VZCZCXRO7320
RR RUEHBC RUEHDA RUEHDE RUEHDH RUEHIHL RUEHKUK
DE RUEHGB #2994/01 3171355
ZNR UUUUU ZZH
R 131355Z NOV 09
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 5422
INFO RUCNRAQ/IRAQ COLLECTIVE

UNCLAS SECTION 01 OF 02 BAGHDAD 002994 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EFIN ECON PGOV EAIR ETRD IZ
SUBJECT: COORDINATOR FOR ASSISTANCE TRANSITION MEETS WITH 
FINANCE MINISTER JABR 
 
¶1. (SBU) Summary: On November 5, Coordinator for Assistance 
Transition Patricia Haslach, EMIN, Finatt, and Brigadier 
General Stephen Lanza met Minister of Finance Baqir Jabr Al 
Zubaidi to discuss follow up to the Dialogue on Economic 
Cooperation (DEC) and the U.S.-Iraq Business and Investment 
Conference as well as the discussions between the 
International Monetary Fund (IMF) and the Government of Iraq 
(GoI) on a Stand-By Arrangement (SBA).  Haslach also asked 
about talks with the World Bank on Development Policy Loans 
(DPLs); the 2010 GoI budget; the International Compact with 
Iraq (ICI); debt relief negotiations with China; the Iraq 
Financial Management Information System (IFMIS); exemption 
from customs duties for U.S. humanitarian assistance; and 
budgeting for employment of the Sons of Iraq.  End summary. 
 
Follow up to DEC and USIBIC 
--------------------------- 
 
¶2. (U) At a November 5 meeting, Haslach thanked Minister Jabr 
for his participation and leadership of the Iraqi delegation 
at the DEC.  She reported that all USG participants were 
pleased at the substantive engagement on issues. "It was a 
real dialogue," she said, and underscored the importance of 
following up with the Strategic Framework Agreement (SFA) 
working groups. Haslach handed the Minister a copy of Under 
Secretary Hormats' DEC letter to Jabr, stressing we were 
interested in the Minister's reaction to our proposed path 
ahead. 
 
IMF Stand-By Arrangement and World Bank DPL Discussions 
--------------------------------------------- ---------- 
 
¶3. (SBU) Jabr described negotiations with the IMF on the SBA 
program as near completion.  He had informed the IMF that the 
GOI agreed with a USD 73 per barrel threshold oil price, 
above which the GoI would not draw on the SBA. Contrary to 
earlier indications, Jabr stated that he did not require 
approval from the Prime Minister on the threshold oil price. 
The Minister recalled that the Fund had requested the budget 
be cut by USD 1.5 billion. This was not possible, he 
explained, as the budget already had been sent to the Council 
of Representatives (CoR), and the IMF has subsequently backed 
away from its request. He also noted that the size of the SBA 
had declined from USD 4.5 billion to 3.8 billion based on 
earlier discussions with the Fund. He noted that passing the 
2010 budget and reaching agreement with the World Bank on the 
DPLs were the final issues that the GoI must resolve. 
 
¶4. (SBU) Haslach asked about the World Bank's willingness to 
extend a DPL. Jabr stated that the Bank was willing to lend 
USD 500 million, but the GOI was hoping for more. He 
recounted the Prime Minister's visit with World Bank 
President Robert Zoellick in Washington at which Zoellick 
professed that the Bank was strapped for funds. Increased 
lending to the GOI would require an increase in the Bank's 
capital, a topic Zoellick suggested the PM take up with the 
Treasury Secretary. Jabr repeated earlier requests for 
bilateral U.S. budget support and for help making Iraq's case 
before the World Bank.  Finatt noted that, at this point, it 
appeared unlikely that the World Bank would extend a DPL over 
$500 million.  The World Bank will send a team to Baghdad in 
mid-November to work out the details of the DPL. 
 
2010 Budget 
----------- 
 
¶5. (SBU) Jabr was pleased that the first reading of the draft 
2010 budget has passed the CoR and noted that the atmosphere 
for passage of the budget was "favorable." Last week, he was 
summoned to the CoR Finance Committee expecting to discuss 
the 2010 budget but, was "grilled" for three hours on the 
2009 budget instead. He said he will return to the CoR 
Q2009 budget instead. He said he will return to the CoR 
Finance Committee to discuss the 2010 budget soon. 
 
International Compact with Iraq 
------------------------------- 
 
¶6. (SBU) Regarding the ICI meeting on November 7, Jabr stated 
that the Prime Minister does not support the notion of a 
"compact," and would prefer a term that reflects the "new 
partnership." Haslach agreed and noted that the USG is 
prepared to work together with strong GOI leadership and with 
the international community on a new relationship between 
donors and the GOI.  Jabr provided a copy of his ICI speech, 
which reviewed GOI accomplishments over the last year and a 
half. 
 
Debt Negotiations with China 
---------------------------- 
 
¶7. (SBU) Jabr reported that Dr. Azez Jaffar, his Special 
 
BAGHDAD 00002994  002 OF 002 
 
 
Advisor, was in China to finalize a debt reduction agreement. 
Azez indicated that the Chinese have demanded interest 
payments to cover the period since the debt reduction MOU was 
first signed in July 2007 and that the 20 percent in 
remaining debt should be repaid in 5 years.  Jabr had 
instructed Azez not to agree since this was contrary to Paris 
Club rules, but still hoped the Chinese would finalize the 
deal.  (Note: Subsequently, Post learned that the Chinese had 
agreed to a deal consistent with Paris Club terms.  Azez 
initialed on behalf of the GOI, but the final agreement will 
be signed by the Finance Minister.) 
 
IFMIS 
----- 
 
¶8. (U) Haslach expressed understanding of past problems of 
the IFMIS database system but stressed that the USG wants to 
help the GOI fix it.   Haslach proposed that a team from the 
IFMIS vendor, Freebalance, come to Baghdad to work on the 
system.  Finatt noted that the visit of the Freebalance team 
should be arranged at a time when the General Director of the 
Budget Department could give them her undivided attention, 
probably after work on the 2010 budget is completed. The 
Minister agreed. 
 
Customs Duties Exemption for Humanitarian Assistance 
--------------------------------------------- ------- 
 
¶9. (SBU) Haslach recounted continuing problems with 
USG-funded goods being delayed in customs that should be 
accorded duty-free treatment. She asked the Minister to 
impress upon the Director General (DG) of Customs the need to 
conclude a memorandum of understanding (MOU) to exempt these 
goods from customs duties. She noted that the DG of Customs 
has not taken action since May when Prime Minister Maliki had 
instructed the MOF to exempt these goods from duties in 
accordance with the U.S.-Iraq Assistance Agreement. Jabr 
reported that he had pushed the DG of Customs on this issue 
the previous day. Finatt recalled the history of 
developments, with the Minister directing an MOU be crafted 
to implement the PM's directive on a shipment-by-shipment 
basis, with the USG certifying shipments that should be 
accorded duty-free treatment. Haslach provided a copy of a 
draft MOU that would achieve this objective. (Note: The MOF 
is expected to sign the MOU this week. End note). 
 
Sons of Iraq 
------------ 
 
¶10. (SBU) General Lanza noted that some Sons of Iraq had not 
been fully transitioned into ministries this year and 
emphasized the importance of budgeting for their employment. 
Jabr responded that he believed the 2010 budget provided 
sufficient funds for the Sons of Iraq. He recalled that the 
2009 supplemental budget was to provide extra funds to the 
Ministry of Interior (MoI), if needed, to pay the Sons of 
Iraq this year.  If the MoI needed extra funds this year, the 
Minister said he would advance them the necessary monies from 
the 2010 budget. 
HILL