VZCZCXRO7045
RR RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK
DE RUEHGB #0699/01 0561531
ZNR UUUUU ZZH
R 251531Z FEB 07
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 9887
RUCPDOC/DEPT OF COMMERCE WASHDC
INFO RUCNRAQ/IRAQ COLLECTIVE

UNCLAS SECTION 01 OF 03 BAGHDAD 000699 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: POL ECON EAID AMGT IZ
SUBJECT:  NEA DEPUTY ASSISTANT SECRETARY BUTLER 
MEETS WITH KURDISH OFFICIALS IN IRAQ 
 
This is an Iraqi Kurdistan Regional Reconstruction Team cable. 
 
-------- 
SUMMARY 
-------- 
 
¶1.  (SBU) During his first visit to the Iraqi Kurdistan Region, NEA 
DAS Butler held separate meetings on February 16 with Kurdistan 
Regional Government (KRG) Director of the Office of Foreign 
Relations Falah Mustafa Bakir and Minister of Planning and 
Development Othman Shwani. 
 
¶2.  (SBU) Both Bakir and Shwani emphasized the need to strengthen 
the economy and requested U.S. help in reforming the banking and 
finance systems.  Both emphasized Kurdish friendship for the United 
States, but complained that the Kurdistan Region is not receiving 
its fair share of U.S. assistance. Butler emphasized the need for an 
economic environment in the Kurdistan Region that is business 
friendly.  END SUMMARY. 
 
---------------- 
PRODUCTIVE VISIT 
---------------- 
 
¶3.  (SBU) NEA Deputy Assistant Secretary Lawrence Butler had a 
productive February 15-16 visit to the Iraqi Kurdistan Region.  He 
toured the present Regional Reconstruction Team (RRT) compound in 
Ayn Kawa and the planned RRT site at Camp Zaytun of the Korean army. 
 He also met with KRG Director of Foreign Relations Falah Mustafa 
Bakir, KRG Minister of Planning and Development Othman Shwani, RRT 
staff members, RRT team leader Park Kyu-Ock, and Zaytun Division 
Commander Hwang Jung-Sung.  (The RRT in the Kurdistan Region is a 
joint Korean-American team.) 
 
¶4.  (SBU) This cable reports on the meetings with Director of 
Foreign Relations Bakir (a member of the Kurdistan Democratic Party) 
and Minister of Planning and Development Shwani (a member of the 
Patriotic Union of Kurdistan). 
 
¶5.  (SBU) In addition to Butler, these meetings were attended by 
James Yellin, U.S. Regional Coordinator for the Iraqi Kurdistan 
Region; John Stonham, Deputy to the Regional Coordinator; Anne 
Patterson, USAID Representative for Northern Iraq; Philip Kosnett, 
Political Advisor to the Commander, Multinational Corps-Iraq; Major 
Jung Hee-Hyoung, IRMO National Coordination Team; and Bryan Payne, 
NEA-I. 
 
--------------------------------------------- -- 
BAKIR - KRG COMMITTED TO BUILDING A NEW SOCIETY 
--------------------------------------------- -- 
 
¶6.  (SBU) After thanking Director of Foreign Relations Bakir for 
taking the time to meet with him, Butler praised the progress being 
made by the KRG, noting that the seeds of a thriving economy and 
political system were being planted in the Kurdistan Region. 
 
¶7.  (SBU) Bakir warmly welcomed Butler and observed that the United 
States and the Kurds of Iraq have always been friends.  Bakir stated 
that the thriving economy in Kurdistan can be directly attributed to 
United States support since the 1991 establishment of the no-fly 
zone over northern Iraq.  But we must be realistic, Bakir stated. 
Saddam ruled for 35 years, and it will take time for the Kurdistan 
Region to recover from his legacy. 
 
 
 
 
--------------------------------------------- --- 
BAKIR - USG RECONSTRUCTION ASSISTANCE NOT ENOUGH 
--------------------------------------------- --- 
 
¶8.  (SBU) Bakir said the focus of the KRG is on rebuilding 
infrastructure and strengthening the economy.  The KRG, Bakir added, 
does not want Kurds saying it was better under Saddam, but with only 
two to three hours of electricity a day in some parts of the region 
it is understandable why some people might feel this way.  Bakir 
continued that most Iraqis do not understand why the United States, 
the most powerful country in the world, has been unable to provide 
the Iraqis with the infrastructure for basic services such as 
electricity. 
 
¶9.  (SBU) Butler replied that the U.S. will continue to work hard to 
help the Kurdistan Region, but that the focus of our assistance will 
be capacity building.  He also noted that decentralizing Iraqi 
infrastructure--particularly the electricity and water 
sectors--would prove vital in solving many infrastructure problems. 
 
¶10.  (SBU) Bakir agreed, but complained that the KRG had not 
received its fair share of USG reconstruction assistance. 
 
BAGHDAD 00000699  002 OF 003 
 
 
 
--------------------------------------------- ---- 
BAKIR - KRG WISHES FOR GOOD RELATIONS WITH TURKEY 
--------------------------------------------- ---- 
 
¶11.  (SBU) Butler said that the possible inclusion of Turkey into 
the European Union would result in the Kurdish Region having a 
European neighbor on its border. 
 
¶12.  (SBU) Bakir agreed, stating that the KRG wants good relations 
with Turkey and has reservations about doing business with Syria and 
Iran.  Kurds owe Turkey a debt of gratitude, added Bakir, since 
during the Anfal campaign Turkey opened its borders to Kurdish 
refugees. 
 
--------------------------------------------- - 
KRG BUTLER - MAKE KURDISTAN BUSINESS FRIENDLY 
--------------------------------------------- - 
 
¶13.  (SBU) Butler emphasized the need for an economic environment in 
the Kurdistan Region that is business friendly, and noted that the 
region could become the business gateway to the rest of Iraq. 
 
¶14.  (SBU) Bakir said that Iran has expressed interest in setting up 
an investment bank in Erbil, but that the KRG would prefer big 
western banks such as CitiGroup, Barclays or HSBC.  Butler replied 
that in order for this to occur a strong regulatory system must 
first be put into place.  Bakir replied that KRG Prime Minister 
Nechirvan Barzani has asked for assistance in establishing a banking 
regulatory system.  Butler noted that USAID is already providing 
assistance in this area. 
 
--------------------------------------------- - 
BAKIR - WE WISH TO BE A BEACON FOR ALL OF IRAQ 
--------------------------------------------- -- 
 
¶15.  (SBU) Yellin closed the meeting by thanking the KRG for its 
recent offer to help find property for a U.S. facility in the 
Kurdistan Region. 
 
¶16.  (SBU) Bakir responded that while the relationship between the 
U.S. and the Kurds has had ups and downs, it is built upon 
friendship.  Bakir said he had met with President Bush on two 
occasions, and both times had left with the conviction that the U.S. 
would never abandon the Kurdish people.  We wish to be a beacon for 
all of Iraq, stated Bakir, and if you continue to work with us this 
is what you will see. 
 
----------------------------------- 
SHWANI - PRIVATE SECTOR MUST LEAD 
----------------------------------- 
 
¶17.  (SBU) Following the meeting with Bakir, Butler called on 
Minister of Planning and Development Shwani.  After opening 
amenities, Butler noted that the RRT would continue to coordinate 
USG assistance programs with Shwani.  (Note:  The KRG has tasked 
Shwani with coordinating foreign assistance programs.) 
 
¶18.  (SBU) Thanking Butler for his support, Shwani noted that both 
Ambassador Zalmay Khalilzad and Regional Coordinator Yellin had 
agreed that the USG would coordinate its assistance programs in the 
KRG with his office. 
 
¶19.  (SBU) Shwani said that the private sector must lead the 
development of the Kurdistan Region, and that the KRG must establish 
a legal framework that promotes the private sector and foreign 
investment.  Butler replied that USAID is helping the KRG design an 
Economic Development Plan. 
 
--------------------------------- 
SHWANI - BANKING SECTOR IS WEAK 
--------------------------------- 
 
¶20.  (SBU) Shwani said that both the Kurdistan Region and Iraq as a 
whole have weak banking and financial sectors.  Because of a lack of 
confidence in the banking system, he added, individuals and 
companies in the region have traditionally operated on a cash basis. 
 
 
¶21.  (SBU) Yellin replied that USAID is providing technical 
assistance for banking and financial reform.  Shwani said this 
assistance is appreciated and is needed to put the banking and 
financial sectors on a modern footing. 
 
---------------------------------------- 
INVESTMENT BOARD - MEMBERS ALL FROM KRG 
---------------------------------------- 
 
¶22.  (SBU) Yellin said that it is a cause of concern that all the 
 
BAGHDAD 00000699  003 OF 003 
 
 
members of the Investment Board of the Kurdistan Region are from the 
KRG.  Foreign companies may well fear, Yellin continued, that such a 
board would favor investors associated with the dominant political 
parties. 
 
¶23.  (SBU) Shwani acknowledged that the private sector should be 
represented on the board and claimed that not all its members are 
from the KRG.  He said that six are from the KRG and two from the 
private sector.  (Later the same day, an aide to Shwani phoned the 
RRT and acknowledged that all the board members are KRG officials.)