VZCZCXRO4723
PP RUEHDE RUEHDIR
DE RUEHKU #0338/01 0860829
ZNR UUUUU ZZH
P 260829Z MAR 08
FM AMEMBASSY KUWAIT
TO RUEHC/SECSTATE WASHDC PRIORITY 1077
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE PRIORITY
RUEHEG/AMEMBASSY CAIRO PRIORITY 1093
RUEHBUL/AMEMBASSY KABUL PRIORITY 0352
RUEHVL/AMEMBASSY VILNIUS PRIORITY 0053
RUEHNO/USMISSION USNATO PRIORITY 0105

UNCLAS SECTION 01 OF 02 KUWAIT 000338 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR SCA, NEA/ARP, EUR/NB 
 
E.O. 12958: N/A 
TAGS: EAID ELTN KU AF LH
SUBJECT: LITHUANIA SEEKING GULF COUNTRY FINANCING FOR 
AFGHANISTAN ROAD PROJECT 
 
REF: A. MARCH 4 CAMP-MISENHEIMER EMAIL 
     ¶B. MARCH 9 MISENHEIMER-WERNER EMAIL AND SUBSEQUENT 
 
¶1. (U) This cable contains an action request; please see 
paragraph 10. 
 
¶2. (SBU) Summary:  On March 18, a delegation led by 
Lithuanian Foreign Minister Petras Vaitiekunas met with CDA 
to discuss the GOL's efforts to raise approximately USD 300 
million in funding from the Kuwait Fund for Arab Economic 
Development (KFAED), other sources within the Gulf 
Cooperation Council countries, and/or other countries with 
PRTs in Afghanistan to support a road project associated with 
Lithuania's PRT in Afghanistan's Ghor Province.  Lithuanian 
officials had previously met with A/S Boucher on February 27 
to discuss the same subject.  During his visit to Kuwait, the 
Foreign Minister, who was accompanied by Lithuania's 
Ambassador to Kuwait (resident in Cairo) and a small business 
delegation, met with the Prime Minister, the Foreign 
Minister, the Managing Director of the Kuwait Investment 
Authority, the Director General of the Kuwait Fund, and the 
Director General of the Kuwait Chamber of Commerce and 
Industry.  Vaitiekunas said he received a "cautiously 
positive" response from KFAED.  He added that the GOL had 
already met with representatives from other GCC countries in 
Riyadh. 
 
¶3. (SBU) In a separate meeting with KFAED on March 17, the 
Fund's Regional Manager for Central Asian and European 
Countries told Econoff that before KFAED could allocate any 
new funds for Afghanistan, the GOA would have to sign an 
agreement to commit to the repayment, on highly flexible and 
concessionary terms, of 5.84 million Kuwaiti Dinars (USD 22 
million) in arrears from a KD 8.5 million KFAED soft loan to 
the GOA in 1977 for a sugar project.  Once the GOA 
demonstrates a good faith effort by signing this agreement, 
KFAED is "eager" to provide further loans for development 
projects in Afghanistan on "the most generous and flexible 
terms."  End Summary. 
 
Seeking funds for Ghor Province road project 
-------------------------------------------- 
 
¶4. (SBU) On March 18, a delegation led by Lithuanian Foreign 
Minister Petras Vaitiekunas and Lithuanian 
Ambassador to Kuwait (resident in Cairo) Dainius Ginutis 
Voveris met with CDA to discuss their efforts to obtain 
approximately USD 300 million for a 750 km road project from 
Herat to Chaghcharan in Afhanistan's Ghor Province, where 
Lithuania has a PRT.  Lithuanian officials had met with A/S 
Boucher on February 27 and emboffs from Embassy Vilnius on 
March 5 to discuss the same subject.   Vaitiekunas said he 
had also spoken with Acting A/S for Political-Military 
Affairs and former U.S. Ambassador to Lithuania Stephen Mull. 
 The FM said that a feasibility study for the road project 
was in progress and the GOL had met with representatives from 
the member states of the Gulf Cooperation Council (GCC) in 
Riyadh to seek funding.  Vaitiekunas said he had received a 
neutral response from the Abu Dhabi Fund, and a "cautiously 
positive" response for KFAED Director General Abdulwahab 
Al-Bader.  He said Lithuania was also seeking financial 
support from other countries with PRTs in Afghanistan such as 
Italy and New Zealand. 
 
¶5. (SBU) While in Kuwait, the Lithuanian delegation, which 
included FM Vaitiekunas, Ambassador Voveris, five MFA 
staffers, and a seven-person business delegation, met with 
the Prime Minister, the Foreign Minister, the Managing 
Director of the Kuwait Investment Authority, the Director 
General of the Kuwait Fund, and the Director General of the 
Kuwait Chamber of Commerce and Industry.  Vaitekunas 
mentioned that the delegation was also seeking Kuwaiti 
private and public investment in Lithuania.  The business 
delegation included companies involved in environmental 
protection, printing, real estate investment, furniture, 
dairy products, and logistics.  According to Ambassador 
Voveris, Lithuanian exports to Kuwait last year were valued 
at only USD 2 million. 
 
Kuwait Fund "eager," constrained by arrears 
------------------------------------------- 
 
¶6. (SBU) On March 17, the day prior to the meeting with the 
Lithuanians, Econoff met separately with KFAED Regional 
Manager for Central Asian and European Countries Waleed 
 
KUWAIT 00000338  002 OF 002 
 
 
Al-Bahar to ask about the current status of KFAED's 
relationship with Afghanistan.  Al-Bahar confirmed that the 
Government of Afghanistan still owed KD 5.84 million (USD 22 
million) in arrears from a KD 8.5 million KFAED soft loan 
made to the GOA in 1977 for a sugar project, and KFAED is 
unable to provide any new loans for projects in Afghanistan 
until the GOA formally agrees to repay these arrears.  (Note: 
 This arrears issue is a long-standing obstacle to Kuwaiti 
assistance for Afghanistan, and there have been a number of 
exchanges between the GOK and the GOA since the fall of the 
Taliban government in 2002 to try to resolve it.  We 
understand it was discussed during President Karzai's 
December 2007 visit to Kuwait.  The GOK has consistently 
argued that all it seeks from the GOK is a good faith effort 
to make repayments under highly flexible and favorable terms. 
 KFAED and the GOK have thus far been unwilling to consider 
outright forgiveness of the loan.  We have been told that the 
GOA fears that by committing to repayment of the Kuwait loan, 
it sets a dangerous precedent, opening the door to 
significant claims from a number of other sovereign 
creditors.  End note.) 
 
¶7. (SBU)  Al-Waleed said that in 2007, Afghanistan qualified 
under the World Bank's standard as a Highly Indebted Poor 
Country (HIPC).  He explained that this status allows KFAED 
to offer the GOA exceptionally favorable repayment terms. 
KFAED would grant a sixteen year grace period with no 
payments required and would then allow the balance of the 
loan to be repaid over a period of forty years at an interest 
rate of only 0.5 percent.  Al-Waleed said KFAED had sent a 
letter and draft agreement outlining these terms to 
Afghanistan's Finance Minister in January 2008 but received 
no response.  Al-Waleed said KFAED would be willing and even 
"eager" to provide new soft loans on "the most generous and 
flexible terms" for development projects in Afghanistan as 
soon as the GOA signs this repayment agreement.  He added 
that KFAED would be happy to collaborate with other donors, 
including Lithuania, on development projects, but only after 
this agreement is signed. 
 
¶8. (SBU) Econoff asked about a USD 30 million grant provided 
by Kuwait for the Kandahar ring road project and salary 
payments for GOA employees. Al-Waleed clarified that KFAED 
sometimes administers grants on behalf of the GOK but neither 
of these projects were technically KFAED projects.  KFAED 
projects are operated on the basis of soft loans rather than 
grants.  Furthermore, of the USD 30 million in GOK grants, 
the 15 million for the Kandahar ring road was provided to the 
World Bank's Afghanistan Reconstruction Trust Fund (ARTF) and 
the 15 million for salaries was provided to the Asian 
Development Bank.  He said it was conceivable that the GOK 
could agree to provide additional grants for Afghanistan, but 
this would be a political decision for the GOK, not a policy 
decision for KFAED. 
 
GOL will lobby GOA to consider repayment agreement 
--------------------------------------------- ----- 
 
¶9. (SBU) FM Vaitiekunas said he had received the same 
explanation from KFAED.  He said the GOL would endeavor to 
convince the GOA to give serious consideration to signing the 
KFAED repayment agreement.  In the meantime, the GOL will 
continue to pursue other sources of funding for the Ghor 
Province road project. 
 
Action Request 
-------------- 
 
¶10. (SBU) Please provide guidance on next steps concerning 
this issue (e.g. supporting GOK and GOL efforts to encourage 
the GOA to sign an agreement to repay its outstanding debt to 
Kuwait, thereby enabling the Kuwait Fund to offer new 
assistance, or urging the GOK to write off GOA debt despite 
its clear resistance to debt forgiveness thus far. 
 
********************************************* * 
For more reporting from Embassy Kuwait, visit: 
http://www.state.sgov.gov/p/nea/kuwait/?cable s 
 
Visit Kuwait's Classified Website: 
http://www.state.sgov.gov/p/nea/kuwait/ 
********************************************* * 
Misenheimer