VZCZCXYZ0033
RR RUEHWEB

DE RUEHFRA #0158 0161518
ZNR UUUUU ZZH
R 161518Z JAN 07
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC 0000
INFO RUEATRS/DEPARTMENT OF TREASURY WASHDC
RUCNMEM/EU MEMBER STATES
ARAB ISRAELI COLLECTIVE
RHEHNSC/NSC WASHINGTON DC
RUCNDT/USMISSION USUN NEW YORK

UNCLAS PARIS 000158 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
STATE FOR EUR/WE; NEA 
STATE ALSO FOR EB/IFD/ODF EMILY WAECHTER 
NSC FOR ABRAMS/MAGAN 
 
E.O. 12958: DECL: N/A 
TAGS: EFIN KDEM PGOV PREL LE SY FR
SUBJECT: UPDATE ON LEBANON DONORS CONFERENCE 
 
 
SENSITIVE BUT UNCLASSIFIED, NOT FOR INTERNET 
 
REF: PARIS 112 
 
¶1.  (U) SUMMARY: FRANCE IS ENCOURAGED BY THE GOVERNMENT OF 
LEBANON'S PROPOSED ECONOMIC PROGRAM TO GARNER DONOR SUPPORT, AND 
IS RELATIVELY WELL-ADVANCED IN PREPARATIONS FOR THE JANUARY 25 
INTERNATIONAL CONFERENCE FOR LEBANON.  THE LEBANESE ECONOMIC 
TEAM GAVE A VERY GOOD PRESENTATION OF ITS ECONOMIC REFORM 
PROGRAM AND APPEALED FOR GENEROUS DONOR SUPPORT ON THE 25TH. 
LEBANON AND THE FUND ALSO INDICATED THAT THEY WERE ACTIVELY 
DISCUSSING SOME SORT OF AN IMF PROGRAM FOR LEBANON, ALTHOUGH IT 
IS CLEAR THAT THE GOL IS STILL DIVIDED ON WHAT TYPE OF PROGRAM 
IT SHOULD BE.  END SUMMARY. 
 
¶2.  (U) EB PDAS LIZ DIBBLE, NEA DAS ROBERT DANIN, AND TREASURY 
DAS AHMED SAEED HELD A SERIES OF MEETINGS IN PARIS IN CONNECTION 
WITH THE JANUARY 25 LEBANON DONORS CONFERENCE (A/K/A PARIS III) 
- BILATERALLY ON JANUARY 9 WITH THE FRENCH TREASURY CONFERENCE 
COORDINATOR; SUBSEQUENTLY A MEETING THAT INCLUDED TREASURY U/S 
TIM ADAMS AND THE LEBANESE ECONOMIC TEAM OF FINANCE MINISTER 
JIHAD AZOUR, MINISTER OF ECONOMY SAMI HADDAD, CENTRAL BANK 
GOVERNOR RIAD SALEMEH, AND ADVISOR TO THE PM MOHAMMED CHATTAH; 
AND FINALLY A MULTILATERAL CORE GROUP MEETING ON JANUARY 10. 
 
FRENCH REPORT ON PARIS III CONFERENCE 
------------------------------------- 
¶3.  (SBU) JEAN-PIERRE JOUYET, COORDINATOR FOR THE JANUARY 25 
CONFERENCE TO BE HOSTED BY FRANCE, STRUCTURED THE BILATERAL 
MEETING TO COVER THE POLITICAL SITUATION IN LEBANON; EXCHANGE 
VIEWS ON THE PROPOSED LEBANESE ECONOMIC REFORM PACKAGE; URGE IMF 
INVOLVEMENT; AND EXCHANGE INFORMATION ABOUT THE NATURE AND SIZE 
OF EXPECTED PLEDGES AT THE CONFERENCE.  THE USDEL NOTING THAT 
THE INTERNAL POLITICAL SITUATION IN LEBANON IS COMPLICATED, 
EXPRESSED POSITIVE VIEWS OF THE REFORM PROGRAM, AND NOTED THAT 
THE USG WOULD SUPPORT AN AGREEMENT BETWEEN LEBANON AND THE IMF 
(EITHER A STAFF MONITORED PROGRAM OR AN EMERGENCY POST-CONFLICT 
ASSISTANCE PROGRAM) PROVIDED THE GOL REQUESTS IT. 
 
¶4.  (SBU) JOUYET SAID HE UNDERSTANDS THE IMF IS SPLIT INTERNALLY 
OVER AN EPCA, AND THE MANAGING DIRECTOR HAS NOT YET TAKEN A 
POSITION.  HE AGREED THAT THE GOL NEEDS TO ASK FOR AN EPCA, BUT 
ALSO IS CONSIDERING WHETHER TO HAVE FRANCE INITIATE A HIGH-LEVEL 
DEMARCHE TO CONVINCE THE MANAGING DIRECTOR OF THE MERITS OF AN 
EPCA. THE USDEL ENCOURAGED JOUYET TO GET THE GOL AND THE IMF TO 
REACH CLOSURE, NOTING THAT A UNIFIED G7 POSITION COULD ALSO BE 
HELPFUL.  INTERNAL LEBANESE QUALMS (ESSENTIALLY FROM THE CENTRAL 
BANK) ABOUT AN IMF PROGRAM ALSO SHOULD BE ADDRESSED.  JOUYET 
OPINED THAT CENTRAL BANK GOVERNOR SALAMEH WANTS TO CONTINUE TO 
BE SEEN AS A MIRACLE-WORKER, AND HE NEEDS ASSURANCE THAT HE CAN 
CONTINUE TO SET MONETARY POLICY. 
 
¶5.  (SBU) JOUYET ASKED ABOUT THE SIZE OF THE U.S. CONTRIBUTION. 
THE USDEL ASSURED HIM IT WOULD BE SUBSTANTIAL.  IN ADDITION, 
SECRETARY RICE WILL CONTINUE TO ENCOURAGE OTHER DONORS TO BE 
 
SIPDIS 
GENEROUS DURING HER TRAVEL TO THE MIDDLE EAST.  JOUYET SAID 
FRENCH PRESIDENT CHIRAC WILL ALSO BE PLACING CALLS.  JOUYET 
THOUGHT THE GREATEST DIFFICULTY WILL COME FROM QATAR.  THE UAE 
ALSO HAS NOT BEEN VERY FORTHCOMING.  JOUYET IS REASONABLY 
CONFIDENT ABOUT THE EU CONTRIBUTION, GIVEN THE EXPECTED 
ATTENDANCE OF EC PRESIDENT BARROSO (COMMENT:  WE HAVE 
SUBSEQUENTLY HEARD FROM USEU THAT THE EC CONTRIBUTION IS 
EXPECTED TO BE 187 MILLION EUROS OVER FOUR YEARS, WITH ANOTHER 
100 MILLION EUROS FROM THE EIB.  END COMMENT).  HE NOTED UK 
RELUCTANCE TO OPEN ITS TREASURY COFFERS, AND ITALIAN COMMENTS 
ABOUT ALREADY CONTRIBUTING THROUGH UNIFIL.  HE HAS NOT HEARD 
FROM JAPAN OR CANADA. 
 
¶6.  (SBU) ON POSSIBLE CONFERENCE OUTCOME DOCUMENTS, JOUYET SAID 
HE HAS TO DEFER TO PRESIDENT CHIRAC, BUT AGREED TO ACCEPT INPUT, 
TO MEET AGAIN WITH THE USDEL BEFORE THE CONFERENCE AND TO TRY TO 
MINIMIZE THE NEED TO NEGOTIATE TEXT. 
 
LEBANESE FINANCE MINISTER PRESSES FOR AID 
----------------------------------------- 
¶7.  (SBU) IN A CORDIAL BILATERAL MEETING WITH THE LEBANESE 
FINANCIAL TEAM, LEBANESE FINMIN JIHAD AZOUR SUMMARIZED FOR 
TREASURY U/S ADAMS WHAT AZOUR CHARACTERIZED AS AN AMBITIOUS 
5-YEAR PLAN FOR ECONOMIC DEVELOPMENT.  AZOURS GREATEST WORRY IS 
IMPLEMENTATION, GIVEN THE LEBANESE POLITICAL SITUATION, ALTHOUGH 
HE STRESSED THE PLAN'S ELEMENTS CAN BE TRACED BACK TO POSITIONS 
SUPPORTED BY ALL THE MAJOR POLITICAL PARTIES.  LACK OF A 
PRESIDENTIAL SIGNATURE POSES NO ROADBLOCK, SINCE UNDER LEBANESE 
LAW THE PLAN WILL BECOME EFFECTIVE IF THE PRESIDENT FAILS TO 
 
SIGN AFTER A CERTAIN PERIOD OF TIME.  THE GOL IS EVEN MAKING 
PROGRESS WITH SOME TECHNICAL LAWS IN PARLIAMENT, ALTHOUGH THE 
GENERAL NON-FUNCTIONING OF THE PARLIAMENT LIMITS IMPLEMENTATION. 
 
 
¶8.  (SBU) LEBANESE CENTRAL BANK GOVERNOR RIAD SALAMEH ASSURED 
THE USDEL THAT HE IS COMMITTED TO THE REFORM PROGRAM, BUT 
LEBANON FACES A POLITICAL FIGHT.  THE BIGGEST RISK IS DELAY, 
WHICH LEADS TO MARKET NERVOUSNESS, HIGHER INTEREST RATES, AND A 
LARGER BALANCE OF PAYMENTS DEFICIT.  GIVEN THE SIZEABLE DEBT 
SERVICING REQUIREMENTS FALLING DUE THIS YEAR, THE GOL NEEDS TO 
GET ASSISTANCE UPFRONT. 
 
¶9.  (SBU) AZOUR SAID THE OPPOSITION'S MAIN CRITICISM IS THAT 
ECONOMIC REFORMS ARE BEING IMPOSED ON LEBANON.  U/S ADAMS 
ASSURED AZOUR THE US WOULD GET THE MESSAGE OUT THAT THE PROGRAM 
IS "HOMEGROWN."  AZOUR MENTIONED THAT THE GOL HAS NOW DEVELOPED 
A DOMESTIC PUBLIC RELATIONS CAMPAIGN FOR THE ECONOMIC PROGRAM. 
HE DOES NOT SEE HOW DEMOCRACY CAN BE STABILIZED WITHOUT AN 
ECONOMIC RECOVERY.  HE PRESSED FOR DISBURSEMENTS THAT ARE 
FRONT-LOADED, WITHOUT CONDITIONS, AND WELL IN EXCESS OF PARIS II 
PLEDGES.  HE ASKED FOR USG HELP TO GAIN G7 SUPPORT, AND TO HAVE 
THE IFIS INCREASE THEIR ASSISTANCE ENVELOPES.  HE ALSO ASKED FOR 
USG HELP IN DECIDING BETWEEN AN EPCA AND A STAFF MONITORED 
PROGRAM (SMP) WITH THE IMF.  ALTHOUGH THE DANGER OF OVERLY HIGH 
EXPECTATIONS IS REAL, IT IS NO SECRET THAT THE GOL NEEDS BETWEEN 
USD 8-10 BILLION. 
 
¶10.  (SBU) SALAMEH INTERJECTED WITH A NUANCED VIEW THAT THREE 
APPROACHES ARE NEEDED OVER THE NEXT FIVE YEARS - FIRST A LARGE 
UPFRONT DONATION IN 2007, THEN FUND HELP TO IMPLEMENT THE REFORM 
PROGRAM, AND FINALLY WITH THE BENEFIT OF TIME, A STAND-BY 
ARRANGEMENT.  HE FAVORS AN SMP OVER AN EPCA SINCE AN EPCA 
USUALLY ONLY PERMITS DIPPING INTO A SMALL PORTION OF THE IMF 
QUOTA. 
 
¶11.  (SBU) THE USDEL PRESSED AZOUR TO MAKE USG ASSISTANCE EASIER 
BY REMOVING IMPEDIMENTS TO A SUCCESSFUL PARIS III OUTCOME, SUCH 
AS BY REACHING AGREEMENT QUICKLY WITH THE IMF, AND REACHING OUT 
TO POTENTIAL DONORS.   U/S ADAMS STRESSED THAT AGREEMENT ON AN 
IMF PROGRAM WOULD ENCOURAGE G-7 DONORS AS WELL AS THE GULF 
STATES. 
 
CORE GROUP: LEBANON NEEDS TONS OF CASH, FAST 
-------------------------------------------- 
¶12.  (U) AT A CORE GROUP MEETING ON JANUARY 10, LEBANESE FINMIN 
AZOUR SPOKE OF THE USD 6 BILLION COST OF THE WAR, THE PROPOSED 
ECONOMIC REFORM PROGRAM, AND THE NEED FOR INTERNATIONAL SUPPORT 
FOR THE EXPECTED USD 4.5 BILLION IN IMMEDIATE FINANCING NEEDS, 
AND USD 87 BILLION OVER THE NEXT FIVE YEARS.  LEBANESE ECONOMIC 
MINISTER SAMI HADDAD PROVIDED DETAILS OF THE REFORM PACKAGE, 
STATING THE OBJECTIVE IS TO REACH 4-5% GDP GROWTH RATES. 
LEBANESE CENTRAL BANK GOVERNOR SALAMEH TOUCHED ON THE ROLE OF 
THE BANK IN MAINTAINING CONFIDENCE AND PARTICIPATING IN THE 
REFORM PROGRAM.  AZOUR CONCLUDED BY ARGUING THAT INTERNATIONAL 
SUPPORT IS LIKELY TO UNLOCK LEVELS OF PRIVATE SECTOR SUPPORT 
THAT WOULD FAR OUTSTRIP DONOR GRANT LEVELS, PUTTING LEBANON ON A 
VIRTUOUS ECONOMIC DEVELOPMENT PATH. 
 
¶13.  (SBU) THE IMF REPRESENTATIVE STATED THE FUND HAS BEEN 
WORKING CLOSELY WITH THE GOL, ESPECIALLY ON FISCAL ADJUSTMENT. 
THE REFORM PROGRAM IS AMBITIOUS, BUT COMMENSURATE WITH THE SIZE 
OF THE IMBALANCES.  THE FUND HAS PREPARED AN INITIAL DEBT 
SUSTAINABILITY ANALYSIS, AND USING THE ARBITRARY FIGURE OF USD 9 
BILLION IN GRANT ASSISTANCE, CONCLUDED LEBANON WOULD BE ABLE TO 
SOLVE ITS DEBT PROBLEM.  THE FUND IS STILL DISCUSSING INTERNALLY 
WHAT OPTIONS EXIST FOR A PROGRAM, AND EXPECTS A DECISION IN THE 
NEXT FEW DAYS.  IN ANY EVENT, DONOR SUPPORT SHOULD BE STRUCTURED 
IN A WAY THAT MAINTAINS INCENTIVES FOR LEBANON TO KEEP ON THE 
REFORM PATH. 
 
¶14.  (U) THE UN REPRESENTATIVE ANNOUNCED THAT UN SYG BAN KI-MOON 
WOULD ATTEND THE JANUARY 25 MEETING, AND URGED DONORS TO FOCUS 
ON THE MOST DISADVANTAGED BY THE WAR.  THE EUROPEAN COMMISSION 
REPRESENTATIVE ARGUED AGAINST EXCESSIVE UPFRONT REFORM MEASURES, 
EXCEPT FOR REMOVING ANY IMPEDIMENTS TO THE PRIVATE SECTOR, AND 
EXPRESSED HOPE THAT EU MEMBER STATES WOULD BE GENEROUS.  THE 
EUROPEAN UNION WILL BE REPRESENTED BY JOSE BAROSSO, PRESIDENT OF 
THE EUROPEAN COMMISSION; BENITA FERRERO-WALDNER, EUROPEAN 
EXTERNAL RELATIONS COMMISSIONER; AND JAVIER SOLANA, SECRETARY 
GENERAL OF THE EU COUNCIL AND HIGH REPRESENTATIVE FOR EU COMMON 
FOREIGN POLICY.  THE WORLD BANK DELEGATION WILL BE HEADED BY 
PRESIDENT PAUL WOLFOWITZ. 
 
¶15. (U) IN A TOUR DE TABLE, PARTICIPATING DELEGATIONS REACTED TO 
THE GOL PRESENTATION AND INDICATED THEIR GOVERNMENT'S LIKELY 
LEVEL OF REPRESENTATION AT THE JANUARY 25 CONFERENCE.  ALL 
EXPRESSED APPRECIATION FOR THE AMBITIOUS REFORM PROGRAM TO WHICH 
THE GOL HAD COMMITTED.  SOME HAD UPDATES ON THE STATUS OF 
STOCKHOLM PLEDGES, BUT THERE WERE FEW SPECIFICS ON PLANS FOR THE 
JANUARY 25 CONFERENCE (WITH A FEW EXCEPTIONS, NOTED BELOW). 
 
¶16.  (SBU) IN TWO SEPARATE INTERVENTIONS IN THE MORNING AND IN 
THE AFTERNOON, U/S ADAMS AND PDAS DIBBLE CONGRATULATED THE GOL 
FOR PASSING AN AMBITIOUS AND SERIOUS REFORM PROGRAM.  THEY 
ANNOUNCED THAT AS A DEMONSTRATION OF US SUPPORT FOR LEBANON, 
SECRETARY RICE WOULD LEAD THE (LARGISH) INTERAGENCY USG 
 
SIPDIS 
DELEGATION.  THEY URGED DONORS TO DEMONSTRATE SUPPORT TO LEBANON 
WITH SUBSTANTIAL CONTRIBUTIONS, WITH ADAMS EXHORTING THE GROUP 
TO "GIVE UNTIL IT HURTS".  THEY STRESSED THE IMPORTANCE OF AN 
IMF PROGRAM TO ENSURE A SUSTAINED REFORM EFFORT AND TO LEND A 
CRITICAL SEAL OF APPROVAL TO LEBANON'S REFORM EFFORTS, BUT NOTED 
IT WOULD BE UP TO THE GOL TO SOLICIT THE PROGRAM. 
 
¶17. (SBU) BELGIUM AND LUXEMBOURG INDICATED THEY WOULD BE 
REPRESENTED AT THE LEVEL OF PRIME MINISTER.  THE FOLLOWING 
DELEGATIONS EXPECTED REPRESENTATION AT THE LEVEL OF FOREIGN 
MINISTER: GERMANY (INCLUDING IN ITS ROLE OF THE EU PRESIDENCY; 
IT HOPES TO GIVE MORE THAN THE 31 MILLION EUROS PLEDGED AT 
STOCKHOLM BUT THE LEVEL OF SUPPORT WILL DEPEND ON REFORM 
IMPLEMENTATION), NETHERLANDS, NORWAY (THE DEVELOPMENT MINISTER 
WILL ALSO ATTEND, NORWAY WILL HAVE A "SUBSTANTIAL" PLEDGE); 
SWEDEN (WILL ALSO BE REPRESENTED BY THE MINISTER FOR 
INTERNATIONAL ASSISTANCE); ITALY (FOREIGN MINISTER PROBABLE, THE 
ITALIANS WOULD "DO THEIR BEST" AND WERE LOOKING AT HOW TO DO 
BUDGET SUPPORT OR SOFT LOANS); GREECE (LIKELY CONTINUED FOCUS ON 
PROJECT-BASED ASSISTANCE IN AREAS SUCH AS RENEWABLE ENERGY); THE 
NETHERLANDS (LIKELY); FINLAND; SPAIN; MALAYSIA; AND CYPRUS. 
SAUDI ARABIA WILL BE REPRESENTED BY BOTH ITS FOREIGN AND FINANCE 
MINISTERS.  THE SAUDI REPRESENTATIVE EMPHASIZED THE SUPPORT THE 
KINGDOM HAS ALREADY PROVIDED AND SAID IMF ENGAGEMENT WOULD BE 
HELPFUL GOING FORWARD. 
 
¶18. (SBU) THE FOLLOWING DELEGATIONS EXPECTED REPRESENTATION AT 
THE LEVEL OF FINANCE MINISTER:  EGYPT; KUWAIT (TO BE JOINED BY 
DIRECTOR GENERAL OF THE KUWAIT FUND, NO DETAILS ON LIKELY PLEDGE 
BUT WOULD WORK CLOSELY WITH COUNCIL FOR DEVELOPMENT AND 
RECONSTRUCTION TO IDENTIFY APPROPRIATE PROJECTS); AND JORDAN. 
 
¶19. (SBU) THE UK WILL BE REPRESENTED BY MINISTER OF STATE 
HOWELLS. (THE UK REP NOTED THAT LEGISLATIVE RESTRICTIONS MADE 
PROVISION OF SUBSTANTIAL ASSISTANCE IN LEBANON DIFFICULT, BUT 
PROMISED TO TAKE HOME CORE GROUP'S MESSAGE OF IMPORTANCE OF 
DOING AS MUCH AS POSSIBLE; HE TOLD US PRIVATELY THAT THE UK MAY 
HAVE TO RETHINK THE LEVEL OF PARTICIPATION, GIVEN THE LEVEL OF 
OTHER COUNTRIES' PARTICIPATION.)  QATAR, JAPAN (LIKELY TO 
PROVIDE SUPPORT FOR DE-MINING OPERATIONS AND TECHNICAL 
ASSISTANCE), UAE, CANADA (EMPHASIZED IMPORTANCE OF AN IMF 
PROGRAM), BRAZIL AND AUSTRIA WOULD ANNOUNCE REPRESENTATION AT A 
LATER DATE.  THE CHINESE DELEGATION WILL BE LED BY THE SPECIAL 
ENVOY FOR THE MIDDLE EAST; AUSTRALIA BY ITS AMBASSADOR TO 
FRANCE. 
 
¶20. (SBU) IN HIS SUMMARY, CONFERENCE ORGANIZER JEAN-PIERRE 
JOUYET REMARKED THAT ALL DELEGATIONS HAD EXPRESSED STRONG 
SUPPORT FOR THE REFORM PROGRAM DESCRIBED BY THE GOL.  THE IMF 
REP HAD ALSO PRAISED THE QUALITY OF THE PROGRAM AND HIGHLIGHTED 
THE IMPORTANT ROLE OF THE INTERNATIONAL COMMUNITY'S ASSISTANCE 
TO ITS SUCCESS, JOUYET NOTED.  IT WAS NOW INCUMBENT ON THE GOL 
TO TRANSFORM THE PROGRAM INTO A NATIONAL AGENDA AND FIND 
PRACTICAL STEPS FOR MOVING IT FORWARD FOR THE BENEFIT OF THE 
LEBANESE PEOPLE.  IDENTIFYING APPROPRIATE SEQUENCING FOR 
IMPLEMENTATION AND PROGRAMMING IS A CRITICAL NEXT STEP. 
 
¶21. (U) THIS CABLE WAS CLEARED BY THE DELEGATION AFTER RETURNING 
TO WASHINGTON. 
 
PLEASE VISIT PARIS' CLASSIFIED WEBSITE AT: 
HTTP://WWW.STATE.SGOV.GOV/P/EUR/PARIS/INDEX.C FM 
 
STAPLETON #