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Cablegate: The Importance to Iraqs Post-War Economy

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 KUWAIT 001416

SIPDIS

STATE FOR IO - WILL IMBRIE
STATE FOR EB - TONY WAYNE
TREASURY FOR OASIA - MCDONALD
USDOC FOR BERNARD CARREAU

E.O. 12958: N/A
TAGS: ETTC ETRD ECON EFIN PREL IZ
SUBJECT: THE IMPORTANCE TO IRAQS POST-WAR ECONOMY
OF ENDING SANCTIONS NOW

1. SUMMARY AND ACTION REQUEST: ORHA believes that
its success in administering the newly liberated
Iraq will depend significantly on stimulating
early economic activity and sending a message of
hope for their economic future to the Iraqi
people. ORHA proposes to encourage trade with,
and investment by, historic neighboring trade
partners as part of an effort to help "jump start"
Iraq's economy. This cannot occur without lifting
United Nations and U.S. bilateral sanctions that
bar imports and exports to and from Iraq except
under the provisions of the Oil for Food program.
Accordingly, ORHA requests that Washington
agencies work with the international community to
end sanctions on Iraq's economy as soon as
possible. END SUMMARY AND ACTION REQUEST.

2. The strategic end state we seek in Iraq is:

"A unified Iraq, with an Iraqi national identity
that respects tribal, ethnic and religious
heritages. Governed by a broad-based, freely
elected government that adheres to the rule of
law, Iraq is neither a threat to the region nor a
supporter of WMD or terrorism. The nation will
adopt and develop a viable, free market-based
economy."

3. ORHA (The Office of Reconstruction and
Humanitarian Assistance), led by LTG (R) Jay
Garner, and initially a component of the Coalition
Provisional Authority will work to return the
control of Iraq back to a duly constituted
government of Iraq as soon as possible. ORHA may
be viewed as the first step in that process. ORHA
is establishing itself in Baghdad and elsewhere in
Iraq as circumstances permit. ORHA will address
immediate humanitarian assistance requirements and
will establish civil administration and
reconstruction priorities.

4. As noted above, a key reconstruction priority
is setting the stage for a free market-based
economy in Iraq. ORHA recognizes that creating an
institutional and policy framework conducive to
the development of a free market-based economy,
led by the private sector, will require short,
medium and long-term efforts. Many of the medium
(90 days to six months) and long-term efforts (six
months to two years) will entail international
assistance programs that will last beyond ORHA's
mandate. In the short-term ORHA will focus on
actions that can stimulate activity in the Iraqi
economy and send a message of hope to the Iraqi
people for their economic future and enable Iraq's
private sector to start to contribute.

5. ORHA has developed an "Iraq Economic Jumpstart
Program." The objective of the program is to
allow Iraqis to realize an immediate improvement
in their lives and to allow normal economic
activity to begin to operate during the first 90
days. The elements of the program include trade,
finance, investment, and other measures as
follows:

-- Work with the international community to
quickly lift sanctions on trade, commerce, and
investment.

-- Issue emergency payments of USD20 to all civil
servants who return to work.

-- Place top priority on supplies of water,
electricity and fuel.

-- Open borders to traditional trade partners.

-- Declare a 90-day tariff holiday.

-- Challenge all international assistance donors
to use Iraqi businesses and workers whenever
possible.

-- Remove all barriers to internal trade except
safety and security standards.

-- No currency will be denied validity including
the Iraqi Dinar, Old Iraqi (liberation) Dinar and
US Dollars with exchange rates determined by the
market.

-- Immediate attention to restoring a functioning
banking system.

-- Immediately assist Iraq in restoring relations
with the IMF and World Bank.

-- Implement USAID and other USG assistance to
Iraqi businesses - e.g. USAID micro credit
programs.

6. Trade and investment will be a key source of
reconstruction resources for Iraq. To that end,
several of the elements of ORHA's "Economic
Jumpstart Program" focus on trade - open borders
for trade, a 90-day tariff holiday, removing
internal barriers, etc.

7. U.S. and United Nations sanctions against Iraq
make all trade with Iraq except as allowed via the
cumbersome mechanism of the Oil for Food program
contrary to international law. Yet the
justification for such sanctions no longer exists
in the post Saddam regime era. Economic sanctions
are central to the average Iraqis daily
perceptions. Further, maintaining sanctions sends
the worst possible message to the average Iraqi
regarding the intent of the Coalition, the United
States and the international community.
Accordingly, ORHA urges that Washington agencies
work with the international community to end the
application of sanctions to trade by Iraqi
business and citizens as soon as possible.

JONES

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