VZCZCXRO7722
OO RUEHBC RUEHBW RUEHDE RUEHFL RUEHIHL RUEHKUK RUEHKW RUEHLA RUEHROV
DE RUEHSM #0368/01 1401459
ZNY SSSSS ZZH
O 191459Z MAY 08
FM AMEMBASSY STOCKHOLM
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3441
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCNRAQ/IRAQ COLLECTIVE

S E C R E T SECTION 01 OF 04 STOCKHOLM 000368 
 
SIPDIS 
 
FOR THE SECRETARY FROM AMBASSADORS WOOD AND CROCKER 
 
E.O. 12958: DECL: 05/19/2018 
TAGS: PREL PGOV EAID ECON SENV IZ SW
SUBJECT: SCENE-SETTER FOR THE SECRETARY'S MAY 28-30 VISIT 
TO SWEDEN AND INTERNATIONAL COMPACT WITH IRAQ CONFERENCE 
 
Classified By: Ambassador Michael M. Wood for reasons 1.4 (b) and (d). 
 
¶1.  (U) This is a joint Embassy Stockholm/Embassy Baghdad 
message. 
 
SWEDEN 
 
¶2.  (C) Madame Secretary, welcome to Sweden.  You are the 
first sitting Secretary of State to visit Stockholm since 
Lawrence Eagleburger in 1992.  The occasion is historic: 
Sweden's hosting of the first post-Saddam meeting on Iraq to 
be held in Europe.  It marks a new era in Europe's 
relationship with Iraq.  Hosting the ICI conference 
represents a major political and financial commitment for the 
Swedish government.  In meetings with Reinfeldt and Bildt, 
you will have opportunities to thank them.  We recommend you 
also thank them for heading a PRT in Afghanistan, preview 
priorities for Sweden's EU presidency the second half of 2009 
-- including climate change -- and urge Sweden to make a 
contribution to the Clean Tech Fund. 
 
Reinfeldt's Government 
---------------------- 
¶3.  (C) Prime Minister Reinfeldt leads a four-party 
center-right governing coalition that, in 2006, turned out 
the Social Democrats who had governed Sweden for most of the 
20th century.  The jockeying has already begun for the next 
parliamentary elections taking place in 2010, with the 
governing coalition lagging the Social Democrats.  The focus 
will remain on economic and job issues, although immigration 
will also be on the docket.  Most foreign policy issues, 
including NATO relations, are not on the front burner. 
Sweden is a strong NATO partner, with troops under NATO 
command in Kosovo and in Afghanistan, where Sweden has 365 
troops and leads a PRT.  Reinfeldt has made clear that NATO 
membership is not on the agenda for this electoral period and 
would only be considered after 2010 if the Social Democrats 
joined a broad consensus in favor. 
 
¶4.  (C) Reinfeldt has presided over a sea-change in our 
bilateral relations, and your visit to Sweden is seen here as 
one of the benefits of this change.  Reinfeldt routinely 
defers to Bildt on foreign policy issues.  Following Bildt's 
September 2007 trip to Iraq, Bildt said there was "a real 
national and European interest in a stable and democratic 
Iraq," adding that he believed "that the UN and the EU have a 
more important role to play than we have seen so far."  The 
decision for Sweden to host the ICI was taken thanks to 
Bildt, and over internal objections within the MFA and the 
Swedish International Development Agency (SIDA).  Several 
retired Swedish diplomats have asserted that in hosting the 
conference Sweden is legitimizing a U.S. "war of occupation," 
but the media and the leading opposition parties seem to be 
withholding judgment until they see how it actually turns 
out.  We should thank Reinfeldt and Bildt -- and ask them to 
do more.  Sweden's foreign policy is assistance-driven, and 
they can step up efforts in Iraq, putting a national flag on 
key projects, as well as fostering broader involvement and 
greater contributions from the EU and the UN. 
 
¶5.  (C) Sweden holds the EU Presidency during the last half 
of 2009, and intends to focus on climate issues.  Sweden 
agrees with us on tightening U.S./EU positions in the UNFCC 
negotiations, and advocates two goals for the COP-14 meeting 
in Poznan:  agreement on a longer-term (2050) aspirational 
goal; and financing technology transfer, e.g., Clean Tech 
Fund.  Reinfeldt's office has indicated that he will raise 
climate change during your May 29 meeting.  Sweden strongly 
supports the Kyoto Protocol, and cap and trade schemes for 
limiting emissions, but recognizes that an effective 
post-2012 agreement will require that the U.S. and China both 
participate.  Reinfeldt recently visited China and Japan and 
urged both to support the next international climate change 
agreement. 
 
One Big Thing, Alternative Energy Cooperation 
--------------------------------------------- 
¶6.  (C) My focus as Ambassador has been on cooperating with 
Sweden to achieve a breakthrough in alternative energy -- an 
effort that resonates here and has become positively branded 
as One Big Thing.  This cooperation has yielded many 
benefits, including a USD five million investment by the 
Defense Advanced Research Projects Agency (DARPA) in a 
promising Swedish biofuel technology, the creation of a new 
Fulbright Professor position in alternative energy 
technology, and increased U.S. private capital investment in 
Sweden's green technology sector.  In June 2007, we signed a 
bilateral Science and Technology cooperation agreement that 
has become a framework for identifying promising alternative 
 
STOCKHOLM 00000368  002 OF 004 
 
 
energy projects in both countries and matching them with U.S. 
or Swedish government funds.  Alternative energy cooperation 
has also had a halo effect, changing the tone of the 
conversation and making it easier for the Swedish government 
to cooperate with the U.S. on other issues, such as Iraq. 
 
¶7.  (C) We should take the opportunity to seek broader 
cooperation with the Swedes on climate change, which is at 
the top of their agenda and where they can also be a positive 
influence within the EU, the UN, and elsewhere.  I recommend 
asking Prime Minister Reinfeldt to have Sweden contribute to 
the Clean Tech Fund. 
 
The Swedish Connection to Iraq 
------------------------------ 
¶8.  (C) Sweden has a connection with Iraq -- over one percent 
of Sweden's population of 9.1 million are Iraqis.  Of these 
more than 100,000 Iraqis, nearly 19,000 of them arrived as 
asylees in 2007, representing about half of all Iraqis who 
immigrated to Europe that year.  This has led to criticism of 
the U.S. for allegedly causing and then not doing enough 
about the refugee problem, and of other European nations for 
not taking in more refugees.  Foreign Minister Bildt's visit 
to Baghdad in September 2007 led to an agreement with Iraq on 
repatriation, although repatriations are just a tiny fraction 
of the total number of asylees.  Some Iraqi-Swedes who 
represent an earlier generation of refugees from Saddam,s 
regime have returned to Iraq voluntarily; the Swedes tell us 
they hear much Swedish spoken in the Kurdish areas.  Iraqi 
Foreign Minister Zebari has relatives in Sweden.  Sweden 
seeks to foster reconstruction efforts by the EU and UN that 
will make return more attractive.  Sweden has preparations 
underway to open an embassy in Baghdad by August/September. 
 
IRAQ 
 
Political Climate in Iraq 
------------------------- 
¶9.  (S) PM Maliki is still riding high following security 
operations in Basra and Sadr City, in which he was able to 
claim success in forcefully confronting the Jaysh al-Mahdi 
and the Sadrist Trend (and by extension, Iran).  While the 
realities are far more complex, Maliki's image as a strong 
and nationalist leader has been burnished, resulting in 
new-found support from the majority of Iraq's other political 
party leaders.  The PM continues to trade on this new 
positive atmosphere, recently launching an operation against 
extremists in Mosul and pushing to secure Baghdad from armed 
Shia militias.  He is also working to capitalize on slowly 
warming relations with Turkey and the Arab neighbors, who 
fear growing Iranian influence in the region.  Despite an 
incipient sense of optimism, many challenges remain to ensure 
effective national governance. 
 
¶10.  (S) Maliki has yet to return the Sunni Tawafuq bloc and 
others to his government, leaving 17 of 36 ministries with 
Acting Ministers.  The Executive Council ("3-plus-1"), 
including the 3 Presidency Council members and Maliki, has 
met only sporadically and has yet to formalize a secretariat, 
by-laws, or a list of key objectives drafted in January. 
Nevertheless, continued support by the Kurdish bloc allows 
Maliki to continue operating as normal, focusing foremost on 
security issues.  Focus in Parliament has turned to passage 
of an elections law, a hydro-carbons framework law, and 
internally disputed boundary issues.  Recent passage of a 
national budget, a De-Baathification law, and a general 
amnesty have buoyed the political process somewhat, though 
implementation issues remain contentious.  In all, as PM 
Maliki heads to Stockholm, he will be able to convey some 
encouraging news on the home front, despite many enormous 
remaining problems to be addressed. 
 
Progress on ICI Benchmarks... 
----------------------------- 
¶11.  (U) Much work remains to be done to transition Iraq to a 
fully secure, democratic country enjoying a functioning 
market-based economy.  But the GOI has made substantial 
progress across many reform areas captured in the ICI's Joint 
Monitoring Matrix (JMM).  In Stockholm they will report 
progress on internal reconciliation, noting in particular the 
creation of a new National Commission for Reconciliation and 
Dialogue, and passage of the de-Baathification law.  They 
will point to PM Malikis' successes generating government 
wide consensus against militias as an example of promoting 
reconciliation.  They can rightly point to stepped up 
international engagement over the last year, with 
Iraq-related "Neighbors" meetings garnering good attendance, 
the opening of the OIC office in Baghdad, and the convening 
in Irbil of the Arab Parliamentary Union conference. 
 
STOCKHOLM 00000368  003 OF 004 
 
 
Unfortunately, no Gulf Cooperation Council states have yet 
established Embassies here, despite numerous high level 
approaches from the GOI and USG.  In addition, the GOI has 
made progress in developing new structures for the Defense 
and Interior ministries, but progress professionalizing those 
services has been slow. 
 
¶12.  (U) On the economic front, Iraq can point to a number of 
solid advances, despite obvious setbacks such as the 
assassination of the Finance Ministry DG responsible for 
budgeting, and the burning of the Iraqi Central Bank. 
Advances can be noted in monetary policy - the Central Bank 
has brought core inflation down from 63 percent in 2006 to 
about 12 percent today.  Capital budget execution improved 
throughout 2007, reaching at least 63 percent by the end of 
the year, versus 22 percent executed in 2006.  The GOI 
managed the greatly improved 2007 execution rate despite 
facing obstacles such as imposing an IMF-compliant Chart of 
Accounts half way through the year and the continued absence 
of the comprehensive financial management tool (the Financial 
Management Information System -FMIS) which was put on the 
back shelf when contractors implementing it were kidnapped 
from the Ministry of Finance in early 2007.  (Note:  The 
project was revived earlier this year by USAID and could be 
ready to go live for all government transactions by the end 
of the year.  End Note.)  The GOI is making progress 
developing plans for careful, phased reform of the Public 
Distribution System which provides most of the food and basic 
commodities for poorer Iraqis.  Oil revenues are up with 
record-high world prices, which will give Iraq a budgetary 
cushion to continue to step up its reconstruction while 
reforming the hangover of state subsidies from the Saddam 
era. 
 
...Despite Tenuous Support for the ICI Across the GOI 
--------------------------------------------- -------- 
¶13.  (C) We like to say that the ICI is an "Iraqi owned and 
operated process."  However the reality on the ground is that 
support for, and even understanding of the ICI within the GOI 
is spotty at best.  Many Iraqi government officials, when 
they know anything at all about the ICI, simply view it as 
another donor mechanism.  As a result, for these people 
buy-in to the ICI is contingent on the ICI continuing to 
provide financial benefits for Iraq.  In our efforts to 
broaden GOI support for the ICI, rather than focusing on 
additional donor pledges, we have worked with the GOI to use 
the debt reduction commitments reiterated at the Sharm 
el-Sheik meeting in May 2007 to generate further debt relief 
agreements.  Looking down the road, as more countries reach 
such debt relief agreements we will need to demonstrate that 
the ICI continues to provide utility to the GOI by ensuring 
that foreign support for necessary Iraqi reforms is directed 
at Iraqi priorities, as reflected in their National 
Development Strategy, and that it makes most efficient use of 
donor resources. 
 
¶14.  (C)  To date, the Maliki government has not provided the 
ICI structures with the level of support needed to ensure 
that the GOI can fully live up to its ICI-related 
commitments.  Symptomatic of this is the incomplete 
institutionalization of the ICI Secretariat, which is 
currently a part of DPM Barham Salih's office.  The 
Secretariat remains hampered by limited personnel -- only 
seven of a planned complement of 42 have been assigned; two 
seconded from other offices.  The Secretariat's current 
office space is in a trailer adjacent to the parking lot of 
the DPM's main office.  Only one of three proposed 
internationally funded advisors has been deployed, primarily 
because local UNAMI staff (correctly) seek to encourage the 
GOI to take real ownership of the ICI processes. 
Notwithstanding that, the single UN-funded advisor drafted 
the entire Annual Report, with inputs from the donor 
community after a series of meetings convened by UNAMI in 
January, complemented by limited inputs from the GOI itself 
(see below).  This does not reflect much progress in GOI 
ownership of the process since last July, when a local World 
Bank staffer drafted virtually the entire mid-term report. 
 
¶15.  (C) Many of Iraq's needed reforms are reflected in the 
benchmarks of the ICI Joint Monitoring Matrix (the JMM).  Yet 
the political and personal rivalries that slow or block 
progress in so many areas of Iraqi governance and reform are 
also reflected in poor GOI support for ICI structures and 
processes.  The ICI Secretariat reports to DPM Barham Salih. 
However virtually all of the activities reflected in the JMM 
are implemented by other ministries.  When Barham issued 
instructions in January 2008 for ministries to convene the 
ICI Thematic Working Groups (TWGs), to review progress and 
begin drafting the Annual Report on Progress, only two TWGs 
 
STOCKHOLM 00000368  004 OF 004 
 
 
met.  The critical economic reform TWG, chaired by Finance 
Minister Jabr, never met.  By late March it was clear that 
the Ministries were not going to convene the TWGs, so an 
official at the Ministry of Planning and Development 
Cooperation (MOPDC) took the initiative to convene an 
informal inter-ministerial meeting to try to extract some 
useful information to inform the Annual Report.  Yet we 
cannot count on the MOPDC for consistent support to the ICI, 
since it manages the current funding streams under the IRFFI 
trust funds.  MOPDC staff at IRFFI meetings in Bari and 
Naples as recently as December 2007 downplayed the 
effectiveness of the ICI Secretariat and encouraged donors to 
continue to use IRFFI mechanisms for their support. 
 
¶16.  (C) If the ICI is to succeed fully, a reinvigorated GOI 
effort to stand up effective ICI support structures will be 
necessary.  It is not clear that the ICI Secretariat will 
ever be effective if it is located in DPM Barham Salih's 
offices.  UNAMI Deputy Guy Siri told us recently that the UN 
will propose a "structural realignment" of the ICI within the 
GOI -- which we should support.  The UN proposal is to embed 
the ICI Secretariat in the Council of Ministers' Secretariat 
(COMSEC).  ICI Secretariat Dir. Dr. Hadi Hussein told us on 
May 14 that "the GOI does not support the UN's proposed 
structural alignment."  It remains to be seen however whether 
that was simply a Barham staffer's view or if it is a 
considered GOI view. 
WOOD