VZCZCXYZ0009
OO RUEHWEB

DE RUEHC #9304 2382333
ZNR UUUUU ZZH
O 262318Z AUG 09
FM SECSTATE WASHDC
TO RUCNDT/USMISSION USUN NEW YORK IMMEDIATE 0000
INFO RUEHGB/AMEMBASSY BAGHDAD IMMEDIATE 0000
RUEHKU/AMEMBASSY KUWAIT IMMEDIATE 0000

UNCLAS STATE 089304 
 
SIPDIS 
FOR GERMAIN AND FINERTY 
 
E.O. 12958: N/A 
TAGS: PREL UNSC IZ
SUBJECT: GUIDANCE: DFI-IAMB CONSULTATIONS, AUGUST 27 
 
¶1. (U) USUN should draw from the following building blocks 
(para 2) during August 27 UNSC consultations on the 
Development Fund for Iraq (DFI) and the International 
Advisory Management Board (IAMB). 
 
¶2. (U) Begin building blocks: 
 
-- The United States welcomes the first report of the 
Secretary-General pursuant to paragraph 3 of resolution 1859 
(2008). 
 
-- UN Security Council Resolution 1859 (2008) carried forward 
for one year the arrangements for the Development Fund for 
Iraq (DFI), including the obligation to deposit proceeds from 
export sales of oil and natural gas into the DFI, the 
oversight function of the IAMB, and the obligation 
(originally contained in resolution 1483 (2003)) on states to 
extend certain immunities to petroleum, petroleum products, 
and natural gas originating in Iraq and revenues from such 
export sales as well as to the DFI.  In anticipation of the 
expiration of the arrangements at the end of 2009, the United 
States is working with the Government of Iraq to continue the 
arrangements, in particular, the immunities. 
 
-- We note today our understanding that the bulk of 
commercial claims inherited from the former regime have been 
formally reduced and resolved, and that Iraq has made great 
progress in settling sovereign debt. The United States is 
exploring with the Government of Iraq a state-to-state 
resolution of claims of U.S. victims of Saddam Hussein era 
terrorism. 
 
-- Resolution 1859 also extended the mandate of the IAMB, 
whose audits of DFI accounts over the last four years have 
consistently noted a serious lack of internal controls in 
accounting for and managing the DFI, as well as the lack of 
an adequate system for metering Iraqi oil production. 
 
-- The IAMB has now met 25 times since 2003, including twice 
in 2009.  During the last meeting of the IAMB in Vienna on 
July 22nd and 23rd, the results of the 2008 DFI audit were 
reviewed.  This report again highlighted key issues of 
concern regarding weaknesses in controls over oil extraction 
and use of the resources. The fact that poor internal 
controls remain a significant concern and that the metering 
of Iraqi oil production remains inadequate, frustrates all 
serious efforts to accurately determine how much of Iraq's 
oil revenue is being lost through theft, smuggling, or 
leakage. We are concerned that this is one of the IAMB's 
earliest recommendations from 2004 and it remains incomplete. 
Accordingly, we note the need to implement comprehensive, 
system-wide metering. 
 
-- The successor organization to the IAMB - the Committee of 
Financial Experts (COFE) - was established in 2007 to assume 
the roles and responsibilities of the IAMB upon completion of 
the IAMB mandate, as envisaged under UNSCR 1859.  While the 
United States recognizes the confidence the IAMB has in the 
competence and capabilities of COFE, we are concerned whether 
COFE has the skill set and independence that it needs to 
have.  Although COFE's initial mandate provides for its 
independence, its current composition includes officials with 
government ministry ties and its top official is the 
President of the Board of Supreme Audit. 
 
-- The United States welcomes COFE's close work with the 
IAMB, as well as its increased role in the follow-up and 
implementation of recommendations contained in the IAMB 
commissioned independent audit reports. As preparations begin 
to review the DFI and IAMB mandates at the end of this year, 
it will be important to ensure COFE is prepared and capable 
to succeed the IAMB as an effective, transparent oversight 
mechanism. 
 
-- The United States calls on the Government of Iraq to 
implement the recommendations of the IAMB, and to stand ready 
to support COFE's capacity to take over the tasks currently 
entrusted to the IAMB. 
 
-- It will also be important to ensure that a mechanism to 
continue payments from Iraq's oil and gas export proceeds to 
the United Nations Compensation Fund be considered, if Iraq 
and Kuwait have not reached an agreed settlement of Iraq's 
remaining UNCC payment obligations at that time.  The United 
States call on Iraq and other interested parties to continue 
the discussion already begun under United Nations 
Compensation Commission auspices on solutions to the issue of 
outstanding compensation payments. 
 
-- We welcome the next meeting of the IAMB, together with 
COFE, which is expected in December 2009. 
 
End building blocks. 
CLINTON