Cablegate: Response to Action Request of Way Forward On Asset Transfer


DE RUEHGB #1839/01 1700236
P 180236Z JUN 08



E.O. 12958: N/A


1. SUMMARY: Over the past few months, Mission has raised with GOI
officials our need to secure written acceptance of the transfer of
major USG-financed assets, pressing for resolution of this
long-standing issue. Based on these discussions, we believe that
the most viable means of achieving an asset transfer agreement is
through a series of Memoranda of Understanding (MOU) between the
Department of State (DOS) and the applicable Ministries within the
Government of the Republic of Iraq (GOI) that will address asset
transfers and that contain a statement that no claims may be made
against the United States Government (USG) in connection with these
assets. Our proposed memoranda would also state that the GOI will
be responsible for all operation and maintenance (O&M) following
transfer. When signed, these MOUs would release the USG from
liability for: a) assets already transferred to the GOI, whether
through mutual agreement or a unilateral process; b) assets
completed but not yet transferred to the GOI. Post will continue to
press the subject with the Ministry of Finance (MoF) and Ministry of
Planning & Development Cooperation (MoPDC). We will also work
through them to gain PM Maliki's endorsement of this course of
action in the form of a letter or memo that will serve to strengthen
our hand and give individual ministers the political cover to
execute the MOUs. Post will also continue efforts to improve the
process for the functional transfer of assets to designated GOI
entities, in their current condition, in a manner sustainable by the

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2. Mission is in receipt of the draft MOU prepared by L, and
understands its underlying intent. Our discussions with GOI
officials on this subject, however, indicate that it would be a very
tough sell. ITAO, in cooperation with the Embassy's joint Asset
Recognition and Transfer Operations Group (ARTOG), has prepared a
version that may have a greater chance of succeeding in the current
Iraqi political environment.

3. Our proposed MOU will seek to document USG transfer to the GOI
of any DOS-funded capital asset over $250,000 in a manner that
protects the USG from liability and responsibility for O&M. In
accordance with our discussions with the Ministry of Finance, the
applicable GOI Line Ministers will be signature authorities for this
MOU. We will seek a communication from the Prime Minister to all
relevant Line Ministers authorizing/encouraging them to work
directly with us to conclude a MOU for asset transfer in their areas
of responsibility. We propose that the MOU be accompanied by a
transfer letter that will document assets already transferred to the
GOI (whether through mutual agreement or unilateral process) as well
as assets already completed but not yet transferred to the GOI. This
approach will enable transfer of projects from multiple
reconstruction programs.

4. We will coordinate this draft MOU through the Baghdad Asset
Recognition and Transfer Operations Group (ARTOG) and then submit it
to the Department's Legal Advisor for review and approval. If the
GOI ministries do not accept the MOU, post will document the given
reasons and consult with L before proposing any adjustments to the
MOU. Post will continue to negotiate the MOU with the intention of
concluding the MOU before expiration of Iraq Relief & Reconstruction
Fund (IRRF) obligation authority on September 30, 2008. Post is
also developing a process for supporting the process of functional
transfer, to include information and advice on effective Iraqi
assumption of Operations, Maintenance and Sustainability, and to
design and implement procedures for end-use-monitoring that will
allow periodic reviews on the status of major transferred assets to
ascertain that assets are being used for or in support of their
intended purpose.

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5. The data requested as an appendix to the MOU represents thousands
of records of data. While a list of the projects would be beneficial
at the presentation of the MOU to the GOI, it is recommended that
the list not be made a part of the MOU document, especially since
the information is still changing on a daily basis. The list of
projects (data as of March 28, 2008) was presented to the Minister
of Finance and the Minister of Planning & Development Cooperation by
Ambassador Ries on April 7, 2008. The current list of USG funded
projects will be presented to each Ministry along with the Transfer
Letter. (A draft Ministry Transfer Letter will be forwarded to L for
approval.) It is intended that these letters in conjunction with the
MOU will provide a uniform method for sustainable transfer and
release from liability for the USG mission in Iraq.

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6. Post will draft an inter-agency process on procedures for asset
recognition and transfer (ART) of USG funded capital assets to the
GOI. A charter will also be drafted to reform the inter-agency ART
operations/working group (ARTOG), which has existed since 2006, in
support of unified ART efforts and improved coordination with the
GOI. The process and charter will submitted to Legal for review.

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7. Our discussions with GOI officials on asset transfer - with DPM,
MoF, MoPDC - lead us to believe that we must moderate our
expectations. GOI ministers have already balked at the prospect of
signing blanket agreements. They will likely accept our lists of
assets, but will want to document any incomplete projects, or
inferior design, materials, or workmanship. This will take time.
Our MOU will stipulate acceptance of assets "as is," but we expect a
natural caution to be exercised. Iraqi ministers are averse to
accepting responsibility for any action that may subject them to
accusations of incompetence or corruption in future. This
negotiation will take time and the asset transfer program itself
will require manpower, time and resources to negotiate, document and

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8. Two kinds of projects - PRDC and Rule of Law - have already
established separate procedures for transfer and O&M. PRDC projects
that fall under the FY07 supplemental are directed to have 'Letters
of Sustainment' (LOS) which become part of the documentation and
close-out package. However, an LOS was not included in the FY06
project packages. Post will ensure that asset transfer and release
from liability is part of the close-out process for PRDC projects.
Asset transfer documentation becomes part of the close-out
documentation and is scanned for uploading into the IRMS database.
This documentation represents tens of thousands of pages of
information and it is not suitable for transmission over the DOS
cable system. Post requests a point of contact if this documentation
is required. It should also be noted that the separation and review
of these documents may be very difficult without the direct use of
the IRMS database. Through the ARTOG, Post is also evaluating the
ART process for inclusion of letters of sustainment for all future
U.S. funded projects.

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9. To date, the asset transfer mechanism for Rule of Law capital
assets - including facilities for law enforcement, judicial and
corrections systems-has fallen under the transfer processes used by
the relative executing agencies, usually the Gulf Region Division
(GRD) of the U.S. Army Corps of Engineers (USACE). INL has oversight
responsibility for all IRRF- and INCLE-funded prison construction
projects, which are being built under GRD-managed contracts. Post's
Rule of Law Coordinator's Office (ROLC) has also obtained letters of
sustainment for some projects with the Ministry of Justice. The
first official handover of an IRRF-funded prison facility to the
Ministry of Justice is due to be conducted in June 2008. ROLC and
INL will work with ITAO to ensure that transfers for ROL project
track the capital asset transfer and release of liability procedures
described in this cable.


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