VZCZCXRO8679
OO RUEHBC RUEHDE RUEHIHL RUEHKUK
DE RUEHKU #2954/01 2041541
ZNY CCCCC ZZH
O 231541Z JUL 06
FM AMEMBASSY KUWAIT
TO RUEATRS/DEPT OF TREASURY WASHDC IMMEDIATE
RUEHC/SECSTATE WASHDC IMMEDIATE 5904
INFO RUCNRAQ/IRAQ COLLECTIVE PRIORITY
RHMFISS/HQ USCENTCOM MACDILL AFB FL PRIORITY

C O N F I D E N T I A L SECTION 01 OF 02 KUWAIT 002954 
 
SIPDIS 
 
NOFORN 
SIPDIS 
 
FOR NEA/ARP, NEA/I AND EB; NSC FOR BOUZIS, LONDON FOR TSOU, 
PARIS FOR ZEYA 
 
E.O. 12958: DECL: 07/22/2016 
TAGS: EAID PREL KU IZ KUWAIT IRAQ RELATIONS
SUBJECT: DEPUTY TREASURY SECRETARY KIMMITT AND COUNSELOR 
ZELIKOW ENLIST ARAB FUND SUPPORT FOR IRAQ COMPACT 
 
 
Classified By: CDA Matt Tueller for reason 1.4 (d) 
 
¶1. (C/NF) Summary: During a July 22 meeting with Mr. Abdul 
Latif Al-Hamad, Director General (DG) of the Arab Fund, 
Deputy Treasury Secretary Kimmitt and State Dept. Counselor 
Dr. Philip Zelikow outlined the concept for the Iraq Compact, 
laid out a timeline for critical steps, and solicited the 
active participation of the Arab Fund as a member of both the 
preparatory group and the executive committee.  Deputy 
Secretary Kimmitt emphasized the credibility and competence 
 
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of the key Iraqi participants in the Compact as well as the 
need for the regional, technical, and process expertise that 
the Arab Fund could bring to the project. The DG responded 
that the Arab Fund was eager to return to Iraq and contribute 
to reconstruction.  He acknowledged that after being "totally 
cut off from Iraq for 15-16 years" the Fund lacked specific 
knowledge of the Iraqi landscape.  (Note: Iraq is still 
technically suspended from participation in the Arab Fund. 
End note.) Nevertheless, the DG accepted the invitation to 
participate in the Compact, stressing that his staff would 
need weeks to prepare.  He added that the Fund could "fill in 
gaps" in areas such as water and power, realizing significant 
benefits from investments at the margin.  In conclusion, the 
DG expressed optimism about Iraq's future while predicting 
progress would be slow and difficult.  End summary. 
 
Kimmitt Explains Compact, Asks for Arab Fund Participation 
--------------------------------------------- ------------- 
 
¶2. (C/NF) Deputy Secretary Kimmitt opened the July 22 meeting 
with Director General Abdul Latif Al-Hamad of the Arab Fund 
by stating that the Iraq Compact was the best mechanism for 
driving development within Iraq.  Kimmitt and Zelikow were 
accompanied by Rear Admiral Robert Moeller of U.S. Central 
Command, NSC Director Evangelia Bouzis, CDA Matt Tueller, 
State Dept. Financial Economist Alexei Monsarrat, Treasury 
Dept. Financial Economist Vickie Alvo, and Econoff 
(notetaker). DepSec Kimmitt explained that the invitation to 
the Arab Fund to play a leading role was strongly supported 
by the USG.  He said the Iraq Compact would comprehensively 
address political, economic, and security problems by 
compelling the GOI to commit to critical economic reforms in 
exchange for financial and technical support from the 
International Community.  He added that the involvement of 
the Arab Fund would lend credibility and bring needed 
expertise.  Kimmitt added that, if necessary, this 
participation could take place remotely.  Kimmitt explained 
that although the initial meeting of the preparatory group 
scheduled for July 20 had to be postponed due to events in 
Lebanon, the formation of the Compact would still need to 
adhere to an ambitious timeline.  Technical discussions would 
continue through August culminating in a meeting of the 
preparatory group at the end of the month.  Meetings would 
then be held at the margins of the IMF/World Bank sessions in 
September.  Signing would be scheduled for November prior to 
the debate in the Security Council over the continuation of 
the mandate for the Multi-national Force in Iraq in December 
and prior to the end of Kofi Annan's term as Secretary 
General. 
 
DG Commits to Participation but Recognizes Challenges 
--------------------------------------------- --------- 
 
¶3. (C/NF) Director General Al-Hamad explained that the Arab 
Fund had not committed to sending a representative to the 
July 20 meeting because he "had no one to send" -- a 
significant proportion of his small staff is on vacation in 
July/August and the Fund was given notice only four days 
prior to the meeting.  The DG said that although the Fund was 
still technically prevented from working with Iraq, this 
situation could be easily remedied.  He said that Iraq could 
play an important, constructive role in the region with the 
caveat that stability in Iraq was "a longshot."  However, he 
expressed some optimism that the Fund, with its broad 
experience in the region, could play a useful role despite 
its disengagement from Iraq in recent years.  The DG said 
that the Compact would serve as a "vote of confidence from 
the international community," but he warned that the work of 
the Compact must "create an impression of equity and unity in 
development" to dispel the image of Iraq as "not a country, 
but a collection of vested interests and fighting groups." 
Al-Hamad accepted the invitation for the Fund to participate 
in the executive committee. 
 
DepSec Vouches for Competence and Commitment of the Iraqis 
--------------------------------------------- ------------- 
 
KUWAIT 00002954  002 OF 002 
 
 
 
¶4. (C/NF) Kimmitt referred to the GOI's success in 
stabilizing the dinar, building up foreign reserves, and 
collecting government revenue.  He added that the IMF had 
endorsed the Iraqi economic team, recognizing that they had 
"laid a strong macroeconomic foundation."  The Deputy 
Secretary said that it was, in fact, the GOI that conceived 
 
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the idea of the Compact as a means of creating a binding 
external commitment that would help the Government to 
overcome domestic political constraints.  He stated the 
shared vision for the Compact to serve as a plan of action 
rather than an aspirational document.  To allay the DG's 
concerns over a lack of accurate, up-to-date data on Iraq, 
DepSec Kimmitt offered to furnish copies of recent World 
Bank, IMF, UNDG, and IRRFI reports.  (Note:  The Embassy has 
followed up and provided the reports to the Arab Fund.  End 
Note.)  Counselor Zelikow said that the Fund could support 
the Iraqi team by drawing on its broad experience in 
identifying the most appropriate development targets to 
strategically address the most critical problems.  Picking 
the right targets, and then being tough on implementation 
would be key.  Zelikow added that the USG was eager to 
re-engage the Fund at a broader, systemic level in the near 
future. 
 
Arab Fund On Board but Level of Involvement Uncertain 
--------------------------------------------- -------- 
 
¶5. (C/NF) The DG expressed eagerness to engage but with 
modest expectations.  He emphasized that initial involvement 
by the Fund would be limited to "filling in gaps" to enhance 
the performance of existing projects.  He also stated that 
the extent of the Fund's involvement would be limited by the 
size of his staff as well as the time of the year with summer 
vacations being followed by Ramadan and the Haj. 
Nonetheless, he said that the effects of modest and 
accessible projects such as improving the provision of clean 
drinking water could be significant.  In closing, the 
Director General said, "I'm optimistic despite all the 
problems.  It's a long haul, but there's really no 
alternative." 
 
¶6. (U) Deputy Secretary Kimmitt and Counselor Zelikow have 
cleared this cable. 
 
********************************************* * 
For more reporting from Embassy Kuwait, visit: 
http://www.state.sgov.gov/p/nea/kuwait/?cable s 
 
Visit Kuwait's Classified Website: 
http://www.state.sgov.gov/p/nea/kuwait/ 
********************************************* * 
TUELLER