VZCZCXRO5286
RR RUEHBC RUEHDA RUEHDE RUEHDH RUEHIHL RUEHKUK
DE RUEHGB #1633/01 1730309
ZNR UUUUU ZZH
R 220309Z JUN 09
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 3575
INFO RUCNRAQ/IRAQ COLLECTIVE

UNCLAS SECTION 01 OF 02 BAGHDAD 001633 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: EFIN ECON PGOV EAIR ETRD IZ
 
SUBJECT: Finance Minister Says Treasury Bills for GE Payment and IMF 
Loan Negotiations Are on Track 
 
REF:  Baghdad 976 
 
¶1. (SBU) SUMMARY: At a June 17 meeting with EMIN and Brigadier 
General Stephen Lanza, Minister of Finance Bayan Jabr said the GOI 
and International Monetary Fund (IMF) had agreed to conduct 
technical negotiations on an 18 month loan program of around $5.5 
billion.  He also believed that the issuance of treasury bills could 
be completed within a week to finance General Electric payments, but 
only if the Council of Representatives (CoR) could provide written 
confirmation to the Ministry of Finance that the government can 
issue Treasury bills without further approval.  Jabr was less 
certain on whether the Boeing payments would be made.  He also 
indicated a supplementary budget, paid for by the sale of mobile 
phone licenses, could aid provinces with low 2008 budget execution 
rates.  EMIN also urged Jabr to arrange for the finance ministry to 
sign a grant in aid agreement that will allow it to take ownership 
of equipment for USAID's Iraq Financial Management Information 
System (IFMIS).  End summary. 
 
IMF Stand-By Agreement Discussions 
---------------------------------- 
 
¶2. (U) At a June 17 meeting with EMIN and General Lanza, Minister 
Jabr said the GoI and the IMF recently agreed in Amman to an 18 
month loan program of around $5.5 billion.  Jabr stated that the IMF 
had agreed to conduct technical meetings in June and a policy 
meeting in July in Washington, DC, followed in October by the 
conclusion of the Stand By Agreement (SBA)in Istanbul, two days 
before the IMF annual meeting there.  (Note: We believe technical 
negotiations were planned to take place in July in Beirut.) 
According to Jabr, Japan has promised a $3.5 billion loan at 4 
percent, repayable over 40 years, after approval of the SBA by the 
IMF Board.  Jabr stated that he had consulted with his legal adviser 
on whether Council of Representatives (CoR) approval of the SBA 
would be necessary, but they were not certain about this issue yet. 
 
Treasury Bills for General Electric Payments 
-------------------------------------------- 
 
¶3. (U) On June 15, the CoR ratified a resolution for issuing 
treasury bonds totaling $2.4 billion to finance payments to General 
Electric and Siemens, but the CoR insisted on using the term "bills" 
or "drafts" instead of "bonds."  Asked by EMIN about the 
distinction, Minister Jabr stated that there was no substantive 
difference, but that not calling them "treasury bonds" avoided the 
need for CoR approval.  He asserted that the treasury bill issuance 
could be completed in a few days to a week, but that it could occur 
only if the CoR could provide written confirmation to the Ministry 
of Finance that the government can issue treasury bills without 
further approval.  He requested U.S. assistance in urging CoR 
Speaker Ayad Al-Samarraie to respond quickly with such a letter, 
emphasizing the need to "strike while the iron is hot." (Comment: 
Charge passed a letter to Al-Samarraie on June 26 urging action. 
Samarraie said this was a reasonable approach and indicated he would 
send a letter to Bayan Jabr confirming COR approval for the issuance 
of t-bills.  Embassy will follow-up with Samarrie's staff in the 
next day or two.  End comment.) 
 
Boeing Progress Payment 
----------------------- 
 
¶4. (U) Asked whether the GoI would meet the first scheduled progress 
payment of $1.777 million under its contract with Boeing for the 
acquisition of 737 and 787 aircraft, Jabr responded that Boeing had 
changed the delivery timetable, giving the GoI the right to cancel 
the contract or continue it by paying the first progress payment. 
Qthe contract or continue it by paying the first progress payment. 
(Note: there has been no change in the delivery dates for the Boeing 
Aircraft.  End note).  He emphasized that his only role in this 
matter was to provide payments, and that he had no role in any other 
decisions regarding the aircraft acquisition contract.  He also 
pointed out that the ongoing corruption investigation by the CoR was 
scrutinizing Bombardier and Boeing, and that it may affect GoI 
willingness to continue with the Boeing deal.  He emphasized that 
"we have no money" to even make the payments because of low oil 
production and prices. 
 
2009 Supplementary Budget 
------------------------- 
 
¶5. (U) Asked about the 2009 supplementary budget, Jabr stated that 
it would be used for the provinces such as Diyala and Ninewa that 
had extremely low budget execution rates in 2008 because of ongoing 
fighting.  When these provinces could not execute their budgets in 
2008, the funds reverted to the central government, and "it would 
not be justice" to miss out on the funding that other provinces 
enjoyed that year.  The funding would also be important to maintain 
security in Mosul.  Funds for the supplementary budget would come 
from sales of mobile phone licenses.  (Note: The Council of 
Ministers has already directed mobile phone companies pay $1.875 
billion cash for the licenses.) 
 
BAGHDAD 00001633  002 OF 002 
 
 
 
¶6. (U) When EMIN asked about the $70 billion infrastructure program 
approved by the CoR, Minister Jabr clarified that the CoR had only 
voted on $3 billion - $2.4 billion for payments to General Electric, 
and $600 million for other projects.  (Note: The Iraqi government 
spokesman has announced that the Iraqi government has submitted a 
request to the COR to approve a plan to invest $70 billion to 
rebuild Iraqi infrastructure and services.  We will seek further 
clarification on this proposal.) 
 
IFMIS 
----- 
 
¶7. (U)   EMIN gave Jabr the Grant in Aid agreement with USAID and 
urged him to designate the Deputy Minister or Special Advisor to 
sign it before June 21 in order to ensure handover of IFMIS 
equipment ownership and implementation of programs before the end of 
the year.  Jabr said that Dr. Aziz would handle the matter.  (Note: 
Dr. Aziz is traveling out of Iraq until at least June 20 and has not 
been responding to attempts to contact him, making it unlikely that 
he will take any action with respect to the Grant in Aid agreement 
before the June 21 deadline.) 
 
 
Comment: 
------- 
 
¶9. (SBU) Although the meeting was cut short by the arrival of a 
former Iraqi royal family member, the discussion highlighted a lack 
of clear coordination between the CoR and the MOF on the treasury 
bills, further magnified by seeking U.S. embassy intermediation in 
the matter.  This lack of coordination and focus among GOI agencies 
seems to have also affected Boeing contract payments and an 
agreement on the IFMIS program.  While it is common practice for GOI 
officials to defer decision-making, we hope that our continued 
advocacy will push Jabr to take action. 
 
Ford