VZCZCXRO1448
PP RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK
DE RUEHGB #0953/01 0971115
ZNR UUUUU ZZH
P 071115Z APR 09
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC PRIORITY 2578
INFO RUCNRAQ/IRAQ COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 03 BAGHDAD 000953 
 
SIPDIS 
SENSITIVE 
 
AIDAC 
 
DEPT FOR NEA/I AND E AND EEB; PLEASE ALSO PASS USTR 
 
E.O. 12958: N/A 
TAGS: ECON EPET EINV ENRG ETRD PREL IZ
SUBJECT: SECOND MEETING OF ECONOMIC AND ENERGY JOINT COORDINATION 
COMMITTEE 
 
REF: BAGHDAD 00399 
 
¶1. (SBU) Summary. Iraqi Deputy Prime Minister (DPM) Barham Salih and 
EMIN Ambassador Marc Wall co-chaired the second Economic and Energy 
Joint Coordination Committee (JCC) under the Strategic Framework 
Agreement (SFA) on March 31.  This follows the initial kick-off 
meeting held on February 12.  The five Working Group co-chairs 
presented draft work plans and lists of short and long term 
priorities.  DPM Salih continues to put his personal energy and 
enthusiasm behind this JCC.  He supported a meeting of the Dialogue 
on Economic Cooperation in late June and proposed the next JCC for 
July.  Going beyond the SFA discussions, Salih reiterated his 
displeasure with current oil policies and said the GOI has made a 
"strategic breakthrough" in recognizing that Iraq's petroleum sector 
needed outside assistance and investment.   End Summary. 
 
Second SFA Joint Committee: 
Economic and Energy Cooperation 
------------------------------- 
 
¶2. (SBU) Deputy Prime Minister (DPM) Barham Salih and EMIN/CETI 
Ambassador Marc Wall co-chaired the second meeting of the Joint 
Economic and Energy Coordination Committee under the Strategic 
Framework Agreement (SFA) on March 31.  The five working group (WG) 
co-chairs presented ongoing work plans (either final or in draft 
form) and priorities both short-term and long-term.  EMIN urged 
Working Groups (WG) to develop practical steps and solutions, going 
beyond identifying problems.  Political will for reform would also 
be necessary as the GOI continues its development on many fronts. 
EMIN also reminded WGs that while the SFA is a bilateral agreement, 
we must not lose sight on involving multilateral partners.  DPM 
Salih continues to put his personal energy and enthusiasm behind 
this JCC, ensuring Government of Iraq participation and follow-up. 
He requested that all WGs finalize bilateral work plans by mid-April 
and proposed the next JCC meeting be held in July.  During the 
meeting, DPM Salih passed to EMIN a draft of "Iraq's Economic Vision 
for 2020"in the spirit of bilateral exchange of information.  Salih 
described it as a long term vision for Iraq for consideration by the 
Iraqi Cabinet, World Bank, and members of the International Compact 
for Iraq.  Post is translating the document. 
 
Strategic Breakthrough on Oil 
----------------------------- 
 
¶3. (SBU) DPM Salih stated that it was clear that Iraq's present oil 
policies were a "total failure and one of the most difficult 
problems we face today."  He said that Iraq has made a "strategic 
breakthrough" in acknowledging that it cannot develop its resources 
with Iraqi talent alone.  Following the February Oil Policy Review 
Symposium, a PM-led committee (including Salih and the Ministers of 
Finance and Planning) was established to implement changes to the 
Ministry of Oil's operations.  The Council of Ministers (CoM) 
granted the committee full authorization to take action on the 
symposium's recommendations with no additional CoM review required. 
Barham noted a broad recognition of the importance of international 
oil company (IOC) assistance, including with the financing of 
petroleum sector projects and investment.  Barham said he looked 
forward to actively engaging with the U.S. side and that, at some 
unspecified future time, wanted to discuss the possibility of "real 
opportunities" for a short list of U.S. and other IOCs.  (Note: A 
Shell company executive, in Iraq to work on details of the flared 
QShell company executive, in Iraq to work on details of the flared 
gas project, told us that, during an April 1 meeting, Barham said he 
would be meeting with the PM and Oil Minister Sharistani shortly to 
discuss a possible direct bidding approach to certain companies. 
Barham assured the executive that Shell would be among the 
companies.  Market Sensitive.  End Note.) 
 
Oil and Gas Working Group 
------------------------- 
 
¶4. (U) Since the Iraqi co-chair and Oil Ministry representatives 
were not present, the U.S. Oil and Gas Working Group co-chair 
provided an update on the working group's activity, pledging to 
cooperate on training and technical support.   Other key goals 
include assisting the GOI to increase oil production, establish the 
Iraq National Oil Company and Supreme Oil and Gas Council, increase 
participation in the Extractive Industry Transparency Initiative, 
and increase downstream capacity (refining oil and gas).  Short-term 
deliverables include training 17 representatives from MoO's 
Petroleum Contracts and Licensing Directorate and others in 
contracts, providing technical advice on Iraq's petroleum sector, 
assisting the GOI to provide oil and gas infrastructure support, and 
training in leasing and tendering.  Long-term deliverables include 
facilitating GOI efforts in procurement assessment; a publicly 
available Petroleum Report; data monitoring and control center 
 
BAGHDAD 00000953  002 OF 003 
 
 
assistance and international best practices in petroleum reservoir, 
project and process management; hydrocarbon pollution reduction. 
 
Public Financial Management and 
Financial Issues Working Group 
------------------------------- 
 
¶5. (SBU)  The Public Financial Management and Financial Issues WG 
pledged to cooperate on developing a medium-term budget framework, 
bank capacity building, restructuring state-owned banks, and 
modernizing non-cash payment systems.  The Finance WG has a long 
list (six pages) of ongoing and potential activities under the JCC. 
Under Public Resource Management, these include aligning public 
finance with sound international practices, including budget 
transparency, international accounting standards, and tax policy 
review.  Banking initiatives including restructuring of state-owned 
banks and strengthening the pension and social safety net system. 
 
¶6. (SBU) A comment by the DPM about the Central Bank not wanting to 
buy T-bills and take an accommodative monetary stance provoked a 
discussion on how the  private market for T-bills could develop in 
Iraq.  The CBI's recent lowering of its reference interest rate and 
reserve requirements has freed up bank liquidity that is looking for 
a good rate of return.   We noted that the USG has offered to 
provide technical assistance in this area through the existing 
Public Finance Management Action Group (PFMAG)of the WG has met to 
link ongoing activities to Iraqi priorities contained in the Iraq 
National Development Strategy and the International Compact with 
Iraq. 
 
Electricity - New Projects Working Group 
---------------------------------------- 
 
¶7. (SBU) The Iraqi Co-Chair Salaam Kazaz, Deputy Minister of 
Electricity, noted the challenge of sufficient electric generation 
to meet demand and said the GE and Siemens contracts were the 
"backbone" to solving this problem.  The Electricity WG plans to 
draft a modern electricity law and a regulatory framework, and will 
initiate a technical assistance program that will embed foreign 
technical experts within the New Projects Division at the Ministry 
of Electricity for twelve months (under existing IRRF 2008 obligated 
funds).  The USG co-chair stated that Iraq's GE and Siemens gas 
turbine deals together constituted the single largest generation 
asset purchase "anytime, anywhere," requiring this group to 
concentrate its work on facilitating the planning for the 
construction and commissioning of the power plants at which these 
generators will be installed.  Other short-term deliverables include 
promotion of a customer and technical standards-based (semi) 
autonomous regulatory agency;  capacity building of a technical 
assistance program within the Ministry administered by International 
Relief and Development; assisting the GOI to procure financing for 
gas turbines; and broadening exchanges between GOI officials with 
USG counterparts. 
 
Industry and Private Sector 
Development Working Group 
--------------------------- 
 
¶8. (SBU) Dr. Sami Al-Araji will continue to be the Iraqi co-chair of 
this group in his new role as National Investment Commission (NIC) 
Chairman.  The Industry and Private Sector Development WG's short 
term goals include a coordinated U.S.-Iraqi effort to increase World 
Bank engagement in Iraq; continued support of the Task Force for 
Business Stability Operations (TFBSO) for investment promotion; 
state-owned enterprise reform; continued USAID support for NIC 
Qstate-owned enterprise reform; continued USAID support for NIC 
capacity development; promotion of small-and-medium enterprises; and 
investment climate regulatory reform. 
 
Trade and Investment Working Group 
---------------------------------- 
 
¶9. (SBU) The Trade and Investment WG's draft work plan emphasized 
the need for continued USG support to the National and Provincial 
Investment Commissions and Iraq's World Trade Organization (WTO) 
accession process, as well as increasing business-to-business 
contacts through the U.S.-Iraq Business Dialogues.  Short-term goals 
include Iraq's participation in the Third WTO Working Party Meeting 
in June, expediting visa processing of Iraq business visitors and 
updating the Investor Roadmap for use at the Investment Conference 
in London on April 30.  Trade Minister Abdulhadi Al-Hamiri will be 
the Iraqi Co-chair of this group. 
 
Dialogue on Economic Cooperation, 
Qualified Investment Zones 
-------------------------------- 
 
BAGHDAD 00000953  003 OF 003 
 
 
 
¶10. (SBU) The Trade and Investment WG's most important deliverable 
will be a Dialogue on Economic Cooperation (DEC) possibly in June, 
which we hope would include a robust private sector component. 
Salih endorsed the DEC and also strongly encouraged the Trade and 
Investment WG to examine the possibilities of setting up Qualified 
Investment Zones (QIZ) in Iraq.  (Comment: We will meet with Salih 
soon to learn more about his objectives in this regard, and whether 
he is really interested in a QIZ -- which would operate under the 
U.S.-Israel Free Trade Agreement -- or something more along the 
lines of the Reconstruction Opportunity Zones in Afghanistan and 
Pakistan).  Salih also noted the recent signing of an Iraqi-Turkey 
strategic economic agreement and welcomed U.S. facilitation in 
cooperation between the two countries. 
 
SFA Documents and Information 
----------------------------- 
 
¶11. (SBU) SFA documents and information are now available to all 
OpenNet users in Sharepoint at the following link (click on SFA 
tab). 
 
http://collaborate.baghdad.state.gov/Pages/De fault.aspx 
 
BUTENIS