VZCZCXYZ0010
OO RUEHWEB

DE RUEHC #4010 0421730
ZNR UUUUU ZZH
O R 111727Z FEB 08
FM SECSTATE WASHDC
TO RUEHGB/AMEMBASSY BAGHDAD IMMEDIATE 5610
RUCNDT/USMISSION USUN NEW YORK IMMEDIATE 0566
INFO RUEHLO/AMEMBASSY LONDON 4910

UNCLAS STATE 014010 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: PREL ECON UNSC IZ
SUBJECT: OIL-FOR-FOOD GUIDANCE AND ACTION REQUEST 
 
REF: USUN 0082 
 
¶1. (U) This is an action request.  Please see paragraph 4. 
 
Background 
---------- 
 
¶2. (SBU) Department has reviewed the January 23 letter sent 
by SYG Ban updating the UNSC on the current status of the 
Oil-for-Food (OFF) program.  We are encouraged by the 
progress made by the OFF Working Group meeting in Amman, at 
which UN OFF experts and GOI ministries reviewed all 
remaining OFF contracts and decided upon a course of action 
for bringing these contracts to a close.  Given this 
progress, Department has no objection to allowing the GOI 
until March 31, 2008 to resolve all remaining OFF contracts 
as recommended by the SYG.  However, it should be noted that 
of the 210 remaining contracts (totaling approximately 
$656,254,000), 114 (totaling approximately $384,982,000) are 
contracts that require the GOI to produce the authentication 
documents necessary to release payment before these contracts 
can be paid and settled.  The GOI has had more than four 
years to settle these contracts and has been unable to do so. 
 The lack of progress by the GOI in generating the required 
authentication documents has been noted in multiple reports 
from the SYG to the UNSC and the Department remains skeptical 
that the GOI will be able to resolve such a large number of 
contracts by March 31.  Additionally, per the SYG's letter, 
the GOI has stated that there are 57 contracts (totaling 
approximately $49,000,000) which the GOI does not believe can 
be resolved bilaterally.  The final status of these contracts 
will most likely have to be resolved using a third party 
arbiter. 
 
¶3. (SBU) The establishment of an arbitration mechanism will 
be an important motivator for the GOI to work quickly to 
generate the documentation necessary to pay the suppliers 
that have delivered goods to Iraq and complete the remaining 
OFF contracts.  Department is aware that there are some 
concerns among UNSC members regarding the cost of 
establishing an arbitration mechanism. We also understand 
that the UK Mission to the UN has the lead on drafting the 
letter to the SYG in response to his most recent update on 
the OFF program. 
 
¶4. (SBU) Action Requests: 
 
For USUN: Department requests that USUN engage UN OFF experts 
to determine the cost of establishing the SYG's recommended 
arbitration mechanism, as well as the potential funding 
source for the establishment and operation of the arbitration 
mechanism (which we would expect to be OFF funds held in the 
escrow account).  Department recommends that USUN begin 
negotiations with UKUN on the text of a reply letter and 
requests that USUN forward a copy of the UK's draft letter 
for Department clearance prior to its circulation in the 
UNSC.  Department is inclined to endorse an arbitration 
mechanism, and asks the UN to begin moving forward with the 
establishment of a mechanism as soon as possible, but would 
first like to see further detail on the mechanism. 
 
For Baghdad: Embassy Baghdad is requested to raise the issue 
of GOI OFF contract completion and generation of the required 
authentication documents with the appropriate GOI officials 
and urge them to take the steps necessary to ensure that all 
of the required documents are given to the UN by the March 31 
deadline. 
RICE