VZCZCXRO5613
PP RUEHBC RUEHDE RUEHDIR RUEHIHL RUEHKUK
DE RUEHKU #4291/01 3042148
ZNY CCCCC ZZH
P 312148Z OCT 06
FM AMEMBASSY KUWAIT
TO RUEHC/SECSTATE WASHDC PRIORITY 7394
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE PRIORITY
RUCNRAQ/IRAQ COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY

C O N F I D E N T I A L SECTION 01 OF 02 KUWAIT 004291 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: DECL: 10/31/2011 
TAGS: PGOV PREL EAID ECON EFIN ETRD EINV LE IZ KU
SUBJECT: KUWAIT FINANCE MINISTER URGES DISCRETION ON IRAQI 
DEBT RELIEF, SAYS KUWAITI PARLIAMENT IS OPPOSED 
 
REF: A. 04 KUWAIT 3481 
     ¶B. 04 KUWAIT 4081 
     ¶C. 05 KUWAIT 651 
     ¶D. 05 KUWAIT 669 
 
Classified By: DCM Matt Tueller for reasons 1.4 (b) and (d). 
 
¶1.  (C) SUMMARY:  On October 31, Treasury Deputy Secretary 
Kimmitt met with Kuwaiti Finance Minister Bader Al-Humaidhi 
to discuss the Iraq Compact, Iraqi debt relief, Lebanon's 
debt situation, oversight of Kuwaiti charities, and Kuwaiti 
investments in the United States.  Kimmitt provided an update 
on the Iraq Compact, including the expectation of reaching a 
consensus on the final document by the end of 2006. 
Al-Humaidhi reiterated Kuwait's support for Iraq's 
reconstruction but expressed disappointment that Kuwaiti aid 
money was not being utilized by the Iraqi government. 
Al-Humaidhi warned against raising the issue of forgiving 
Iraqi debt, saying Kuwait's National Assembly, which must 
approve any relief measure, remains opposed.  On Lebanon's 
fiscal situation, Al-Humaidhi stated his concern over 
Lebanon's debt obligations and said he hoped the January 2007 
conference in Paris would produce more aid to relieve the 
debt burden. 
 
¶2.  (C) Kimmitt stated that the quality of Kuwait's banking 
regulatory system makes the movement of illicit funds through 
charities more likely, and urged particular scrutiny on 
cross-border transactions.  Regarding Kuwaiti investments in 
the United States, Kimmitt said that the U.S. welcomes 
foreign investment and invited the Kuwait Investment 
Authority to discuss proposed investments with the Treasury 
Department.  END SUMMARY 
 
"How can we commit new funds when others aren't being used?" 
--------------------------------------------- ---------------- 
 
¶3.  (C) On October 31, Treasury Deputy Secretary Kimmitt, 
accompanied by DAS Ahmed Saeed and the DCM, met with Minister 
of Finance Bader Al-Humaidhi.  Also attending the meeting was 
Executive Director of the Kuwait Investment Authority (KIA), 
Bader Al-Saad.  Kimmitt briefed Al-Humaidhi on the status of 
the International Compact on Iraq (ICI) and the expected 
outcome of the ICI meeting on October 31.  Kimmitt said the 
goal of the meeting will be to obtain final comments on the 
document from the Government of Iraq (GOI) and donor 
countries in preparation for a possible signing in December 
¶2006.  Al-Humaidhi reiterated Kuwait's support for Iraq's 
reconstruction but expressed disappointment that "not one 
dollar has been disbursed" of the Kuwaiti assistance 
commitment.  Responding to Kimmitt's statement that Kuwait 
should look to pledge more aid, Al-Humaidhi asked, "How can 
we commit new funds when others aren't being used?"  Kimmitt 
responded that one of the goals of the ICI is to address this 
problem. Al-Humaidhi acknowledged that security problems are 
a "major factor" but noted the GOI's struggle to designate 
and approve projects. (Rather than correct Al-Humaidhi in 
front of his subordinates, Kimmitt asked Kuwait Fund DG 
Abdulwahab Ahmed Al-Bader in a subsequent meeting to inform 
both Al-Humaidhi and Deputy Prime Minister and Minister of 
Foreign Affairs Sheikh Muhammad Sabah Al-Salem Al-Sabah that 
$75 million has been disbursed.) 
 
Kuwaiti Parliament Opposition Makes Debt Relief a Tough Sell 
--------------------------------------------- --------------- 
 
¶4.  (C) Kimmitt noted the importance of Iraqi debt relief, 
the deterrent effect high levels of debt can have on foreign 
investment, and the USG's commitment to 100% relief.  Kimmitt 
stated that debt relief is one of the keys to achieving Iraqi 
economic self-sufficiency, and he urged Kuwait to meet at 
least the Paris Club goal of 80%.  Al-Humaidhi advised 
against pursuing relief of Kuwaiti-held Iraqi debt at this 
time, noting that the Parliament is "not ready for such a 
thing" and that it would be "very difficult" to obtain 
parliamentary approval.  (Refs A-D.)  Al-Humaidhi related 
that he also advised the GOI delegation at a recent 
conference in Singapore against raising Kuwait-held debt. 
 
¶5.  (C)  Kimmitt asked Al-Humaidhi if the Kuwaiti 
Parliament's position would change if an 80% consensus 
emerged within the GCC.  Al-Humaidhi responded that a GCC 
consensus would mean little since the hard-line taken by 
Kuwait's Parliament was rooted in Kuwait's unique history 
with Iraq, each GCC nation has a different mechanism for 
making such decisions, and countries such as Saudi Arabia and 
the UAE do not have parliaments to contend with.  The DCM 
said a strong GOK endorsement of debt relief could sway 
Kuwait's Parliament, but Al-Humaidhi disagreed, arguing that 
 
KUWAIT 00004291  002 OF 002 
 
 
Parliament's position was backed by popular opinion. 
Al-Humaidhi said that the GOK has taken no official decision 
forgive Iraqi debt.  Kimmitt reiterated how important it was 
to the USG to have Iraq's debt burden reduced. 
 
Al-Humaidhi:  Debt is Lebanon's Biggest Problem 
--------------------------------------------- -- 
 
¶6.  (C) Kimmitt thanked Al-Humaidhi for Kuwait's assistance 
pledges to Lebanon but noted the challenges of enacting 
economic reform there.  Al-Humaidhi agreed that reform is 
difficult in Lebanon, primarily due to ongoing political 
issues between the PM and President.  He stated that 
Lebanon's debt burden is "more difficult than Iraq" and is 
"the biggest problem facing Lebanon" as interest payments 
constitute more than 50% of the GOL's budget.  He said he 
anticipates the GOL will ask for help with its debt at the 
upcoming meeting in Paris in January 2007.  Al-Humaidhi 
stated that Lebanon needs to engage in a program of economic 
reform and privatization but that he has concerns that the 
political situation will make this difficult.  Saeed noted 
that Lebanon's debt is mostly domestic, not foreign, which 
complicates any restructuring.  Kimmitt invited Al-Humaidhi's 
insight into Lebanon's situation ahead of the January meeting 
in Paris. 
 
Charities a Source of Concern 
----------------------------- 
 
¶7.  (C) Kimmitt raised recent sanctions imposed against Iran 
and North Korea for money laundering activities, and 
emphasized that these sanctions are not politically 
motivated, but are aimed to curb the financing of terrorism, 
and of weapons proliferation, organized crime, and drug 
syndicates.  Kimmitt said charities need to be watched 
carefully as they have been used as conduits for illicit 
funds, both in the Middle East and the United States. 
Al-Humaidhi responded that the Central Bank of Kuwait (CBK) 
is "one of the best in the region at dealing with money 
laundering."  Kimmitt agreed that CBK has made progress, but 
cautioned that the quality of Kuwait's banking system 
overnight means that the use of charities for illicit 
financing is even more likely, particularly for moving money 
across borders. 
 
U.S. Welcomes Kuwaiti Investment 
-------------------------------- 
 
¶8.  (SBU) Kimmitt said that after the recent controversies 
over the Dubai Ports World and CNOOC controversies there 
could be some concern on the part of foreign investors that 
the U.S. is raising barriers to investment, but these cases 
are not indicative of the investment environment.  He 
acknowledged that extra scrutiny is given to deals involving 
state-owned foreign entities, but that all investment is 
encouraged and 98% of proposals are approved within 30 days. 
He urged the KIA to approach members of Congress whose states 
would directly benefit from Kuwaiti investment and seek their 
support.  KIA Managing Director Saad said the KIA does not 
invest directly in businesses but prefers to invest in 
private equity funds like Carlyle Group and Morgan Stanley. 
The KIA's only real direct investment in the U.S., he said, 
is in real estate, which was complicated by a 1998 tax law 
revision. 
 
¶9.  (U) This cable was cleared by Deputy Secretary Kimmitt. 
 
******************************************** 
For more Embassy Kuwait reporting, see: 
http://www.state.sgov.gov/p/nea/kuwait/index. cfm?cables 
 
Or Visit Embassy Kuwait's Classified Website: 
http://www.state.sgov.gov/p/nea/kuwait/ 
******************************************** 
LeBaron