policy. 
 
¶6. (SBU) Solana's operational budget, limited as it is, 
allows a quick-response mechanism to kick-in in periods of 
crisis.  This is particularly the case for civilian ESDP 
missions in support of negotiated settlements and resolution 
of conflicts as we have seen in the EU response to Aceh, 
monitoring the settlement of a conflict in a major Muslim 
nation; and the Rafah border crossing where the EU deployed 
monitors along the Gaza-Egypt border (an area where US 
personnel cannot be deployed for security reasons) in support 
of Israeli disengagement. 
 
Reforming the European Commission's Assistance 
--------------------------------------------- - 
¶7. (U) The EC began to reform external assistance through the 
budgetary process under the Prodi Commission in 2003. They 
established the Directorate General for EuropeAid Cooperation 
(DG AIDCO) to implement the assistance policies of the 
so-called "RELEX Family" of DG ExternalRelations, DG 
Development, DG Trade, DG Enlargement, DG Agriculture.  They 
built up the capacity of the EC Delegations in the field and 
over a three year period "deconcentrated" authority to the 
field.  Heads of Delegation in 77 EC missions around the 
world now have the authority to program the funds allocated 
for their country programs.  Brussels Headquarters engages in 
setting the overall allocation, cross-border programming and 
monitoring.  The technical capacity has been moved to the 
field, leaving few experts in Brussels.  The EC is 
accelerating disbursements and commitments of funds. 
Commitments are up 54 per cent and payments are up 52 percent 
in 2005 from where they were in 2001. 
 
¶8. (U) In order to better achieve policy coherence, the 
Commission proposed that the 2007-13 Financial Perspectives 
(budget) abolish the existing 90 or so funding instruments 
which have been built up over the years, each with its own 
legal base, and be replaced with six large funding 
instruments:(a) humanitarian assistance; (b) macro-economic 
financial support; (c) a new European Neighborhood 
Partnership Instrument for the 14 countries in the Mashrek, 
Maghreb, Palestinian Authority and Eurasia which form the new 
Neighborhood; (d) a new Development and Economic Cooperation 
Instrument; (e) a Pre-Accession Instrument; and (f) the 
Stability Instrument to bridge the gap between humanitarian 
assistance and longer term development assistance. 
 
¶9. (U) The proposals were generally welcomed by the European 
Parliament and Council for policy coherence, but then 
interest groups became concerned when they couldn't see the 
line item in the budget for their issues.  The Commission 
responded to the concerns by proposing an additional seven 
thematic instruments:  (a) democracy and human rights; (b) 
food security, (c) support for non-state actors; (d) engaging 
the industrialized world; (e) energy and environment; (f) 
migration and asylum and (g) human and social development. 
Conceptually, the EC approach is very similar to the USAID 
Policy Framework for Bilateral Foreign Aid in terms of 
identifying categories of countries and types of assistance 
for which the executive is accountable to the legislative 
bodies for results. 
 
Governance 
---------- 
¶10. (SBU) After much debate with member states, the EC is 
launching a Governance Facility as part of its proposed 
European Neighbourhood Partnership Instrument. The concept is 
similar to the Millennium Challenge Corporation approach in 
rewarding performance, the notion that incentives are more 
important than assistance, and the importance of the process 
being transparent.  The Commission is in the process of 
negotiating bilateral Action Plans with each of the ENPI 
partners.  Seven Action Plans are agreed and five more are in 
process.  The Action Plans have benchmarks on political 
reform, which if achieved will entitle the beneficiaries to a 
"reform premium" to be spent on mutually agreed upon 
investments in any sector.  Thus, the EU will reward good 
performance against reform benchmarks.  The Commission has 
proposed 10 to 15% of total funding for the ENPI be allocated 
for the Governance Facility.  They will start with a small 
pilot effort of euros 50 million in 2006 for the countries in 
the Middle East eligible for MEDA funds, likely Jordan and 
Morocco. 
 
¶11. (U) In a parallel fashion, the EU Strategy for Africa 
foresees the launching of a governance initiative in support 
of the African Peer Review Mechanism and to support the 
efforts of the countries concerned in implementing the 
reforms identified by those reviews. 
 
Democracy Promotion 
------------------- 
¶12. (SBU) In 2005, the U.S.-EU Senior Level Group (co-chaired 
on the U.S. side by U/S Burns and U/S Shiner) launched a 
dialogue on democracy promotion efforts in the dictatorships 
of Belarus, Zimbabwe, Iran, Uzbekistan and Myanmar (Burma). 
Expert level discussions have broadened the agenda to include 
transitional regimes in Egypt, Yemen, Ethiopia, Georgia, and 
Krygystan.  The EC is more comfortable engaging with us on 
this dialogue than the member states are and during the last 
US-EU Task Force the EU said they preferred to use the 
existing U.S.-EU Troika consultations for the dialogue and 
filter the countries to be discussed through certain 
criteria.  The EC has a number of tools in its tool kit which 
are proving particularly effective and contribute to their 
aspirations for greater visibility.  Most notable are the 
Election Observer Missions managed and funded by the EC and 
led by a Member of the European Parliament hand picked by the 
Commissioner responsible for that geographic region. 
 
Fragile States: Key Priorities 
------------------------------ 
¶13. (U) The Commission, Council Secretariat and European 
Parliament Development Committee and Foreign Affairs 
Committee share a sense of concern for fragile states and see 
the bulk of EU assistance going to those countries, whether 
for poverty reduction or to address underlying causes of 
terrorism. Fragile states and regional instability are key 
security threats identified by the 2003 European Security 
Strategy. There is tremendous scope for deepening and 
broadening the dialogue on fragile states, particularly in 
Africa where the EU retains deep commitments in the Great 
Lakes region, West Africa and Horn of Africa, as well as 
Sudan and Liberia where we already enjoy excellent 
cooperation.  While there is no real constituency for Asia in 
the European Parliament, and budgets have historically ended 
up skewed to other regions, there is increasing interest in 
dialogue and cooperation in South Asia particularly 
Bangladesh, Nepal and Sri Lanka. 
 
Examples: Fragile and Strategic States 
-------------------------------------- 
¶14. (U) Afghanistan:  The Commission has remained a committed 
partner in Afghanistan.  The EC has exceeded its original 
pledge of $1 billion for the Bonn Process and are now 
negotiating with the European Parliament and Council for the 
2007-13 budget.  The EC has had the same Head of Delegation 
in Kabul for four years and were the first Delegation given 
authority from Brussels to make decisions locally. As part of 
the 2006 budget, the EC is looking at the possibility of 
providing up to euros 10 million for small EU member states 
to launch PRTs in Afghanistan. 
 
¶15. (U) Iraq:  The Commission has come a long way in its 
relations with Iraq.  They have pledged and disbursed most of 
the EC pledge of euros 530 million through the IRFFI World 
Bank and UN Trust Funds.  They have funded the Iraqi 
elections, assisted with the drafting of the Constitution and 
are now negotiating a bilateral Trade and Cooperation 
Agreement.  At the political level, the EU meets regularly 
with Iraqi leaders, invites them to Brussels and has senior 
EU officials travel periodically to Baghdad.  Efforts are 
under way to open an EC Delegation in Baghdad.  In addition 
to their bilateral efforts, the Member States are 
contributing technical experts to the EU Rule of Law mission 
EUJUSTLEX, which trains Iraqi prosecutors, judges and prison 
officials. 
 
¶16. (U) Sudan:  The Commission has provided euros 196 million 
of humanitarian assistance (including food security) and is 
now implementing the first phase of development assistance 
activities for the 2005 -07 period for which euros 318 
million are available.  The EC has provided euros 162 million 
through its Africa Peace Facility to support AMIS and is 
exploring the possibility of a further euros 50 million 
contribution. 
 
¶17. (SBU) Broader Middle East and North Africa:  the 
Commission has made significant strides in working with us on 
the reform agenda over the past 18 months.  They are active 
participants in the Forum for the Future, made a euro 1 
million contribution for the Fund For the Future and are 
encouraging an EIB contribution to the Foundation For the 
Future.  As one senior Commission official explained, our 
procurement procedures and the complexity of engagement with 
the member states and European Parliament have led to our 
"distinct, but complementary" approach the region.  He went 
on to describe the US and EC as "like two elephants in the 
region, we need to pull in the same direction, but we don't 
necessarily need to be tied at the ankles." There is now 
clear consensus within the EC that incentives for reform are 
more important than the assistance itself.  As a reminder, 
the EC spends over euros 2 billion per year in the Middle 
East and North Africa through the Euro Mediterranean 
Partnership/Barcelona Process. 
 
¶18. (U) Haiti:  the Commission hosted the Haiti Donors' 
Meeting in Brussels in November to ensure donor support for 
the transition to an elected government.  Under the Interim 
Cooperation Agreement, the EC is providing euros 294 million, 
including critical budget support to the GOHto meet IMF 
requirements. The EC  provided an additional euros 18 million 
to fund the EU Election Observer Mission for the elections. 
 
¶19. (U) Palestinian territories:  The Commission has been and 
remains the biggest funder for the Palestinian Authority 
since the Oslo Accords, providing some euros 500 million per 
annum.  Through the MEPP and Quartet we have ensured close 
coordination and cooperation on assistance.  We are now 
entering into a more challenging period as we seek to align 
our messages and assistance in light of the recent elections 
and the likely Hamas-led government. There are two ESDP 
(security)operations currently under way in the Palestinian 
Territories (a Border Assistance Mission in Rafah, and a 
Police Training Mission headquartered in Ramallah). It is not 
yet clear whether either will continue under a Hamas-led 
government. 
 
¶20. (U) DRCongo:  The DRC is at the top of the EU's list of 
priorities. The Commission has committed 750 million euros 
for humanitarian activities since the beginning of the 
transition, including a pledge for 38 million euros this 
year.   Some euros 388 million are allocated under EDF for 
development activities.  The EU Foreign Ministers have 
pledged to respond favorably to a DPKO request for the 
deployment of EU troops to provide contingency support to 
MONUC before and after the elections. The nature and extent 
of that support has not yet been determined. 
 
Achilles' Heel of the EC 
------------------------ 
¶21. (SBU) While the EC is moving in the right direction in 
its reform of external assistance, they still face a major 
obstacle as their internal regulations are too restrictive 
and don't encourage risk taking. In acknowledging this fact, 
a Member of Commissioner Ferrero-Waldner's Cabinet said the 
forced resignation of the Santer Commission over allegations 
of corruption had the same psychological impact on the 
European Commission as "9/11" had on US thinking.  The 
pendulum immediately swung to the extreme -- with the 
objective having become ensuring the accountability of funds. 
  When a senior official such as the Director General of 
Europe Aid signs funding allocations he incurs personal 
liability, not institutional liability as he would as a Dutch 
Development Ministry official. 
US and EC Both Seeking Foreign Aid Reform 
----------------------------------------- 
¶22. (SBU)  Conclusion:  The European Commission and US are 
both seeking to reform their foreign aid in order to provide 
greater policy coherence and accountability for results from 
taxpayer resources. We are coming from different starting 
points, but find ourselves in much the same place in terms of 
broad goals. Building on our already close policy 
coordination with the Council Secretariat, we can achieve 
concrete results on the ground by working more closely with 
the European Commission. We recommend the Department regional 
Bureaus, new USAID leadership, MCC and S/CRS look to 
expanding the dialogue with the European Commission on our 
critical priorities for assistance. 
 
GRAY 
 
 
.