VZCZCXRO7430
RR RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK
DE RUEHGB #2501/01 2230611
ZNR UUUUU ZZH
R 100611Z AUG 08
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 8744
INFO RUCNRAQ/IRAQ COLLECTIVE
RUEHRL/AMEMBASSY BERLIN 0101

UNCLAS SECTION 01 OF 02 BAGHDAD 002501 
 
SENSITIVE 
 
SIPDIS 
 
C O R R E C T E D   C O P Y (ADDED CAPTION) 
 
E.O. 12958: N/A 
TAGS: EINV ECON ETRD IZ GM
SUBJECT: THE GERMAN-IRAQI INVESTMENT PROMOTION AGREEMENT 
AND THE JOINT ECONOMIC COMMISSION 
 
REF: A. BAGHDAD 2440 
     ¶B. BERLIN 1044 
     ¶C. BERLIN 786 
 
BAGHDAD 00002501  001.2 OF 002 
 
 
¶1. (SBU) SUMMARY: According to the departing German 
Ambassador to Iraq, the recently initialed German-Iraq 
Investment Promotion Agreement (IPA) would be better 
described as an "Investors' Protection" Agreement.  Routine 
to nearly all German bilateral commercial relationships, 
similar documents are in force with 126 countries worldwide. 
As important is the IPA is to establishing legal dispute 
resolution mechanisms and to bolstering German investors' 
confidence, the Ambassador also hailed the re-establishment 
of the German-Iraq Joint Economic Commission (JEC).  There 
are still serious obstacles to a major return of German 
investment to Iraq, but investors' interest is very high, and 
the IPA and JEC are welcome steps toward re-establishing what 
was once a very robust commercial relationship.  End Summary. 
 
¶2. (SBU) EconCouns and Econoff met with German Ambassador to 
Iraq Hanns Schumacher and incoming Ambassador Christof Weil 
at the German residence August 9 to learn more about the 
recently initialed German-Iraq IPA (Reftel B).  The IPA is 
not really an investment agreement, Schumacher clarified, but 
more of an "Investors' Protection" Agreement.  (The FRG even 
proposed to call the IPA a Protection Agreement, but GOI 
officials expressed discomfort at the use of the term 
"protection."  Once the word "promotion" replaced 
"protection," the Iraqis agreed to the text with no 
substantive changes, Schumacher reported.)  An IPA is 
"routine" in all of Germany's significant commercial 
relationships, and FRG currently has 126 such agreements in 
place worldwide.  IPAs have treaty status, and while the 
German-Iraq IPA has only been initialed, Schumacher did not 
foresee any political difficulties on the German side in 
securing ratification.  The agreement protects investors 
specifically against government interference in their 
operations and confiscation, and includes an arbitration 
clause that refers unresolved disputes to the International 
Centre for the Settlement of Investment Disputes (ICSID) in 
The Hague.  (We have been promised a copy of the document, 
which will be signed once the German, English and Arabic 
texts have been reconciled.) 
 
¶3. (SBU) As important as the IPA will be to the eventual 
return of German investment to Iraq, Schumacher was equally 
enthusiastic about the revival of the German-Iraq Joint 
Economic Commission (JEC), which held its first meeting in 20 
years during PM al-Maliki's trip to Germany (Reftels).  The 
JEC is actually a GOI-FRG body, which the Iraqis, in 
particular, feel is necessary to the bilateral commercial 
relationship given the "mixed" economy that is emerging in 
post-Saddam Iraq.  The JEC will "break the ice" for 
high-level government-to-government contact which, in 
post-Socialist Iraq, the GOI still feels is necessary to 
accommodate and facilitate business, Schumacher said. 
 
¶4. (SBU) In more general terms, Schumacher underscored that 
both large German corporations and SMEs have shown a 
surprising amount of enthusiasm for returning or coming to 
Iraq.  Economic Minister Glos and other senior officials were 
concerned that turnout among German business leaders might be 
low for al-Maliki's visit, but in fact it was very 
encouraging.  Unlike most US businesses, German companies 
have a long history of working in Iraq (Germany was Iraq's 
leading trading partner for much of the 1970s and 80s, 
Schumacher claimed) and understand the opportunities that are 
emerging. 
 
¶5. (SBU) EconCouns also raised the International Compact with 
Iraq (ICI), asking if there were any provisions within it for 
FRG- or private sector-led capacity building programs for 
Iraqis.  Schumacher noted that while German bilateral 
technical assistance in security and education were ongoing, 
there were no business-related programs in place.  He 
suggested that some business umbrella organizations were 
considering the possibility of sponsoring 6-12 month 
internships for Iraqis at German companies, but that this was 
still only in the discussion stage.  Schumacher proposed that 
an effective means to address capacity-building and to 
promote investment might be a major business seminar in 
Berlin, to be hosted by the Iraqi Embassy and some of the 
German-Arab business associations, with support from the FRG 
and perhaps the US Embassy.  EconCouns agreed that this was 
an idea worth exploring, and might particularly bear fruit in 
the housing and construction sectors, where foreign 
investment partnerships could be crucial to mitigating the 
dire housing shortages in Iraq. 
 
¶6. (SBU) COMMENT: German enthusiasm for investing in Iraq is 
tempered in the near-term by real obstacles, not the least of 
 
BAGHDAD 00002501  002.2 OF 002 
 
 
which remains security.  However, as the security environment 
continues to improve, the IPA and the re-establishment of the 
JEC lay the groundwork for revitalizing what was once a very 
robust German-Iraqi commercial relationship. 
 
¶7. (SBU) COMMENT CONTINUED: The German presence in Baghdad 
remains small, and teh FRG embassy here would be hard-pressed 
to support a business conference such as that proposed in 
para 5.  Likewise, the Iraqi Embassy in Berlin may face 
similar problems.  A trilateral Iraqi-German-US sponsored 
event might prove a more realistic scenario.  If German and 
European politicians see their companies straining at the bit 
to expand their involvement in a cash-rich Iraq, they might 
become more interested in expanding their political 
involvement as well.  We would welcome Embassy Berlin's 
thoughts on this concept.  End comment. 
CROCKER