VZCZCXRO0864
PP RUEHDE RUEHDIR
DE RUEHKU #0976/01 2551601
ZNY SSSSS ZZH
P 111601Z SEP 08
FM AMEMBASSY KUWAIT
TO RUEHC/SECSTATE WASHDC PRIORITY 2102
INFO RUEHGB/AMEMBASSY BAGHDAD PRIORITY 1295
RUEHZM/GCC COLLECTIVE

S E C R E T SECTION 01 OF 03 KUWAIT 000976 
 
SIPDIS 
NOFORN 
 
FOR NEA/ARP, NEA/I 
EMBASSY BAGHDAD FOR GRAY AND WALL 
 
E.O. 12958: DECL: 09/11/2018 
TAGS: PREL EINV EAID MASS KW
SUBJECT: MFA U/S on Kuwait Air negotiations, PM visit, and 
concerns about arms sales and SOFA with Iraq (S) 
 
Classified By: Ambassador Deborah K. Jones for reasons 1.4 
(b) and (d). 
 
Refs:  A) Kuwait 947, B) Kuwait 936 
 
¶1. (U) This is an action request.  Please see paras 10 and 11. 
 
¶2. (S/NF) Summary: Ambassador met with MFA U/S Khalid Al- 
Jarallah on September 11 to review the September 8 visit of 
the Iraqi Finance Minister to Kuwait and to preview the 
Kuwaiti PM's September 18-19 visit to the U.S.. Jarallah 
was broadly positive about the Iraqi Finance MinisterQs 
visit, noting that he thought an agreement in principle had 
been reached to settle Kuwait Airways claims with a USD 500 
million payment, though he noted the Kuwaitis would insist 
on a bank guarantee.  (Note:  His version differs slightly 
from that of Kuwait Airways' Legal Advisor, who said that 
the negotiations had run into difficulties on Kuwait 
Airways insistence that the GOI provide a bank guarantee 
from an international, not an Iraqi, bank. End Note.) 
Jarallah told Ambassador that the GOI planned to send a 
Minister of Foreign Affairs-led team to Kuwait within a 
month to try and resolve a number of other outstanding 
issues, including the border.  He added that he hoped that 
this visit would take place prior to the Prime Minister's 
visit to Iraq, for which he sought U.S. security 
assistance.  Jarallah also expressed concern about the 
U.S.- Iraq Status of Forces Agreement and future U.S. arms 
sales to Iraq. Ambassador noted our ongoing interest in 
significantly improving counter terrorism cooperation. 
Jarallah said that the PM would likely ask about Iraq, 
Iran, the peace process, Kuwaiti detainees, visas, and the 
possibility of a free trade agreement.  End Summary 
 
Iraq 
---- 
 
¶3. (S) Jarallah told Ambassador that Prime Minister Sheikh 
Nasser Al-Mohammed Al-Sabah would be very interested in the 
ongoing U.S. Q Iraqi Status of Forces negotiations, as the 
results would affect Kuwaiti security.  He pushed for more 
details on the terms of the agreement, saying that the 
Kuwaitis were frankly "confused" about its terms and 
conditions.  Ambassador explained briefly that the 
negotiations were still ongoing, but that PM Maliki 
appeared to accept the need for some type of continuing 
U.S. military presence in the country following the 
expiration of Article 7.  Jarallah also raised the proposed 
sale of U.S. military equipment to Iraq, noting that 
Kuwait's Ambassador to the U.S. had learned, from an 
administration source, that the U.S. planned to sell 30 
F-16s to Iraq.  Ambassador replied that she had briefed the 
Foreign Minister about the Iraq Security Force Transition 
plan, and that the process was designed to improve Iraq's 
counter-insurgency capability (ref b). 
 
¶4. (S) With regard to the Prime Minister's planned visit to 
Iraq, Jarallah expressed serious concern about the security 
situation and asked specifically what the USG could do to 
provide security.  He noted that the PM is likely to stay 
"only a few hours" which would include lunch or dinner with 
PM Maliki and would likely fly in on one of the GOK's Amiri 
fleet jets. 
 
Iraq Airways Negotiations 
------------------------- 
 
¶5. (SBU) Ambassador asked Jarallah for his read-out on the 
September 8 visit of the Iraqi Finance Minister to Kuwait 
to discuss the debts owed to Kuwait Airways.  Jarallah said 
that he thought the two sides had reached an acceptable 
agreement, in principle, for the Iraqis to pay USD 500 
million out of the USD 1.3 billion in outstanding Kuwait 
Airways claims.  He explained that the original Iraqi offer 
of USD 150 million, plus an intent to funnel Iraqi 
passengers to Kuwait Airways rather than Jordan or Dubai, 
was unacceptable to Kuwait Airways.  Kuwait Airways had 
taken steps in court to enforce their claim, resulting in a 
Montreal court order to seize Bombardier aircraft, 
purchased for Iraqi Airways.  This action, Jarallah noted, 
quickly brought the Iraqis to the table to say "please 
stop."   The Iraqis originally insisted that the Kuwaitis 
stop the Canadian enforcement action before negotiating but 
agreed to talk, when the Kuwaitis responded that Kuwait 
Airways still had "two days" before they needed to act on 
the Canadian judgment. 
 
 
KUWAIT 00000976  002 OF 003 
 
 
¶6. (SBU) Ambassador noted her understanding that the talks 
might have faltered due to Kuwait Airways desire to have an 
international bank handle the fund transfer rather than an 
Iraqi bank.  Jarallah stayed positive on the agreement, but 
noted that the Kuwaitis wanted a bank guarantee from the 
Iraqis for the payment.  (Note:  There appears to be a 
slight disconnect between the GoK and Kuwait Airways about 
the status of the talks.  The Legal Advisor for Kuwait 
Airways told Econoff that both sides had agreed to a 
proposed USD 500 million settlement, but that the Iraqis 
had balked when asked to sign minutes saying that the 
agreement would be accompanied by a payment guarantee 
issued by an international bank.  The GoI had originally 
proposed an Iraqi bank guarantee.  Ahmed Sadawi, the Iraqi 
Advisor for Civil Aviation apparently said that the GoI had 
no funding in the FY 08/09 budget to cover the payment; 
funding would need to come from a FY 09/10 budget.  For 
that reason, Iraq would not be able to pay before March 
¶2010.  The Kuwait Airways Legal Advisor said that he 
suspected that the GOI wanted a signed agreement to present 
to the courts in Montreal to gain release of the aircraft. 
Putting the two sides' stories together, it may be that the 
GoI asked the GoK to accept its USD 500 million offer on 
good faith in order to obtain release of the Bombardiers 
aircraft, while awaiting the 2009 budget for actual 
payment.  The Kuwaitis, businessmen first and foremost, 
demanded bank guarantees before taking any action. End 
Note.) 
 
Iraq to Send Committee to Work on Resolving Kuwaiti 
Concerns 
--------------------------------------------- ------ 
 
¶7. (C) Jarallah said that he had raised a number of other 
Kuwaiti concerns with the Minister of Finance.  These 
included the Iraq-Kuwait border, demarcation of the sea 
border, the continued presence of Iraqi farmers on Kuwaiti 
soil, and the fact that the GoI continued to block trucks 
from Kuwait and other GCC states at the border.  According 
to Jarallah, the Iraqi Finance Minister told him that a 
committee led by the Iraqi Minster of Foreign Affairs and 
including the Ministers of Defense, Oil, and Interior would 
come to Kuwait to address all of these issues.  Jarallah 
hoped that they would within the month and prior to the 
PM's visit to Iraq.  With regard to the Iraqi farmers, 
Ambassador asked whether the MFA had followed up on 
discussions with the Iraqi side.  When it became clear that 
Jarallah was unaware of any GoK follow-up, Ambassador again 
passed over information on an Iraqi MFA point of contact 
provided by Embassy Baghdad. 
 
Counter-Terror Concerns 
----------------------- 
 
¶8. (S/NF) Ambassador and U/S Jarallah discussed the 
upcoming Prime Ministerial visit to Washington and New 
York.  She noted that the USG wanted to acknowledge and 
honor the strong relationship, but added we would likely 
highlight our interest in improving our counter terror 
cooperation.  She suggested that there was frustration on 
both sides that the liaison relationship was not more 
productive, and that we would need to look creatively at 
ways to improve it.  She also noted Washington's interest 
in having Kuwaiti leadership speak out more forcefully 
against terrorist activities and work more closely with 
their neighbors to secure the borders.  All of these 
actions, she stressed, were in both countries mutual 
interest. Jarallah said the Kuwaitis shared U.S. concerns 
about terrorism and were worried about the activities of 
people within their borders as well.  He said the GoK was 
doing the best it could, though he acknowledged the need to 
do more.  He welcomed closer cooperation, noting that the 
GoK was "ready to cooperate in any way." 
 
The Prime Minister's Agenda 
--------------------------- 
 
¶9. (C) Jarallah said that the Prime Minister would be 
raising issues of his own, and that it was important to 
have high-level frank discussions about mutual concerns. 
On a regional level, he noted, the PM would want to discuss 
Iraq, Iran, and the peace process.  On a bilateral basis, 
he suggested the PM would be interested in the remaining 
Kuwaiti detainees, visas, and the possibility of an FTA, 
noting that Ambassador had advised against pushing for an 
FTA.  Ambassador reiterated that there was no possibility 
of concluding an FTA at this time.  Jarallah asked 
 
KUWAIT 00000976  003 OF 003 
 
 
Ambassador whether the USG had an opportunity to react to 
the various agreements that MFA had provided.  Ambassador 
clarified that the agreements on the table were:  A 
chemical weapons challenge inspection agreement, a Critical 
Energy Infrastructure Protection MOU, and the Broadcasting 
Board of Governors agreement. Jarallah stated that the PM's 
advance team would be in Washington by the weekend and 
would be contacting the Department on Monday. 
 
Action Request 
-------------- 
 
¶10. (SBU) For NEA/ARP: Please advise as to status of the 
three agreements referenced by Jarallah. 
 
¶11. (S/NF) For Baghdad: Please advise what actions can be 
taken to enhance security for the post-Ramadan visit of the 
PM to Baghdad. 
 
JONES