VZCZCXRO4675
RR RUEHROV
DE RUEHKH #0274/01 0531326
ZNR UUUUU ZZH
R 221326Z FEB 07
FM AMEMBASSY KHARTOUM
TO RUEHC/SECSTATE WASHDC 6223
INFO RUCNIAD/IGAD COLLECTIVE

UNCLAS SECTION 01 OF 02 KHARTOUM 000274 
 
SIPDIS 
 
SENSITIVE 
SIPDIS, NOT FOR INTERNET POSTING 
 
E.O. 12958: N/A 
TAGS: PREL PGOV EAID EFIN PINS SU
SUBJECT: FEBRUARY AEC WEALTH SHARING WORKING GROUP MEETINGS 
 
REFTEL: Khartoum 136 
 
¶1. (SBU) SUMMARY: The Assessment and Evaluation Commission's Wealth 
Sharing Working Group, chaired by the USG, convened two sessions in 
advance of the February 15 AEC plenary to bolster implementation of 
critical components of the CPA's wealth sharing provisions.  The 
meetings focused on the current status and operations of the Fiscal 
and Financial Allocation and Monitoring Commission and the National 
Petroleum Commission.  Discussions revealed the efforts of capable 
technocrats striving to implement the peace agreement despite 
strained relations within the Government of National Unity and 
repeated obstacles laid down by the GNU Ministry of Finance.  END 
SUMMARY. 
 
¶2. (SBU) The Charge convened a February 12 special session of the 
AEC Wealth Sharing Working group to solicit the views of Fiscal and 
Financial Allocation and Monitoring Commission Chairman (FFAMC) 
Ibrahim Moneim Mansour on the progress of national revenue transfers 
fifteen months after the establishment of the advisory commission. 
The FFAMC, formally established by the CPA to steer fiscal 
decentralization enshrined in the peace agreement, establishes the 
revenue sharing formula for transfers of non-oil revenues from the 
GNU to all 25 states. 
 
¶3. (SBU) Mansour, at the helm since the commission's inception, has 
worked doggedly to meet CPA-mandated deadlines, including the 
completion of the fiscal federalism formula in advance of the 2007 
budget.  In contrast with the frustration expressed previously to 
Post regarding Ministry of Finance imposed roadblocks (reftel), the 
Chairman was circumspect with the assembled AEC members. "Allowances 
must be made for expected difficulties in the first year."  Despite 
this politesse, he highlighted GNU shortcomings in the wealth 
sharing agreement's implementation: the Finance Ministry's own, 
repeated violation of the 2007 Budget Act, inaction on FFAMC 
guidance, and slow progress on CPA-mandated "revenue pooling" due to 
the refusal of some government institutions to report revenues.  The 
Chairman noted, with a glance at National Congress Party (NCP) 
representatives, that "increased cooperation with the Ministry of 
Finance would be useful." 
 
¶4. (SBU) Despite a six month delay in the FFAMC's operations 
stemming from Mansour's participation in the Abuja peace talks and 
late ministerial appointments of some commission members, the 
commission has effectively worked its way into the Sudanese 
bureaucracy.  Less than six months after it inaugural May meeting, 
the body tabled the recommendations by its Panel of Experts to the 
Presidency. By late October, Mansour and his colleagues had become 
fixtures in senior GNU discussions determining the allocation of 
revenues to fifteen northern and ten southern states.  The 
twenty-member Panel of Experts consists of a cross-section of 
Sudan's academic and financial elite. (NOTE: Full lists of the PoE 
and FFAMC membership has been e-mailed to AF/SPG. END NOTE.) The 
2007 Resources and Revenues Act on the Allocation of Resources 
(reftel) is a virtual carbon copy of the FFAMC recommendations. 
 
¶5. (SBU) Although the Commission's technical expertise has been 
incorporated into Sudan's fiscal statutes, its implementation 
guidelines - particularly important for overall CPA implementation - 
have thus far been largely ignored. Non-oil revenue transfers for 
2007 were slated to occur as follows: $5.003 billion for the 
Ministry of Finance, $2.497 billion dispersed to each of the fifteen 
northern states, and $1.423 billion for the ten southern states. In 
practice, the Ministry transferred funds earmarked for the North and 
South to the National States Support Fund; an overt violation of the 
2007 budget act, and a move that has further delayed funds transfers 
to Juba. 
 
¶6. (SBU) Full implementation of the FFAMC's vision for comprehensive 
fiscal federalism has been further constrained by capacity issues in 
southern Sudan.  The lack of banking infrastructure in all ten 
southern states has forced the Government of Southern Sudan to act 
as the steward for the entirety of the funds destined for southern 
state governments.  The lack of GOSS-generated information on 
state-level self-generated income has hampered the degree to which 
the commission will be able to monitor and verify intra-South funds 
to each state "in accordance with the information it has on hand." 
Mansour noted to the AEC that the Presidency has endorsed this 
arrangement. 
 
¶7. (SBU) COMMENT: Mansour's refusal to stray beyond the technical 
realm, and the absence of the SPLM at the session due to the 
scheduling conflict with party meetings in Yei, hampered the AEC 
Working Group's ability to rectify much of the Ministry of Finance's 
stymieing of the FFAMC's efforts during the course of the session. 
He would not address the relationship between the FFAMC and the 
National States' Support Fund (NSSF) (currently holding nearly $9 
billion in funds against the advice of the commission), contending 
it was improper to comment on a government entity that pre-dated the 
CPA.  In the same vein, he dodged requests to comment on the 
Ministry of Finance, ceding the floor to NCP representatives.  In 
the absence of bullying by the SPLM, the NCP refused to address the 
 
KHARTOUM 00000274  002 OF 002 
 
 
question, noting that it was not the GNU, but a party to the CPA. 
END COMMENT. ) 
 
¶8. (SBU) In a separate AEC Wealth Sharing Working Group meeting 
chaired by the Charge on February 13, Ministry of Energy and Mines 
representatives gave a historical overview of petroleum exploration 
in Sudan, and fielded questions on the Ministry's relationship to 
the National Petroleum Commission (NPC). Deputy Secretary General 
Hamad El Neel Abdul Gadir noted that the Presidency recently 
established guidelines for the NPC's role in relation to 
pre-existing ministries and institutions in Sudan's energy sector. 
 
 
¶9. (SBU) The NPC's Joint Technical Committee - comprised of 
representatives from the GOSS and Ministry of Energy and Mines - 
drafts and submits final oil production contracts for the NPC's 
final review and approval. El Neel noted new contracts were to be 
ready for NPC review beginning March 1. Three of Sudan's 22 oil 
blocks remain open to bid.  Ministry projections for oil production 
in 2007 are for 579,310 barrels per day. This is projected to 
decline to around 168,000 b/d by 2017. 
 
¶10. (SBU) El Neel's largely technical briefing glossed over 
political impediments to a functioning NPC.  He discussed block 
concessions leased after the CPA's signing and before the NPC's 
establishment, but neglected to note this was in violation of the 
peace agreement, or comment on how it would be rectified.  While the 
review of technical committee's evolution was thorough, the fact 
that rules governing its operations remain under dispute went 
unaddressed.  The SPLM's absence (again as a result of Yei) 
prevented a more probing AEC posture.  The March 7 AEC Wealth 
Sharing Working Group's focus on oil and the environment is expected 
to place the dysfunctional NPC back at the fore of the AEC's 
agenda. 
 
HUME