VZCZCXRO2810
PP RUEHDBU RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSR RUEHTRO
DE RUEHTU #0237/01 1071425
ZNY CCCCC ZZH
P 171425Z APR 09
FM AMEMBASSY TUNIS
TO RUEHC/SECSTATE WASHDC PRIORITY 6210
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCNMGH/MAGHREB COLLECTIVE
RUEHAB/AMEMBASSY ABIDJAN 0045
RUEHOT/AMEMBASSY OTTAWA 0234

C O N F I D E N T I A L SECTION 01 OF 03 TUNIS 000237 
 
SIPDIS 
 
DEPT FOR NEA/FO (FELTMAN/HUDSON), NEA/MAG (NARDI/WILLIAMS), 
NEA/EX (HOHE), A/OPR/OS (CAMERON), OFM (BARTON), L/DL 
(BENDA) 
 
E.O. 12958: DECL: 04/16/2019 
TAGS: ASCH AFDB PGOV PREL TS
SUBJECT: AMERICAN SCHOOL CRISIS ABATES, TIME FOR 
NEGOTIATIONS 
 
REF: A. SECSTATE 36413 
     ¶B. TUNIS 223 
     ¶C. TUNIS 222 AND PREVIOUS 
 
Classified By: Ambassador Robert F. Godec, Reason 1.5 (b) and (d) 
 
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SUMMARY 
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¶1.  (C) Under mounting US and international pressure, the 
Tunisian authorities have offered public and private 
assurances of their commitment to keep the American 
Cooperative School of Tunis (ACST) open and their willingness 
to negotiate a settlement to the current tax crisis.  These 
gestures included a rare briefing of members of the 
diplomatic corps by the Foreign and Finance Ministers, 
personal commitments by the Prime and Foreign Ministers and 
public statements by the Finance Minister in the Tunisian 
press.  With the school no longer in imminent danger of 
closing, post requests that a Department delegation be sent 
to Tunis as soon as possible to negotiate ACST,s status and 
fiscal obligations now and in the future.  (See action 
request paragraph 11.)  End summary. 
 
------------------------------- 
MINISTER OF FINANCE GOES PUBLIC 
------------------------------- 
 
¶2.  (C) On the morning of April 15, the same day Special 
Envoy for Middle East Peace George Mitchell met with the 
Tunisian Prime Minister (septel), the major daily papers 
reported a press conference given by Finance Minister 
Kechiche the previous day on economic issues, including fuel 
prices and taxation.  In a topic highlighted by many papers 
with a teaser headline or highlight box, the Minister 
responded to a question on a rumored audit and possible 
closing of the American school.  FM Kechiche emphasize that 
all legal entities in Tunisia are subject to taxation and 
audits are routine, but dismissed any suggestion that the 
school would be closed.  In fact, he expounded at length on 
the high value that Tunisians place on education, the role of 
the school in promoting good relations with many nations, and 
the importance of foreign residents being able to choose 
appropriate education for their children.  He stated clearly 
that schools would not be closed because of tax issues.  In 
response to a follow up question asking, "Why now?", he again 
emphasized the routine nature of the proceedings. 
 
----------------------------------- 
REASSURING THE DIPLOMATIC COMMUNITY 
----------------------------------- 
 
¶3.  (C) After repeated inquiries by Ambassadors and other 
diplomatic community representatives to the GOT, including a 
demarche on the Tunisian Ambassador in Berlin, Foreign 
Minister Abdallah and Finance Minister Kechiche (joined by 
External Communications Director Romdhani) conducted an 
almost unheard of joint briefing.  Speaking to a group that 
included African Development Bank President Kaberuka and the 
Ambassadors of the UK, France, Spain, Italy, Germany, 
Switzerland, Egypt, Kuwait, Belgium, Nigeria, Indonesia, 
Algeria and the European Commission (but not the US Embassy 
or ACST) the Tunisian officials said they wanted to set right 
the "rumors and misunderstandings" concerning the school. 
They emphasized the routine, non-political nature of tax 
issue, that a delegation from Washington would be coming to 
negotiate a solution and asserted that the school would not 
be closed, period.  Foreign Minister Abdallah also emphasized 
that the case itself would take years in courts, although he 
did not make clear which side would bring the matter before 
the courts. 
 
¶4.  (C) The UK Ambassador, who provided a readout, said that 
there was considerable "relief" in the room that the school 
will not be closed and the generally positive tenor of the 
meeting.  While stinging in his criticism of Tunisian 
behavior on the issue, including the assertion that the 
meeting was part of "regular" consultations between the GOT 
and the diplomatic community, the Swiss Ambassador assessed 
the Tunisians had made a clear commitment to keep the school 
open.  Other Ambassadors have also been critical of the GOT 
for its actions on ACST and of the briefing provided by the 
ministers, but they have welcomed the new commitments 
regarding the school. 
 
TUNIS 00000237  002 OF 003 
 
 
 
-------------------------------------------- 
THE OTHER NEGOTIATIONS...WITH ACST,S BANK 
-------------------------------------------- 
 
¶5.  (SBU) ACST,s Board and Administration received on April 
14 a notice from their US creditor PNC BANK that, in light of 
the material change for the worse in the school,s financial 
outlook and the fact of being in default on an obligation to 
a government, the school had been formally declared in 
default on the balance of its construction loan despite never 
having missed a payment.  The bank had placed a $2 million 
hold on the school,s accounts which, while not having an 
immediate effect on day-to-day operations, could have forced 
the school to shut down sometime after the end of the school 
year.  Subsequent negotiations between ACST and PNC 
representatives have resulted in a change in the bank,s 
tone, and the PNC Account Manager and Vice-President have 
recommended, subject to internal review, that the hold be 
reduced to $1 million and a renewable forbearance agreement 
be put in place to allow the school to continue operations. 
 
-------------------------------- 
AMBASSADOR BRIEFS HIS COLLEAGUES 
-------------------------------- 
 
¶6.  (SBU) After assessing the latest developments and 
exchanging e-mails with Washington, the Ambassador spoke 
April 16 with each of the ambassadors involved in the ACST 
issue.  These included the ambassadors of Germany, the UK, 
the Netherlands, Canada, Italy, Romania, Belgium, Poland, 
Spain, Switzerland, India, the European Commission and 
others.  He also updated AfDB President Kaberuka through the 
USED at the bank. The Ambassador: 
--noted the new commitments and statements the GOT has made 
in recent days regarding the school; 
--said the US would respond positively by sending a 
negotiating team that would focus on both the status and tax 
issues; 
--informed them the ACST school board would send a positive 
letter to parents to keep them informed (see below); 
--suggested a period of "quiet" to allow negotiations to 
work, but added that difficult issues remain ahead; 
--thanked them for their help, saying it was key to the 
progress that has been made, and promising to keep them 
informed. 
 
¶7.  (SBU) All of the ambassadors responded positively, 
expressing their strong support and ongoing commitment to 
work with us to reach a solution.  Some of the ambassadors 
expressed the view that the combined international pressure 
had clearly pushed the Tunisians to change direction.  The 
Ambassador also provided a copy of the ACST letter to MFA 
chief of staff Khemiri, noting it was intended as a signal 
that we want to reach to reach an equitable, negotiated 
solution on all issues regarding the school. 
 
------------ 
ACST ACTIONS 
------------ 
 
¶8.  (SBU) On the basis of the progress in the Tunisian 
position, and to reassure the ACST community in advance of 
the scheduled April 17 Annual General Meeting to elect new 
Board members and conduct other businees, ACST Board 
President Matthew Long on April 16 sent a letter to all 
parents and staff detailing new developments.  The letter 
made clear that there would be negotiations regarding the 
school,s status and tax matters that could have significant 
implications, but expressed optimism for a successful 
outcome.  The letter has been e-mailed to NEA/MAG.  ACST has 
stood down immediate preparations for a possible school 
shutdown, though prudent contingency planning continues with 
reduced urgency. 
 
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COMMENT 
------- 
 
¶9.  (C) Under growing US and international pressure, the GOT 
has, for the first time, agreed to negotiate seriously 
regarding the future of ACST.  They have also clearly 
acknowledged the importance of the school and promised they 
will not close it over tax matters.  In light of the 
substantial improvement in the tone and substance of the 
 
TUNIS 00000237  003 OF 003 
 
 
Tunisian position, including public and private assurances 
that seem to put the school out of immediate danger, we 
recommend proceeding directly to negotiations on the 
school,s status and fiscal obligations without insisting 
that the tax decree be formally rescinded in advance. 
 
¶10. (C) Despite recent positive developments, there is still 
tough work ahead.  The talks are likely, in our view, to be 
difficult and protracted.  We will need to do considerable 
preparatory work, and we must insist that the status issue be 
the first one negotiated, so that any tax requirements 
resulting from the status agreement are clear for the future. 
 End comment. 
 
-------------- 
ACTION REQUEST 
-------------- 
 
¶11.  (C) In light of the new developments, we ask the 
Department to send a delegation to Tunis to begin 
negotiations as soon as possible, but in any case before May 
¶23.  If, after decades of reticence, the Tunisians are now 
ready to negotiate a clear and definitive status for ACST, 
there is no time to waste.  End action request. 
Godec