VZCZCXRO2071
OO RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK RUEHTRO
DE RUEHC #8209/01 2282259
ZNR UUUUU ZZH
O P 152253Z AUG 08
FM SECSTATE WASHDC
TO RUEHSJ/AMEMBASSY SAN JOSE IMMEDIATE 9109
RUCNDT/USMISSION USUN NEW YORK IMMEDIATE 2783
INFO IRAQ COLLECTIVE PRIORITY
UN SECURITY COUNCIL COLLECTIVE PRIORITY
RUEHGB/AMEMBASSY BAGHDAD PRIORITY 0288

UNCLAS SECTION 01 OF 02 STATE 088209 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PREL UNSC IZ EFIN
SUBJECT: INSTRUCTIONS TO LOBBY COSTA RICA ON OIL-FOR-FOOD 
 
REF: A. USUN 366 
     ¶B. KUJWINSKI-PHEE EMAIL 4/23/08 
 
¶1. (U) Summary and Action Request: On March 28, the Russian 
Presidency of the UNSC circulated a draft letter to the 
Secretary-General on closing down the OFF program.  This 
letter would have granted the Government of Iraq (GOI) 45 
days to provide Confirmations of Arrival (COAs) for the 
remaining Letters of Credit (LOCs) with Claims of Delivery 
(CODs).  Any LOCs for which the GOI did not provide a COA, or 
did not provide evidence contesting the COD, would be paid 
out to the supplier.  The Costa Rican delegation subsequently 
placed a hold on this letter (Ref A).  Ambassador Khalilzad 
agreed to not press the Costa Ricans to lift their hold until 
after the UNSC received the next report of the UN Working 
Group on OFF (Ref B).  This report was issued on July 25th 
and confirmed a lack of progress on the part of the GOI in 
providing COAs for the remaining LOCs.  From May 1 through 
June 30, only 11 out of 143 outstanding LOCs with CODs were 
provided COAs and paid out to the supplier.  The provision of 
COAs for other 132 LOCs, with an approximate aggregate worth 
of US$273 million, remained outstanding. 
 
¶2.  Action Request: USUN is requested to re-circulate an 
updated version of the March 28 draft letter to the 
Secretary-General (para. 5).  USUN and Embassy San Jose are 
also requested to press the Government of Costa Rica (GOCR) 
to lift its hold on this letter, drawing from the talking 
points in paragraph 4. USUN and Embassy San Jose should 
inform P-5 counterparts of this demarche and its outcome and 
encourage them to approach the GOCR as well. The letter 
enjoys the support of the P-5, and the Costa Ricans are 
isolated in their reluctance to issue the letter.  Therefore, 
if the GOCR refuses to lift its hold, we will move forward 
with adopting a resolution that contains the provisions in 
the letter, thereby circumventing the need for consensus. 
(Note: Letters from the UNSC must be passed by consensus, 
while resolutions require a simple majority.) 
 
¶3.  Reporting and POC: USUN and Embassy San Jose are 
requested to report the results of their demarches no later 
than Friday, August 22.  IO/UNP POC is Bridget Lines, at 
LinesBM@state.gov, or 202-647-7142. 
 
¶4.  Begin talking points: 
 
-- UNSC members share a keen desire to wrap up the OFF 
program, which officially ended in December 2007, and the UN 
is anxious to complete its responsibility for managing the 
program. 
 
-- The GOI has thus far made little progress in resolving the 
outstanding Oil-for-Food payments, despite numerous 
reassurances that greater attention would be devoted to the 
issue. This lack of progress has been repeatedly noted by the 
Secretary-General, most recently in his July 25th note. 
 
-- We therefore believe that the most expeditious solution is 
to place the burden of authentication on the GOI.  If the GOI 
would like to contest a supplier,s claim of delivery, there 
are mechanisms in place for it do so.  However, if the GOI 
does not provide evidence to support their dispute of the 
supplier,s claim, the contract will automatically be paid 
out to the supplier at the end of the 45-day period.  The OFF 
program ended over eight months ago, and the Iraqis, lack of 
progress in the intervening months indicates that such 
measures are necessary to ensure that suppliers are repaid 
for the delivery of their goods. 
 
-- We read Costa Rica,s August 4 letter to the Security 
Council Presidency, and would support a briefing by the 
Secretariat to the Security Council on Oil-for-Food if that 
would help Costa Rica drop its objections to the letter. 
 
-- If the GOCR refuses to join consensus on the draft letter, 
or if it continues to stall on this issue, we and the other 
members of the P-5 are prepared to adopt a resolution which 
would elicit the same effect as the transmission of the draft 
letter. 
 
¶5.  Begin text of draft letter: 
 
Dear Mr. Secretary-General, 
 
I have the honor to inform you that your letters dated 11 
 
STATE 00088209  002 OF 002 
 
 
March and 25 July 2008 and the accompanying Notes concerning 
the processing of letters of credit pertaining to the Oil for 
Food Program have been brought to the attention of the 
members of the Security Council. 
 
Security Council members continue to welcome the ongoing work 
of the United Nations Secretariat to bring a complete and 
timely conclusion to all outstanding issues related to the 
Oil for Food Program, which terminated on 31 December 2007. 
In this regard, Council members express their concern at the 
slow processing of authentication documents by the Government 
of Iraq, and of the high number of outstanding letters of 
credit. 
 
Accordingly, members of the Council decide that the 
Government of Iraq be given 45 days from the date of this 
letter to confirm delivery of goods associated with all 
letters of credit with outstanding claims of delivery, as 
reported in the accompanying Note to your letter dated 25 
July.  The Government of Iraq should also issue and transmit 
the necessary confirmations of arrival to the UN Secretariat 
within this same period of 45 days, in order for payment to 
be made under the relevant letters of credit.  The Government 
of Iraq may also provide relevant documentation to contest 
the associated claims of delivery within this same period. 
In the event that neither confirmations of arrival nor 
documentation contesting the associated claims of delivery is 
received within 45 days, Council members request the 
Secretariat to instruct BNP Paribas to proceed with payment 
to the supplier. 
 
If the Government of Iraq provides relevant documentation 
that substantiates the contested claims of delivery within 
the 45 day period, Council members request that the dispute 
be handled according to the dispute mechanism detailed in the 
underlying contract.  If no such mechanism exists, or the 
parties decide not to rely on that mechanism, the dispute 
should be solved through the use of an established 
international arbitration mechanism agreed upon by the 
supplier and the Government of Iraq. 
 
Regarding the letters of credit with no claims of delivery 
asserted by the supplier, Council members await the 
conclusion of the UN Secretariat,s evaluation whether any or 
all of these letters of credit can be cancelled, and endorse 
the recommendation of cancellation.  For any letter of credit 
cancelled, Council members request that the associated funds 
on deposit with the UN be made available to the Development 
Fund for Iraq when all outstanding issues are resolved.  For 
those contracts where the UN Secretariat determines that the 
letter of credit in question cannot or should not be 
cancelled, the supplier should be asked to provide all 
relevant supporting documentation that indicates contract 
performance before the December 31, 2007 expiry of the 
program. 
 
In the event that a company can produce such documentation, 
Council members encourage the UN and the Government of Iraq 
to follow the mechanisms outlined in the paragraphs above. 
The Council members wish to recall that commercial disputes 
in connection with the above letters of credit should be 
handled in accordance with the dispute resolution mechanism 
provided for in the underlying contract or, in the absence of 
such a mechanism, through the use of an established 
international arbitration mechanism agreed upon by the 
supplier and the Government of Iraq. 
 
Council members reiterate their call upon the Government of 
Iraq to do its utmost, in liaison with the Secretariat of the 
United Nations, to expedite the processing of the remaining 
letters of credit.  In this regard, Members of the Council 
request a further progress report, to be issued by the 
Working Group between the representatives of the Government 
of Iraq, the Central Bank of Iraq, and the Secretariat, after 
the expiration of the 45 day deadline outlined above. 
 
The members of the Security Council also take note of the 
possibility of transferring $100 million of unencumbered 
funds to the Development Fund for Iraq (DFI).  While Council 
members recognize the availability, in principle, of such 
funds for the transfer to the DFI in accordance with 
resolution 1483 (2003), they recommend that all unencumbered 
funds associated with the Oil for Food Programme remain in 
the Iraq escrow account until such time as all outstanding 
issues are resolved. 
RICE