VZCZCXYZ0008
PP RUEHWEB

DE RUEHGB #0764/01 0741243
ZNY CCCCC ZZH
P 141243Z MAR 08
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC PRIORITY 6234
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

C O N F I D E N T I A L BAGHDAD 000764 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR NEA/I AND NEA/RA 
TREASURY FOR CMORAVEC 
COMMERCE FOR ACHOPPIN/FDAVIDSON 
 
E.O. 12958: DECL: 03/03/2018 
TAGS: KBTC ECON ETRD PREL EFIN IZ
SUBJECT: ARAB LEAGUE BOYCOTT: STRATEGY FOR IRAQ 
 
REF: A. BAGHDAD 42 
     ¶B. BAGHDAD 90 
     ¶C. BAGHDAD 393 
 
Classified By: Economic Counselor Todd P. Schwartz, for reasons 1.4 (b) 
 and (d). 
 
¶1. This is an action request (see para 16). 
 
¶2. (C) SUMMARY: Iraq's status as a "boycotting country" under 
the League of Arab States' boycott of Israel (Arab League 
Boycott -- ALB) has been listed as "under review" since the 
beginning of Operation Iraqi Freedom in March 2003.  Some 
elements in the GOI have cooperated with Embassy and U.S. 
companies, individuals, and other entities ("U.S. persons") 
by not implementing ALB provisions in the registration of 
trademarks.  Others, to include private Iraqi firms, continue 
to sign contracts which include anti-boycott compliance 
language.  As a result, U.S. persons continue to file 
quarterly reports with the Office of Anti-Boycott Compliance 
(OAC) of Iraqi contracting instruments that contain 
proscribed ALB implementation language.  Embassy will 
continue to encourage supervisory ministries in the areas of 
intellectual property protection to further entrench 
non-implementation practices for trademark, patent, and 
copyright registration.  Where feasible, we will engage 
specific GOI ministries to provide alternatives to proscribed 
language and insist on its immediate use.  And we will make 
clear at the highest levels of the GOI that continued reports 
of ALB implementation in contracting will result in Iraq's 
listing as a boycotting country, to the detriment of Iraq's 
reputation in the U.S. Congress and in international trade 
and investment circles.  END SUMMARY. 
 
Jumped the Gun 
---------------- 
 
¶3. (C) Post reported ref A that, although the existing 
ambiguity of GOI law required our request of a waiver of 
Section 565 of the prohibition against contracting with firms 
that comply with the ALB, we believed that practice under the 
law had moved in the direction of non-implementation in Iraq 
of ALB provisions.  We gave as evidence the experience of 
Embassy's contracting officers with Iraqi suppliers who 
routinely signed contracts with the USG that included 
specific language countering ALB practices.  We later 
reported ref B what we considered to be good news regarding 
trademark applications that had been registered and gazetted 
without implementation of ALB provisions.  We saw these as 
indicators that, as the Minister of Industry and Minerals had 
told us, the GOI had made a determination at the level of 
Council of Ministers to cease de facto implementation of the 
Arab League Boycott of Israel (ALB).  We suggested that these 
elements were sufficient for a positive reconsideration of 
keeping under review Iraq's status as a "boycotting country". 
 
¶4. (C) Post stresses that these facts on the ground are 
indeed indications of a move toward de facto 
non-implementation of ALB provisions.  However, in other 
areas of GOI practice, we continue to be informed that 
specific GOI entities continue with contracting practices 
that contain ALB implementation elements. 
 
¶5. (C) USG anti-boycott regulations (15 CFR Parts 730-774 
(2003), Export Administration Act of 1979 as amended) require 
U.S. persons to report quarterly to the OAC requests they 
have received to take actions to comply with, further, or 
support an unsanctioned foreign boycott.  There were 21 
prohibited requests in 2007, down from 33 in 2006, with U.S. 
persons reporting two GOI requests to comply with ALB 
provisions in Q1 (January-March) 2007; three requests in Q2 
(April-June); 14 requests in Q3 (July - September) 2007; and 
two requests in Q4 (October - December) 2007.  (Comment: 
Unfortunately, it is impossible to determine how many total 
contracts or tenders were issued over this period; as such we 
cannot determine on a percentage basis how widespread this 
problem is.  End comment.) 
 
"Refusals to do Business" 
-------------------------- 
 
¶6. (C) 15 CFR Section 760.2(a) of the anti-boycott 
regulations prohibits "refusals to do business" and 
agreements to refuse to do business when those actions are 
pursuant to a request from a boycotting country.  A "refusal 
to do business" is an action that, inter alia, requires a 
U.S. person to choose to do business with one person over 
another on the basis of the ALB against Israel, or to carry 
out another person's boycott-based selection when they know 
or have reason to believe that the selection is boycott-based. 
 
¶7. (C) SOUTH OIL COMPANY: The majority of prohibited requests 
in 2007 came from South Oil Company and relate to language in 
shipping instructions for hydrocarbon products that state: 
"Supplies of our purchase order should never be consigned or 
shipped by steamers included on Israel Boycott List."  This 
language is downloaded from the South Oil web site 
www.soc-basrah.com. 
 
Prohibited Requests 
for Information 
-------------------- 
 
¶8. (C) MINISTRY OF HEALTH: Several prohibited requests 
originated with the Ministry of Health (MoH).  MoH purchase 
contracts include the following language requiring a U.S 
person to supply information about its or another's business 
relationships with Israel, prohibited under 15 CFR Section 
760.2 (d): "Certificate of origin (should certify that the 
goods are wholly produced or manufactured in the country of 
origin and do not comprise any parts, raw materials, labor or 
capital of Israeli origin and should bear the following 
certification: 'The producer or manufacturer is not a branch 
or mother company of firms in the Israeli boycott blacklist') 
is required with the offer from each item offered." 
 
¶9. (C) Certain requests have been connected to trademark 
applications, also requiring a U.S. person to supply 
information about its or another's business relationships 
with Israel, as prohibited under CFR  Section 760.2(d) 
 
The Way Forward 
---------------- 
 
¶10. (C) TRADEMARKS: We believe that the type of prohibited 
requests reported in Q3 2007 related to trademark 
registration applications have now been addressed, as 
reported ref A. Embassy will continue to closely monitor 
trademark registration applications currently in process 
through the supervisory ministry (Ministry of Industry), as 
well as related intellectual property protection applications 
for copyright and patent protection handled through the 
Ministries of Culture and of Planning and International 
Cooperation, respectively.  We will hold Minister of Industry 
Fawzi Hariri to his word that he has obtained the cooperation 
of the Council of Ministers to ensure that these applications 
are no longer subjected to a de facto implementation of ALB 
provisions.  The Ambassador has sent a letter to Minister 
Hariri thanking him for his help in addressing this matter in 
a positive way. 
 
¶11. (C) SOUTH OIL COMPANY: Embassy has little practical 
ability to influence this company, given its physical 
presence in and control by specific elements within southern 
Iraqi communities which are uncooperative toward USG 
initiatives and interests.  Nonetheless, we will engage the 
Minister of Oil, and request that the Ministry impose a 
change of contracting language on all entities under the 
Ministry's authority, replacing the offending shipping 
instructions with the following: "Shipping instructions: 
Supplies of our purchase order should not be shipped by 
Israeli vessels."  Embassy understands that this language 
would not be reportable to the OAC under U.S. regulations. 
 
¶12. (C) MINISTRY OF HEALTH: Embassy will address the Minister 
of Health to inform him of the prohibited language contained 
in the Ministry's procurement contracts.  We will request the 
Ministry replace the offending certificate of origin clause 
with acceptable language as indicated under U.S. statute: 
"These goods are wholly of U.S. Origin." 
 
High Level Engagement 
---------------------- 
 
¶13. (C) USDOC's Secretary Gutierrez raised the issue of Iraqi 
implementation of the ALB with Prime Minister Nouri al-Maliki 
on Feb 10 (Baghdad 393) and received a commitment from him 
"to work with the relevant authorities to find a solution." 
EMIN and EconCounselor have pressed the issue within the last 
two months with Deputy Prime Minister Barham Salih, and with 
Minister of Trade Abd-al-Falah al-Sudani. 
 
¶14. (C) Embassy will continue to use every opportunity to 
impress upon GOI interlocutors at the highest level the 
importance of eliminating all implementation of ALB 
provisions in dealings with U.S. persons. 
 
¶15. (C) We will seek specific assurances that the changes to 
procurement and contracting language described above be made 
by the end of Q2 (April - June) 2008.  We will stress that, 
absent these changes, the USG will no longer be able to list 
Iraq's status as a boycotting country as "under review".  We 
will ensure that our interlocutors understand the negative 
trade and financial ramifications for the Iraqi economy that 
will result from the USG's explicit listing of Iraq as a 
boycotting country, as well as the serious negative impact 
such a listing will have on Iraq's reputation in the U.S. 
Congress. 
 
Action Request: Proposed Talking Points 
--------------------------------------- 
 
¶16. In order to reinforce the Embassy's message, we ask the 
Department to provide the following talking points to 
high-level administration officials visiting Iraq, as well as 
to CODELS, for use in their meetings with GOI officials. 
 
BEGIN TALKING POINTS: 
 
-- Your government, including specific ministries and 
State-Owned Enterprises, continues to implement measures of 
the Boycott of Israel of the League of Arab States against 
US-origin companies seeking to conduct business with Iraq. 
 
--  Implementation comes in the form of contracts demanding 
that our companies agree to abide by measures against Israel 
that are prohibited under US law. 
 
--  It has also come in the past in the form of refusing or 
delaying trademark, patent, and copyright registration for 
US-origin companies unless they agree to abide by measures 
that are prohibited under US law. 
 
IPR Protection 
 
--  We are concerned by reports that the Ministry of Trade's 
Boycott Office has continued to send such registration 
applications to the Central Boycott Office in Damascus. 
 
--  We are also concerned that applications for trademark 
registration contain requirements to furnish information 
about the firm or company's business relationships with 
Israel. 
 
Contracting -- Refusals to do Business 
 
-- US law prohibits acceptance of "refusals to do business" 
when such actions are pursuant to a request from a boycotting 
country. 
 
--  US-origin companies have informed us that SOUTH OIL 
COMPANY consistently imposes the requirement to sign 
contracts containing the following boycott language: 
"Supplies of our purchase order should never be cosigned or 
shipped by steamers included on Israel Boycott List." 
 
--  Documents with this language are found on the web site 
www.soc-basrah.com. 
 
--  The following change to this language would be acceptable 
under US law: "Supplies of our purchase order should not be 
shipped by Israeli vessels." 
 
Contracting -- Prohibited Requests for Information 
 
--  US-origin companies have also informed us that the 
Ministry of Health consistently imposes the requirement to 
sign contracts containing the following boycott language: 
"Certificate of origin should certify that the goods are 
wholly produced or manufactured in the country of origin and 
do not comprise parts, raw materials, labor or capital of 
Israeli origin and it should bear the following 
ce4rtificdation: 'The producer or manufacturer is not a 
branch or a mother company of firms in the Israeli boycott 
blacklist' is required with the offer from each item 
offered." 
 
--  It would be acceptable to change this language to 
"Certificate of origin should certify that these goods are 
wholly of U.S. origin". 
 
Consequences and Deadline 
 
--  We do not believe it is in the interest of Iraq to be 
spesifically listed as a boycotting country.  U.S. firms and 
investors will have to take this into account when making 
decisions as to whether to do business with Iraq.  They are 
prohibited by U.S. law from complying with your contracting 
requirments.  The U.S. Congress will take an extremely 
negative view of such a determination; our ability to obtain 
continued funding from the Congress for our engagement with 
you will certainly be jeopardized. 
 
--  We ask that you inform us before June 30, 2008, of the 
actions you intend to take to eliminate de facto 
implementation of the Arab League Boycott from your 
government's practices. 
 
END TALKING POINTS 
 
CROCKER