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UNCLAS SECTION 01 OF 04 BRUSSELS 000108 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
USAID FOR ANE/I STAAL, MEDINA, DAYAL; STATE FOR NEA; NAPLES 
FOR USDEL TO IRAQ DONORS MEETING 
 
E.O. 12958: N/A 
TAGS: PINR EAID PREL EUN KDEM MARR NATO GR NL TU
SUBJECT: EUROPEAN UNION VIEWS ON DEVELOPMENT ASSISTANCE TO 
IRAQ IN 2008 AND BEYOND (C-RE8-00009) 
 
REF: STATE 02310 
 
BRUSSELS 00000108  001.2 OF 004 
 
 
1.(U) This message responds to reftel request. Given that the 
EU has no collective security presence in Iraq, the 
discussion focuses exclusively on economic assistance 
provided through the European Commission (EC). 
 
¶2. (U) CURRENT EC DEVELOPMENT ASSISTANCE IN IRAQ:  EC support 
to Iraq from 2003 through the end of 2007 amounted to 818.4 
million euros in grant aid, of which 708.2 million is devoted 
to reconstruction. Major areas of focus include education, 
democracy and governance and health.  Other areas of EC 
interest include agriculture, water, infrastructure, capacity 
building, civil society and refugees. 
 
¶3. (U) Most EC funding to date has been channeled through the 
International Reconstruction Fund Facility for Iraq (IRFFI), 
a multilateral mechanism established in 2004.  Also, the EC 
has been a major contributor to the United Nations 
Development Program Thematic Trust Fund.  Excluding the 
(117.8 million euros between 2003-2007 in) humanitarian 
assistance through the Commission's humanitarian arm ECHO, 
nearly 90 percent of all EC funding for Iraq has been 
allocated through either IRFFI or the UNDP fund. 
 
¶4. (U) The fifth IRFFI donor committee meeting was held in 
Istanbul in March 2007.  A follow-up meeting will be held in 
Naples this week. Among other things, the Istanbul meeting 
extended the lifetime of IRFFI, which was initially expected 
to expire at the end of 2007. According to the agreement, 
IRFFI will now continue until all projects are completed and 
all funds are disbursed. 
 
¶5. (U) EC contributions represent nearly 40 percent of all 
IRFFI funding.  Major bilateral donors to IRFFI include 
Japan, the UK, Spain, Canada and Australia.  A number of 
other countries including Italy, Korea, Sweden, Norway, 
Netherlands, Denmark, Germany, India, Kuwait and the US are 
also represented. 
 
¶6. (U) The EC views itself as a significant supporter of the 
International Compact with Iraq, launched by the Government 
of Iraq in 2006.  Endorsed by the international community at 
a conference attended by more than 60 countries in 
Sharm-el-Sheikh in May 2007, it provides a "national vision 
for Iraq aiming at consolidating peace and pursuing 
integrated political, economic and social development over 
the next five years". 
 
¶7. (U) While direct EC assistance to Iraq has been much more 
modest, a handful of small "bilateral" projects have also 
been launched. Such activity includes grants to the 
International Organization for Migration (IOM) in 2004 and 
again in 2005 to train electoral observers; a 2005 project 
aimed at promoting human rights; and a contract with the 
International Management Group (IMG) to provide two technical 
experts working in Baghdad. 
 
¶8. (U) FUTURE FUNDING LEVELS:  EC assistance is typically 
programmed on a multi-year basis within the context of a 
long-term country development strategy.  However, Iraq 
remains unusual in that funding and program identification is 
undertaken on a year-to-year basis. In the words of one 
senior EC interlocutor, "we maintain a long-term political 
commitment to Iraq but decisions about the aid program are 
made annually." Contact further stated that development of a 
strategy paper would require "a government we could work 
with." 
 
¶9. (U) The EC Middle East budget covering Iraq, Iran, Yemen 
and the Gulf States for 2008 will be around 90 million euros. 
 An estimated 15-20 million euros of this amount will be 
directed toward Yemen and modest funding will be provided to 
Iran, mainly related to civil society and public diplomacy. 
Remaining funds will be allocated to Iraq. 
 
¶10. (U) The EC would like to move to a multi-year strategic 
perspective in Iraq.  In fact, for two years it worked on 
doing exactly that.  However, uncertainty combined with 
shifting realities on the grounds mean that it is still too 
early to adopt a multi-year strategic approach. 
 
BRUSSELS 00000108  002.2 OF 004 
 
 
 
¶11. (U) EC counterparts have indicated a "clear willingness 
by the EU to get more engaged with Iraq" and have suggested 
that there would be "greater engagement by the member states, 
yet this may not bring immediate results".  At the same time, 
they indicated that "greater involvement" does not 
necessarily mean "more funds".  In their view, aid 
effectiveness is more important than the level of funding. 
 
¶12. (SBU) CONSTRAINTS TO GREATER INVOLVEMENT:  The EC views 
limited local capacity as the main constraint to development 
in Iraq, not the amount of donor funding.  Increasingly, Iraq 
should be funding its own development out of its own 
resources.  Declines in EC funding levels since 2003 are 
attributed to the capacity issue, not lack of interest in 
assisting Iraq.  In the words of one counterpart, "Iraq is a 
rich country and has to make better use of its own resources." 
 
¶13. (U) EC counterparts professed an interest in providing 
more direct technical assistance, especially related to 
building administrative and management capacity within the 
Government of Iraq.  Possible areas of involvement include 
budget management, energy and support for the council of 
representatives.  Also, on the humanitarian side, refugees in 
Jordan and Syria and internally displaced communities within 
Iraq are a major concern. 
 
¶14. (SBU) Lack of viable on-ground organizations that can 
deliver assistance effectively coupled with high security 
costs are also cited by the EC as obstacles.  While technical 
advisors receive a premium for working in Iraq, EC officials 
indicated that their salary structures are often not 
competitive with those programs funded by other donors, 
including the US. 
 
¶15. (SBU) EC counterparts professed frustration about their 
limited experience in providing direct technical assistance 
to Iraq.  One case cited involved six million euros allocated 
for work related to customs.  Although the funding was set 
aside after extensive consultations, a new Iraqi counterpart 
arrived on the scene and decided unilaterally to scrap the 
intended focus on capacity building in favor of improving 
infrastructure.  Nothing happened and the funds are no longer 
available. 
 
¶16. (SBU)  A limited EC presence in Iraq also limits 
oversight and awareness about the on-ground situation.  There 
is a limited EC development presence in Baghdad which in turn 
is supported by an EC office in Amman.  Although the EC is 
increasingly providing management authority to its field 
missions around the world, the Iraq program continues to be 
directly handled from Brussels. 
 
¶17. (U)From an EC perspective, there are two constrains 
that affect virtually every aspect of theirwork in Iraq: 
first, security; and, second, instability and uncertainty 
within the government of Iraq. 
 
¶18. (SBU) STRATEGIC ASSESSMENT:  EC counterparts describe 
Iraq as "extremely important" for Europe.  Partly, this has 
to do with physical proximity.  As counterparts pointed out, 
Iraq directly borders a prospective member state, Turkey; "it 
is almost in the neighborhood".  In addition, Iraq's 
significant energy resources are an important concern in a 
continent whose economy hinges on energy imports.  Over the 
long term, the EC would like to see "normal relations develop 
with Iraq, like those that we now have with the various Gulf 
countries". 
 
¶19. (SBU) PARLIAMENTARY CONCERNS:  The European Parliament is 
increasingly asking questions about EC assistance to Iraq. 
Although EC development policy places significant emphasis on 
trust funds and pooled resources along the lines of IRFFI, EC 
officials face increasing skepticism about this approach from 
parliamentarians. Partly, this is due to implementation 
delays, low expenditure levels and perceptions about limited 
impact.  In addition, when assistance is funded through trust 
fund arrangements, individual donors receive far less 
recognition.  Finally, with the passage of time, 
parliamentarians are becoming increasingly interested in 
accountability. 
 
BRUSSELS 00000108  003.2 OF 004 
 
 
 
¶20. (SBU) At a programmatic level, parliamentarians tend to 
promote poverty reduction concerns.  For this reason, 
programs focused on capacity building within Iraqi 
governmental institutions receive special scrutiny.  For 
example, Members of European Parliament (MEPs) questioned 
even a modest one million euro energy program because it was 
not seen to directly address poverty concerns.  As a result 
of increased parliamentary scrutiny, development officials 
are becoming more "cautious". 
 
¶21. (U) PUBLIC OPINION:  Parliamentary interest in 
accountability, impact and other issues is not driven by 
European public opinion.  Rather, it reflects the interests 
of individual MEPs.  Public opinion on EC economic assistance 
in Iraq does not register in the same way as development 
programs related to Africa or disaster relief.  Perhaps this 
is partly because the EC profile in Iraq is small, given the 
reliance on pooled funding through IRFFI.  But it also 
reflects the fact that European public opinion is much less 
seized by issues in Iraq than was the case three or four 
years ago. 
 
22: (U) UPCOMING MEETINGS AND EVENTS:  The next big event on 
the EC donor calendar for Iraq is the upcoming IRFFI meetings 
in Naples. As the major source of funding to IRFFI, EC is 
vitally interested in its impact and effectiveness.   While 
separately expressing concern about the effectiveness of some 
aspects of pooled funding arrangements related to Iraq, EC 
counterparts have indicated that they will continue to press 
for broad international involvement in IRFFI, including US 
support.  Looking further ahead, EC sources indicate that 
uncertainty and instability in Iraq make it "extremely 
difficult to plan anything, even meetings". 
 
¶23. (U) More broadly, the EC would like to sign a trade and 
cooperation agreement with Iraq, providing a common framework 
similar to those often used to help shape EC development 
programs in other countries.  The next round of discussions 
on this subject should take place in Brussels in February. 
At some point, there is hope that these discussions can take 
place in Baghdad as well. 
 
¶24. (U) As for upcoming events in Iraq that are a matter of 
special interest, these include provincial elections; 
legislative elections; and disagreements over the future of 
Kirkuk. 
 
¶25. (SBU) VIEWS ON SECURITY SITUATION:  The EC threat 
assessment has an "enormous impact" on perceptions about 
economic assistance to Iraq. In the EC view, there are 
"enormous constraints for working on the ground".   Mobility 
and access for the small EC presence in Baghdad is limited 
and those assigned there work amidst considerable personal 
risk.  While the EC would like to support programs in 
agriculture, health and other areas directly, access makes 
direct assistance in these areas problematic right now. 
 
26: (SBU) AREAS FOR IMPROVEMENT:  EC counterparts place 
significant emphasis on donor coordination.  In their view, 
too much time is spent responding to questions from multiple 
donors as well as multiple institutions within a particular 
donor country.  At the same time, there is a need for 
accurate and up-to-date information.  Web-based information 
sources are often inaccurate or out of date.  All donors need 
to present their program information quickly and reliably. 
 
¶27. (SBU) Better donor coordination will be a major area of 
interest during the upcoming IRFFI discussions in Naples. 
Without coordination, duplication is inevitable.  However, 
when these discussions take place, the overwhelming emphasis 
should be on improving existing structures, not creating new 
ones.  Also, EC officials strongly believe that the 
International Compact with Iraq launched in 2006 should 
remain as the key frame of reference for providing 
development assistance to Iraq. 
 
¶28. (SBU) COMMENT:  EC aid to Iraq relates entirely to 
economic assistance and does not involve security forces. 
There is strong interest in capacity building as well as a 
desire to provide direct technical assistance.  In reality, 
 
BRUSSELS 00000108  004.2 OF 004 
 
 
though, programmatic requirements and the situation in Iraq 
have led the EC to primarily rely on a trust fund approach, 
with EC programs by and large funded through pooled funding 
arrangements and primarily managed by other institutions, 
most notably the UNDP and World Bank. 
 
¶29. (SBU) While acknowledging that security improvements are 
providing some measure of "guarded hope," EC programming 
mechanisms are unlikely to change over at least the short and 
even medium term. Most notably, initial attempts to provide 
technical assistance directly have proved frustrating, mainly 
because of lack of continuity among counterparts and limited 
local capacity to effectively manage either international or 
local funds.  While the EC is committed to providing economic 
assistance to Iraq, security concerns combined with weak 
counterpart institutions remain as serious stumbling blocks. 
They also continue to color EC perceptions about both the 
impact and effectiveness of their aid programs in Iraq. 
 
MURRAY