VZCZCXRO2551
OO RUEHBZ
DE RUEHC #7347/01 3490012
ZNR UUUUU ZZH
O 142352Z DEC 07
FM SECSTATE WASHDC
TO UN SECURITY COUNCIL COLLECTIVE IMMEDIATE
RUEHGB/AMEMBASSY BAGHDAD IMMEDIATE 4493
RUEHKU/AMEMBASSY KUWAIT IMMEDIATE 2438
RUCNDT/USMISSION USUN NEW YORK IMMEDIATE 0046

UNCLAS SECTION 01 OF 03 STATE 167347 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EFIN AA
SUBJECT: EXTENDING THE LIFE OF THE IAMB FOR IRAQ 
 
REF: STATE 165490 
 
¶1. (U) This is an action request.  See paragraph 6. 
 
¶2. (U) Objective: To explain the role of the IAMB and ensure 
that the Arab Fund for Economic and Social Development is 
aware that the renewal of the Development Fund for Iraq 
(under a new UNSCR) will also require renewal of the IAMB. 
UNSC capitals may also draw on these points if asked about 
the IAMB when discussing the MNF-I/DFI renewal (reftel). 
 
¶3. (SBU)  Background. The International Advisory and 
Monitoring Board for Iraq (IAMB) was created by UNSCR 1483 as 
an international oversight body to monitor the use of 
Development Fund for Iraq (DFI) funds -- which are primarily 
Iraq's petroleum revenues for the benefit of the people of 
Iraq.  Its original membership consisted of senior level 
representatives from the UN, World Bank, IMF, and the Arab 
Fund for Economic and Social Development; following the 
IAMB,s  formation, the Government of Iraq (GOI) joined the 
board.  The IAMB provides important oversight and 
transparency for the nearly $24 billion in the DFI.  To carry 
out its mandate, the IAMB contracts with outside accounting 
firms to audit the DFI for 12 month periods.  Historically 
the IAMB has been heavily critical of the US 
administration of DFI funds during the CPA era.  More 
recently the IAMB has focused its attention on the GOI and 
its lack of internal controls within the Ministry of Finance 
(MOF) and Central 
Bank of Iraq (CBI) for monitoring and accounting for DFI 
funds. The World Bank currently serves as the chair of the 
IAMB and will continue to do so until the end of 2007 when 
the IAMB mandate, the DFI, and immunities for the DFI, 
Iraq,s petroleum revenues, and certain other assets are set 
to expire. 
 
¶4. (SBU)  As part of the resolution extending the MNF-I 
mandate and the DFI arrangements for the calendar year 2008 
which the U.S. and UK introduced into the Security Council on 
December 10, we intend to seek also the extension of the 
mandate of the IAMB until the end of 2008.  In addition, we 
will seek a complementary one-year extension of privileges 
and immunities for the fund, Iraq,s petroleum revenues, and 
certain other assets.  We have encountered resistance from 
various IAMB members to the prospect of extending the IAMB,s 
mandate.  The members of the IAMB feel that its DFI oversight 
responsibilities should be turned over to the Iraqi Committee 
of Financial Experts (COFE).  Earlier this year, those 
countries and institutions participating in the International 
Compact with Iraq, including the UN, the IMF, and the World 
Bank, recommended the continuation of the DFI until a Single 
Petroleum Account is established by Iraq (target date 2008). 
The U.S./UK position is that as long as the DFI exists, and 
benefits from privileges and immunities conferred by the 
Security Council, there must be international oversight of 
the use of those funds. In the past, donor countries, 
including members of the Security Council, have judged the 
role of the IAMB to be critical.  It is our judgment that in 
order to successfully obtain support from the Security 
Council for an extension of DFI authorities, we will need to 
ensure the complementary role of the IAMB continues as long 
as the DFI is in existence.  On behalf of the UN, Warren 
Sach, the UN Comptroller, plans to brief the Council on 
Tuesday, December 18 on DFI/IAMB extension. 
 
¶5. NEA/I met with the IMF members (Bert Keuppens and Mary 
Hoare) at their request to discuss the DFI/IAMB extension on 
Friday, December 7, and EEB also engaged the World Bank, 
Caroline Harper, to deliver the same message.  The IMF 
representatives expressed some fatigue about their continued 
oversight responsibilities for the DFI but said that they 
recognized the importance of the DFI immunities and would 
continue to assist Iraq by serving in this capacity.  They 
outlined their vision for the role that the IAMB will play in 
2008 by saying that while they will not abdicate 
responsibility for DFI oversight, they will task most of the 
functions of the IAMB to COFE and outline strict benchmarks 
to which COFE will adhere.  The USG plans to work with the 
GOI and IAMB to assist in the transition from IAMB to COFE 
oversight.  In this regard 2008 will be a dry run for COFE 
under the watchful eye of the IAMB.  Mr. Keuppens indicated 
that the next IAMB meetings, scheduled for Dec. 12-13, will 
be postponed until January, at which point the next UNSCR 
will most likely be a reality.  Mr. Keuppens indicated that 
he was attending the meeting with NEA and EEB on behalf of 
 
STATE 00167347  002 OF 003 
 
 
the IAMB writ large and would carry this message forward to 
the rest of the members of the IAMB.  The World Bank also 
indicated it is willing to serve on the Board for another 
year, but requested clearer guidance from the USG on goals 
and outcomes for the remaining oversight period. 
 
End 
Background. 
 
¶6.  (SBU) Action Request(Embassy Kuwait):  Embassy Kuwait is 
requested to inform the Arab Fund for Economic and Social 
Development at the most senior appropriate level as soon as 
possible regarding the upcoming UNSCR extending the current 
arrangements for the DFI/IAMB. Coordination with the UK 
should be undertaken where appropriate.  (Note:  Additional 
information regarding the MNFI/DFI/IAMB renewal UNSCR can be 
found in Reftel State 165490) 
 
(UNSC Members): If asked in the context of discussing renewal 
of the MNF-I/DFI (reftel), Posts are authorized to draw on 
background and Q's and A's in this message. (Note: 
Additional information regarding the MNFI/DFI/IAMB renewal 
UNSCR can be found in Reftel State 165490) 
 
 
The following Q,s and A,s can be used when engaging these 
institutions. 
 
 
Begin Q,s and A,s: 
 
Q: Development Fund for Iraq (DFI) was established during the 
occupation/transition. 
Why does the DFI still need to exist now that there is a 
sovereign government? 
 
A: 
 
z     The DFI was established to serve as the single account 
for all Iraqi oil and natural gas proceeds.  A single oil 
proceeds account increases transparency and helps to 
facilitate an equitable distribution of Iraq,s natural 
resources among the various groups in Iraq.  This has been 
shown to be the case in several other countries. 
 
z     Maintaining a single, transparent account into which 
all of Iraq,s oil proceeds are deposited is an 
important confidence building measure among the various 
groups in Iraq as they continue to make progress on oil and 
revenue sharing laws. 
 
Q: What does the International Compact with Iraq (ICI) say 
about the DFI? 
 
A: 
 
z     The ICI calls for the establishment of a Single 
Petroleum Account to succeed the DFI as a priority action for 
¶2008.  All revenues from petroleum operations due to the 
Government of Iraq are to be deposited into this account. 
(Section 4.1.1). 
 
Q: Why should the DFI continue to merit privileges and 
immunities? 
 
A: 
 
z     The international community agreed that it was unjust 
to punish the Iraqi people for the misdeeds of Saddam 
Hussein,s regime, so it granted immunities to the DFI (and 
other Iraqi assets) to protect Iraqi funds crucial to the 
reconstruction of Iraq from the risk of attachment due to the 
enormous 
amounts of outstanding Saddam-era debt. 
 
z     While the GOI has made great strides in concluding 
bilateral debt agreements with many countries, 
immunity from attachment remains an important component of 
the DFI. 
 
z     Providing immunities to the DFI (and other Iraqi 
assets) sends an important signal that the international 
community remains united behind the Iraqi government,s 
efforts to rebuild 
and reform. 
 
z     Removing immunities now could economically destabilize 
the nascent Iraqi economy and thereby further destabilize 
Iraq. 
 
STATE 00167347  003 OF 003 
 
 
 
z     Iraq must still conclude debt deals with several major 
creditors, as well as address the pending lawsuits against 
Saddam that arose post-September 11, 2001. 
 
z     We support the extension of these immunities on a 
limited one year basis, as the GOI has requested, and 
anticipate that the need for these immunities will be reduced 
or eliminated within this 
one year period. 
 
Q: Why does the International Advisory and Monitoring 
Board for Iraq (IAMB) need to continue? 
 
A: 
 
z     We expect that as long as the international community 
agrees to extend the DFI and provide the fund with immunities 
there should be international oversight of how the DFI is 
managed.  Because the IAMB has played this role for the last 
three years the board members are best placed to provide the 
oversight and transparency necessary. 
 
z     It is our strong desire to see the IAMB help increase 
the capacity of COFE to take on the roles and 
responsibilities currently exercised by the IAMB and ensure a 
seamless oversight transition from the DFI to its successor 
single oil proceeds account. 
 
z     We anticipate that the IAMB,s responsibilities will 
cease as Iraq normalizes its financial arrangements by 
succeeding the DFI through the establishment of a single 
petroleum account. 
 
It is also our expectation that the Security Council will 
expect the IAMB to continue its role as long as the DFI 
exists. 
 
Q: How long do you anticipate DFI will exist? 
 
A: 
 
z     Maintaining a single account into which all of the GOI 
hydrocarbon revenues are deposited will continue to play an 
important role in the reconciliation process for some time to 
come.  However, we anticipate that the GOI will establish the 
successor account to the DFI by the end of 2008 as provided 
for in the ICI (Section 4.1.1). 
RICE