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Cablegate: Letter From the Iraqi Interim Government to Secretary

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Diana T Fritz 02/06/2007 05:19:31 PM From DB/Inbox: Search Results

Cable
Text:


UNCLASSIFIED

SIPDIS
TELEGRAM July 14, 2004


To: No Action Addressee

Action: Unknown

From: AMEMBASSY ABU DHABI (ABU DHABI 2372 - PRIORITY)

TAGS: EFIN, ECON, OPDC, PREL

Captions: None

Subject: LETTER FROM THE IRAQI INTERIM GOVERNMENT TO SECRETARY
POWELL

Ref: None
_________________________________________________________________
UNCLAS ABU DHABI 02372

SIPDIS
CXABU:
ACTION: ECON
INFO: P/M AMB POL DCM

DISSEMINATION: ECON
CHARGE: PROG

APPROVED: CDA: RALBRIGHT
DRAFTED: ECON: ALLOO
CLEARED: ECON: CCRUMPLER

VZCZCADI312
PP RUEHC RUEHDE RUEHGB
DE RUEHAD #2372/01 1961328
ZNR UUUUU ZZH
P 141328Z JUL 04
FM AMEMBASSY ABU DHABI
TO RUEHC/SECSTATE WASHDC PRIORITY 5132
INFO RUEHDE/AMCONSUL DUBAI 4153
RUEHGB/AMEMBASSY BAGHDAD

UNCLAS SECTION 01 OF 02 ABU DHABI 002372

SIPDIS

SENSITIVE

STATE FOR SECRETARY POWELL

E.O. 12958: N/A
TAGS: EFIN ECON OPDC PREL IZ TC
SUBJECT: LETTER FROM THE IRAQI INTERIM GOVERNMENT TO SECRETARY
POWELL

REF: NONE

1. (SBU) ON JULY 13, POST RECEIVED THE FOLLOWING CORRESPONDENCE
SIGNED BY THE IRAQI FINANCE MINISTER AND CENTRAL BANK GOVERNOR
REGARDING TREATMENT OF IRAQ'S EXTERNAL DEBT.

2. (SBU) BEGIN TEXT:

12TH JULY 2004
H.E. MR. COLIN POWELL
SECRETARY OF STATE

SIPDIS
UNITED STATES

DEAR SIR,

WE WRITE TO YOU AS REPRESENTATIVES OF THE NEW, SOVEREIGN
GOVERNMENT OF IRAQ RECOGNIZED BY UNITED NATIONS SECURITY COUNCIL
RESOLUTION 1546. AS OUTLINED BY PRIME MINISTER ALLAWI, THE GOALS
OF THE GOVERNMENT ARE TO MOVE QUICKLY TO ESTABLISH SECURITY,
PROMOTE PROSPERITY AND MOVE FORWARD WITH A POLITICAL TRANSITION
LEADING TO NATIONAL ELECTIONS IN JANUARY 2005.

TO ACHIEVE THESE GOALS, WE NEED TO CONCLUDE AN EMERGENCY POST
CONFLICT ARRANGEMENT WITH THE IMF BY THE TIME OF THE OCTOBER 2-3
IMF/WORLD BANK ANNUAL MEETINGS, AS WELL AS TO FINALIZE A DEBT
REDUCTION AGREEMENT IN THE PARIS CLUB BY THE END OF THIS YEAR.
WE COUNT ON YOUR HELP IN ACHIEVING THESE GOALS, WHICH ARE
CRITICAL TO THE SUCCESS OF OUR EFFORTS TO PROMOTE SECURITY,
PROSPERITY AND POLITICAL TRANSITION.

WE WELCOME THE FACT THAT SOME CREDITORS HAVE COMMITTED TO
"SUBSTANTIAL" DEBT REDUCTION AND OTHERS HAVE AGREED TO FORGIVE
THE "VAST MAJORITY" OF THE DEBTS OWED BY IRAQ. WE HAVE NOTED THE
COMMITMENT OF THE HEADS OF GOVERNMENT OFG8 CREDITORS TO PROVIDE
DEBT REDUCTION "SUFFICIENT TO ENSURE SUSTAINABILITY, TAKING INTO
ACCOUNT THE RECENT IMF ANALYSIS" AND THAT THIS REDUCTION SHOULD
TAKE PLACE IN 2004.

WE BELIEVE, FOR REASONS OUTLINED BELOW, THAT THE IMF DEBT
SUSTAINABILITY ANALYSIS MAKES IT INDISPUTABLY CLEAR THAT DEEP
DEBT REDUCTION IS NECESSARY TO ENSURE SUSTAINABILITY. INDEED,
THE IMF'S BASELINE SCENARIO INDICATES THAT REDUCTION SHORT OF 95%
WOULD RESULT IN SIGNIFICANT AND PERSISTING FINANCING GAPS.
MOREOVER, STANDARD STRESS TESTS USED BY THE IMP PRODUCE EVEN
LARGER FINANCING GAPS. TO AVOID UNCERTAINTIES THAT WOULD IMPEDE
IRAQ'S TRANSITIONS, DEBT REDUCTION SHOULD BE IMMEDIATE, COME IN
ONE STAGE AND ENSURE THAT PAYMENTS ON ANY DEBT THAT REMAINS WILL
BEGIN ONLY AFTER A SUITABLE GRACE PERIOD DURING WHICH IRAQ CAN
FOCUS ALL ITS ENERGIES AND RESOURCES ON THE URGENT TASK OF
ECONOMIC RECONSTRUCTION. RECOGNIZING THAT MUCH OF IRAQ'S DEBT IS
HELD BY NON-PARIS CLUB CREDITORS, WE WILL INSIST THAT THE EFFORTS
OF PARIS CLUB CREDITORS ARE FULLY MATCHED BY OTHERS SO THAT
COMPARABLE TREATMENT IS ASSURED.

WE ARE NOT SURPRISED BY THE RESULTS OF THE RESULTS OF THE IMF'S
DEBT SUSTAINABILITY ANALYSIS. IRAQ'S DEBT BURDEN WAS PRODUCED BY
MORE THAN TWO DECADES OF DISASTROUS DECISIONS AND ACTIONS BY THE
SADDAM HUSSEIN REGIME -- COSTLY WARS, MISGUIDED POLICIES THAT LED
TO INTERNATIONAL SANCTIONS AGAINST IRAQ AND ISOLATION OF IRAQ
FROM THE INTERNATIONAL COMMUNITY, SEVERE ECONOMIC MISMANAGEMENT,
AND THEFT OF IRAQ'S PRECIOUS RESOURCES THAT BENEFITED ONLY SMALL
SEGMENT OF ITS POPULATION. IN THE PAST TWO DECADES, LIVING
STANDARDS FOR THE LARGE MAJORITY OF IRAQIS HAVE FALLEN
DRAMATICALLY.

IRAQ FACES ENORMOUS CHALLENGES IN REBUILDING ITS ECONOMY. VITAL
INFRASTRUCTURE MUST BE REBUILT, OFTEN FROM SCRATCH. LIVING
CONDITIONS AND SOCIAL INDICATORS MUST BE IMPROVED. KEY ECONOMIC
REFORMS WILL BE NEEDED. IRAQ'S RECONSTRUCTION, INCLUDING THE OIL
SECTOR, WILL REQUIRE A LONG PERIOD OF TIME, AND WILL OCCUR
AGAINST A BACKDROP OF NEWLY ESTABLISHED GOVERNMENTS THAT ARE
LIKELY TO FACE SUBSTANTIAL SECURITY AND POLITICAL CHALLENGES FOR
THE FORESEEABLE FUTURE. DESPITE IRAQ'S PETROLEUM RESOURCES,
AFTER THREE WARS AND 13 YEARS OF INTERNATIONAL SANCTIONS, WE WILL
REQUIRE SUBSTANTIAL NEW INVESTMENT, OVER MANY YEARS, TO RESTORE
AND MAINTAIN THE COUNTRY'S DILAPIDATED OIL INFRASTRUCTURE, MUCH
LESS TO EXPAND PRODUCTION CAPACITY.

WE BELIEVE THAT IRAQ'S RECONSTRUCTION DEPENDS NOT ONLY ON
SUBSTANTIAL DEBT REDUCTION BUT ALSO WILL NEED TO BE REINFORCED BY
A POLICY PROGRAM BASED ON SOUND ECONOMIC PRINCIPLES:
MACROECONOMIC POLICIES, INCLUDING FISCAL DISCIPLINE AND SOUND
MONETARY POLICY BASED ON PRICE STABILITY THAT ENCOURAGE PRIVATE
INVESTMENT, STRUCTURAL REFORMS THAT IMPROVE ECONOMIC EFFICIENCY,
TRADE AND FINANCIAL POLICIES THAT ENCOURAGE PRIVATE INVESTMENT
AND REINTEGRATE OUR ECONOMY WITH THE REST OF THE WORLD, OPENNESS
AND TRANSPARENCY TO HELP BUILD CONFIDENCE AND REINFORCE POLICY
DISCIPLINE, AND OVERALL POLICIES THAT ADDRESS THE POOREST
SEGMENTS OF IRAQ'S POPULATIONS.

IN CLOSING, WE SEEK THE SUPPORT OF YOUR GOVERNN1ENT FOR THE GOALS
SET FORTH IN THIS LETTER. AS THE PARIS CLUB PROCESS MOVES
FORWARD AND OUR DISCUSSIONS WITH THE IMF PROCEED ON A RAPID
BASIS, WE LOOK FORWARD TO BILATERAL DISCUSSIONS WITH YOU AS A
MEANS FOR ACCELERATING FORMATIONS OF AN INTERNATIONAL CONSENSUS
WITH RESPECT TO TREATMENT OF OUR EXTERNAL DEBT.
WE LOOK FORWARD TO WORKING CLOSELY AND COOPERATIVELY WITH YOU IN
OUR FUTURE DISCUSSIONS.

SINCERELY,
(SIGNED)
ADIL ABDU MAHDI
MINISTER OF FINANCE
REPUBLIC OF IRAQ

(SIGNED)
SINAN AL-SHABIBI
GOVERNOR, CENTRAL BANK OF IRAQ
REPUBLIC OF IRAQ

END TEXT.

3. (U) MINIMIZE CONSIDERED

ALBRIGHT

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