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Cablegate: Mfa Passes Paper Defending First Kuwaiti's Work At

VZCZCXYZ0009
PP RUEHWEB

DE RUEHKU #0091/01 0240535
ZNR UUUUU ZZH
P 240535Z JAN 08
FM AMEMBASSY KUWAIT
TO RUEHC/SECSTATE WASHDC PRIORITY 0651
INFO RUEHGB/AMEMBASSY BAGHDAD PRIORITY 1121

UNCLAS KUWAIT 000091

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR NEA/FO, NEA/EX

E.O. 12958: N/A
TAGS: ABLD AMGT ECON IZ KU PREL
SUBJECT: MFA PASSES PAPER DEFENDING FIRST KUWAITI'S WORK AT
EMBASSY BAGHDAD

1. (SBU) At a January 11 dinner hosted by the Amir in honor
of President Bush, MFA Under Secretary Khaled Al-Jarallah
requested that we pass a paper and DVD to Assistant Secretary
Welch in support of First Kuwait Trading and Contracting
Company's work in building the New Embassy Compound in
Baghdad and other facilities in Iraq. The paper resembles a
generic press release and does not appear to have been
prepared by the MFA. The DVD, apparently produced by First
Kuwaiti and bearing the State Department Seal and a
Confidential label, contains video and still photos of

SIPDIS
various parts of the NEC with a musical soundtrack but no
voice-over. We do not have any information as to how widely
this DVD, which we will forward to Baghdad RSO via pouch, has
been circulated. (Comment: Neither the video nor the paper
adds anything new or significant to the First Kuwaiti - NEC
controversy. End Comment.) The complete text of the paper
follows.

2. (Begin text)

New U.S. Embassy construction - Baghdad design and build by
First Kuwaiti Trading & Contracting Company

First Kuwaiti Trading & Contracting Company ("First Kuwaiti")
is proud of its work in support of the Iraq war effort and
reconstruction and believes that no other firm operating in
Iraq has done more than First Kuwaiti to demonstrate the
quality, efficiency and integrity of Kuwaiti business. Since
2003, First Kuwaiti has successfully completed over 200
contracts in support of Coalition Forces, including the
construction of living compounds for the new Iraqi Army,
division headquarters for the U.S. military, and other
critical facilities. As a result, the company has received
numerous commendations from U.S. military commanders and
government officials. Unfortunately, the high-profile nature
of this work has prompted critics interested in discrediting
the U.S. Administration to make unfair and baseless
allegations against First Kuwaiti.

In 2005, the U.S. State Department recognized First Kuwaiti's
ability to complete substantial projects in the most
difficult of circumstances when it chose the company to be
the prime contractor for its New Embassy Compound ("NEC") in
Baghdad. The 104 acre, 28 building compound is the largest
U.S. embassy in the world and the most complex infrastructure
project yet completed in wartime Iraq. The embassy required
a huge logistical effort undertaken in hazardous conditions.
Construction has occurred in the midst of a dangerous combat
one with compromised supply routes and unrelenting risk to
the lives and safety of First Kuwaiti workers.

Regardless of these and other challenges, First Kuwaiti's
portion of the embassy project has been substantially
completed in just over two years within the original fixed
price budget of $474 million. While impressive, this success
could not have been achieved without the active support of
the Kuwait Government. Not only did the Kuwait Government
facilitate the immigration of foreign workers for the
project, it also assisted greatly with the re-export of
construction materials; exempted the import and export of
materials from customs; and provided extraordinary facilities
for the staging of shipments to Iraq. For example, the NEC
required casting over 150,000 cubic meters of reinforced
concrete using more than 30,000 tons of steel. Because these
commodities were not available in Iraq, they had to be
transported from Kuwait, which was only made possible through
the close cooperation between the Kuwait Government and the
Government of the United States.

Despite First Kuwaiti's success with the NEC project,
Democratic members of the U.S. Congress and other critics of
the war in Iraq have used First Kuwaiti and the NEC project
to attack the Bush Administration. By making sensational
allegations about First Kuwaiti and the NEC project, partisan
critics of President Bush have generated significant media
attention and portrayed the U.S. State Department in a
negative light. Of course, in the American political
context, it is generally easier to make baseless allegations
against a foreign company than against one located in the
U.S. - a fact made worse by the State Department's refusal to
permit First Kuwaiti to defend itself in the press.

The most damaging allegations made against First Kuwaiti are:
(1) that First Kuwaiti's construction of the NEC has been
substandard; (2) that First Kuwaiti trafficked foreign
workers to the NEC site against their will; and (3) that
First Kuwaiti's General Manager was involved in an illegal
bribery and kickback scheme. All three of these allegations
are baseless and ample evidence exists to support that

conclusion.

-- First, a powerful Democratic congressional committee
chairman and strong critic of the Administration alleged that
First Kuwaiti installed counterfeit wiring at a diplomatic
guard camp next to the NEC and that there are widespread
deficiencies in the NEC's fire suppression system. These
claims are absolutely false. the U.S. State Department
itself investigated the wiring allegation and concluded that
"no counterfeit wiring was found." Similarly, First Kuwaiti
has ensured that the NEC's fire suppression system meets the
State Department's standards, and the system has been fully
inspected by a team of independent engineers.

-- Second, congressional Democrats highlighted implausible
claims that First Kuwaiti brought laborers from foreign
countries to work at the NEC against their will. These
allegations are also false. Because of the serious nature of
the allegations, they were investigated thoroughly by three
different entities: the Philippine Government, the Inspector
General of the U.S. State Department, and the Inspector
General of the Multinational Force - Iraq. All three of
these investigations concluded that the trafficking
allegations made against First Kuwaiti were entirely without
merit.

-- Finally, critics of the war and Democratic members of
Congress have alleged that First Kuwaiti "participated in an
illegal kickback scheme to obtain subcontracts under the
Army's multi-billion logistical support contract." This
false allegation is based on an unsubstantiated assertion by
a former KBR contracting officer who claims he accepted
$10,000 from First Kuwaiti's general manager in violation of
U.S. law. We expect that this matter is under review by the
U.S. Attorney's Office in Rock Island, Illinois, where the
KBR employee was indicted. Though no charges have been
brought against First Kuwaiti, it is troubling that the U.S.
Government could pursue a prosecution against a Kuwaiti
company for actions that allegedly occurred entirely within
Kuwait. Moreover, KBR is currently using these allegations
as an excuse to suspend payment of nearly $90 million to
First Kuwaiti for materials supplied and work completed under
unrelated contracts.

The U.S. State Department has declared that the NEC project
has been substantially completed in just over two years and
within budget, and First Kuwaiti is currently awaiting the
Baghdad embassy's final acceptance of the complex. We are
confident that the NEC will serve as a model for U.S. embassy
construction around the world and sincerely hope that
partisan allegations against First Kuwaiti by critics of
President Bush and the war in Iraq will not adversely affect
ongoing relations between the United States and the State of
Kuwait.

(End text)

********************************************* *
For more reporting from Embassy Kuwait, visit:
http://www.state.sgov.gov/p/nea/kuwait/?cable s

Visit Kuwait's Classified Website:
http://www.state.sgov.gov/p/nea/kuwait/
********************************************* *
MISENHEIMER

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