VZCZCXYZ0000
OO RUEHWEB

DE RUEHC #6708 3450033
ZNR UUUUU ZZH
O 110031Z DEC 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 126708 
 
SIPDIS 
USUN FOR GERMAIN AND FINERTY 
 
E.O. 12958: N/A 
TAGS: PREL UNSC IZ
SUBJECT: GUIDANCE: DFI-IAMB CONSULTATIONS, DECEMBER 17 
 
¶1. (U) USUN should draw from the following building blocks 
(para 2) during December 17 UNSC consultations on the 
Development Fund for Iraq (DFI) and the International 
Advisory and Monitoring Board (IAMB).  The U.S. Government 
objectives in supporting an extension of the DFI/IAMB and in 
making a Security Council intervention are to: 1) highlight 
that DFI oversight mechanisms remain inadequate; 2) lay out 
what the Government of Iraq needs to consider in order to put 
into place adequate oversight mechanisms; and 3) urge support 
for a new resolution and 12-month extension. 
 
¶2. (U) Begin building blocks: 
 
--Since 2003, Iraq has made remarkable progress to address 
the prior regime,s legacy of debt and mismanagement of 
national resources.  It succeeded in reaching a landmark 
agreement with the Paris Club for an 80% reduction in its 
Saddam Hussein-era debts, and on these terms has concluded 
formal debt reduction, cancellation or dismissal agreements 
with more than 60 countries and the great bulk of its 
commercial creditors.  It seems as if the time is in sight 
when Iraq will no longer require the exceptional immunities 
and international oversight arrangements of the Development 
Fund for Iraq. 
 
--The United States recognizes the significance of the 
Development Fund for Iraq and the International Advisory and 
Monitoring Board in supporting the Government of Iraq to 
ensure that Iraq's resources are being used accountably and 
transparently to benefit all Iraqi people.  Regrettably, the 
IAMB,s audits of DFI accounts have consistently noted a 
serious lack of internal controls in accounting for and 
managing the DFI, including the persistent lack of adequate 
systems for metering Iraqi oil and gas production and 
exports. 
 
--Given the importance of the DFI accounts for Iraq as the 
country rebuilds its economy, the United States is very 
concerned that the Government of Iraq,s audit and oversight 
of its hydrocarbon resources falls short of international 
standards and the terms of the Iraqi Constitution, which call 
for independent auditing of federal financial resources and 
fair and equitable distribution of the country's oil and gas 
revenues. We thus intend to work with the Government of Iraq 
over the next year as the government establishes an 
effective, transparent oversight mechanism that respects 
Iraq's Constitution while meeting international standards and 
best practices. 
 
--While the IAMB has expressed confidence in the competence 
and capabilities of the Committee of Financial Experts 
(COFE), we question whether COFE has the skills and 
independence it needs.  Although COFE's mandate provides for 
its independence, its current composition includes officials 
having ties to the same ministries that it would monitor. 
Its top official, moreover, is the President of the Board of 
Supreme Audit, an Iraqi government body which has been 
ambivalent about making its findings public and bringing in 
and abiding by international standards and best practices. 
Thus, as currently configured, COFE does not yet have the 
independence and capacity to meet international or Iraqi 
constitutional standards. 
 
--Accordingly, the United States will strongly urge the 
Government of Iraq to take the following steps: 
 
1) Establish a single transparent account for collecting and 
distributing all hydrocarbon export revenues.  This account, 
which would succeed the DFI, would help ensure that the Iraqi 
government complies with its constitutional and international 
obligations, including its obligation to make payments to the 
United Nations Compensation Commission (UNCC).  In that 
regard, we support the call for continued discussion between 
Iraq and other interested parties, which has already begun 
under UNCC auspices, on solutions to the issue of outstanding 
compensation payments. 
 
2) Actively seek to resolve on Paris Club terms any remaining 
Saddam Hussein-era sovereign debts.  The United States also 
will continue to encourage the Government of Iraq to resolve 
the remaining Oil-for-Food claims before the end of 2009, so 
that the program can then be terminated and the remaining 
unpaid balances can be returned to the DFI.  These would be 
major steps forward in normalizing the Government of Iraq,s 
international financial standing. 
 
3) Implement greater internal controls, especially in 
relation to oil and gas metering across the Iraqi 
hydrocarbons sector.  The fact that poor internal controls 
remain a significant concern, and the metering of Iraqi oil 
and gas production, processing and exports remains 
inadequate, frustrates serious efforts to accurately 
determine how much of Iraq's oil and gas revenue is being 
lost through leakage, theft, or smuggling.  Since 2004, this 
has been one of the IAMB's earliest and most consistent 
recommendations, and we want to further underscore this 
concern. 
 
--We have drafted a DFI resolution which has been circulated 
to the Council and which extends the DFI/IAMB arrangements 
for a further, and we hope final, 12 months.  The resolution 
requests the Government of Iraq to provide periodic progress 
reports to the Council on its efforts in the areas I have 
mentioned beginning in April 2010, and we would welcome 
representatives from COFE to brief the Council to discuss the 
establishment of a timeframe and action plan to implement the 
recommendations of the IAMB. We look forward to working with 
you all on this resolution. 
 
--Thank you. 
 
IF RAISED 
 
--The United States is encouraged that the Government of Iraq 
is exercising its sovereignty by engaging in a democratic 
process to adopt a comprehensive and inclusive national 
election law which seeks the largest representation of Iraqis 
at the polls, including those abroad, and ensures the proper 
distribution of seats among the governorates. 
 
End building blocks. 
CLINTON