VZCZCXYZ0001
RR RUEHWEB

DE RUEHRB #0187/01 0631715
ZNR UUUUU ZZH (CCY AD3A847F MSI6117-695)
R 041715Z MAR 09 ZDS
FM AMEMBASSY RABAT
TO RUEHC/SECSTATE WASHDC 9764
INFO RUCNMGH/MAGHREB COLLECTIVE
RUEHGB/AMEMBASSY BAGHDAD 0112
RUEHLO/AMEMBASSY LONDON 3686
RUEHCL/AMCONSUL CASABLANCA 4524
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS RABAT 000187 
 
C O R R E C T E D  C O P Y (CORRECTED SUBJECT LINE TO SAY TOWARD 
MOROCCO AND NOT TOWARD IRAQ) 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR NEA/MAG, EEB 
TREASURY FOR OFFICE OF MIDDLE EAST AND NORTH AFRICA - 
VINOGRAD 
 
E.O. 12958: N/A 
TAGS: EFIN ECON EINV MO IZ
SUBJECT: IRAQI DEBT TOWARD MOROCCO NOT LARGE, BUT NOT EASY TO 
FORGIVE 
 
REF: 3/2 SMITH-VINOGRAD EMAIL (NOTAL) 
 
¶1. (SBU) Summary: Morocco is likely to eventually forgive all 
or most of outstanding pre-Gulf War I Iraqi debt owed to the 
Government of Morocco (GOM).  However, a smaller amount is 
still owed to private enterprises, and GOM officials warn 
that any attempt to settle the debt will elicit a flood of 
requests for repayment from those long-dissatisfied 
creditors.  It may be useful to share other countries' 
experience in similar situations, if such examples exist. 
End Summary. 
 
--------------------- 
NOT A VERY LARGE DEBT 
--------------------- 
 
¶2.  (SBU) Director of the Treasury and External Finance 
Zouhair Chorfi told EconCouns on March 3 that the GOM 
recently sent a letter to the Government of Iraq (GOI) 
inviting the visit to Rabat at the end of March of a team of 
experts from Iraq to decide on the amount of interest 
associated with the debts owed to Morocco stemming from 
pre-1991 commercial transactions.  In earlier discussions, 
the GOM and GOI had "quickly" agreed on the value of the 
principal (USD 11 million), but have debated different 
formulas to determine interest, resulting in a range from 
from USD 9 to 24 million (for a total value therefore of USD 
20 to 35 million).  The Ministry of Finance's role will be 
only to get an agreement on that value, Chorfi emphasized, 
but disposition of the debt is a political question "beyond 
us technocrats." 
 
¶3.  (SBU) Chorfi commented that after a value is agreed upon 
between Morocco and Iraq, the Ministry of Finance will 
present options to the Council of Ministers on how to deal 
with the debt, identifying three possibilities.  The first, 
the "Paris Club" option, would forgive 80 percent of the debt 
and spread out repayment of the remaining 20 percent over 10 
to 15 years.  The second would forgive 90 percent of the debt 
upon immediate payment of the remaining 10 percent.  And the 
final option would be forgiveness of one hundred percent of 
the debt ("your preferred position," Chorfi noted). 
Ultimately, Chorfi predicted, the decision will likely reside 
with the King, and would probably be one element in a broader 
political and economic initiative toward Iraq.  The debt is 
not huge, Chorfi observed, and forgiveness would constitute a 
"friendly gesture" perhaps in coordination with renewed 
bilateral commercial deals or oil supply agreements. 
 
-------------------- 
BUT IT'S COMPLICATED 
-------------------- 
 
¶4.  (SBU) Chorfi and Head of the Balance of Payments Division 
Younes Zouhair pointed out that the GOM is actually the 
creditor for only 90 percent of the USD 11 million principal 
(and its associated interest), having already compensated 
private Moroccan exporters who had state guarantees for 90 
percent of their uncollectible debts.  However, those firms 
(about 26 enterprises) still have a claim to the 10 percent 
still outstanding.  Up to now, Chorfi noted, the GOM has been 
negotiating with the GOI on defining the amount of principal 
and interest for 100 percent of those debts, but the GOM does 
not have the legal authority to take a decision on forgiving 
the ten percent still owed to private enterprises.  In 
addition, Zouhair added, some exporters who were not 
protected by government guarantees are owed an additional 
estimated USD 4.5 million principal, plus interest.  Moroccan 
exporters typically had to pay up to 13 percent in interest 
on the bank loans that financed these transactions, Chorfi 
pointed out.  They have suffered substantially from the 
unpaid debts and a unilateral GOM decision (partly on their 
behalf) to forgive the debts would cause an uproar. 
 
-------------------------- 
HAS THIS BEEN DONE BEFORE? 
-------------------------- 
 
¶5.  (SBU) Comment: GOM forgiveness (or near forgiveness) of 
its share of the debt is highly likely, but we do not expect 
it will come soon.  Chorfi and his staff appeared preoccupied 
with the political implications private creditors might raise 
following forgiveness of the state debt.  If the Department 
 
 
 
or our colleagues in Treasury are aware of examples from 
other countries that may have dealt with such claimants, it 
may be useful to pass those models to the Moroccans for their 
consideration. 
 
 
***************************************** 
Visit Embassy Rabat's Classified Website; 
http://www.state.sgov.gov/p/nea/rabat 
***************************************** 
 
Jackson