Cablegate: Costa Rica Stands Firm On Oil-for-Food


DE RUEHSJ #0707/01 2422301
O 292301Z AUG 08

C O N F I D E N T I A L SAN JOSE 000707



E.O. 12958: DECL: 08/29/2018

REF: A. A) STATE 88209
B. B) LINES-HENIFIN EMAILS OF 8/21/2008 AND 8/28/2008

Classified By: Classified by DCM Peter Brennan per 1.4 (d).

1. (SBU) SUMMARY: Despite an historic (for San Jose)
collective P5 demarche on the issue, FM Stagno and the GOCR
remain firm in their deep-seated opposition to shutting down
the Oil-for-Food (OFF) Program. Stagno and his team reminded
us of Costa Rica,s long-standing concerns about Program
irregularities, as described in the 2005 Volcker Commission
report, and strongly counseled against closing OFF
prematurely. Under the circumstances, he said the GOCR
strongly preferred the current practice (of periodic Working
Group reports) instead of creating a new dispute mechanism or
giving authentication responsibilities to the GOI. Stagno
said that the GOCR would review the current (and still
&inadequate8) text of the proposed P5 letter, but he
signaled that the GOCR would not/not accept a UNSC Resolution
on the issue. Worse than closing down OFF without correcting
its irregularities would be to do so without Council
consensus, he warned. Stagno reprised many of these
arguments for visiting IO A/S Hook on August 28, but in a
much softer tone. He agreed then to a Secretariat briefing,
but did not drop Costa Rica,s objections. END SUMMARY.


2. (SBU) In order to lay the groundwork for a broader and
higher-level P5 demarche, we began at the senior working
level. On August 19, we delivered Ref A points to MFA UNSC
Team Leader Adriana Murillo and Foreign Policy Coordinator
for International Organizations Randolf Coto. The two
explained that Costa Rica continued to object to the OFF
Program being closed down out of concerns over transparency.
Automatic payments to suppliers after 45 days did not make
sense in light of the well-known problems and payment
irregularities highlighted by the independent investigative
(Volcker Commission) report. The GOCR strongly supported a
different mechanism to ensure that goods are delivered before
payment is made. This responsibility should be neither the
Iraqi government's alone, nor that of the companies involved.
One can't just take the word of a company that it had
delivered goods, they insisted; appropriate documentation is
needed. Murillo and Coto compared it to an import/export
transaction, where clear proof of delivery is required.

3. (SBU) When asked why they were objecting to ending OFF
when even the Iraqis were not, Murillo and Coto replied that
Costa Rica is "defending the good use of international
resources and transparent mechanisms." To the GOCR, the
solutions in the P5 letter are "not viable." The two
officials would not predict how the GOCR would respond to a
UNSC resolution to close OFF, if it came to that. In the
meantime, they indicated that Costa Rica would continue to
urge that its letter of July 25 (circulated on August 4) be
considered "officially" by the Council, along with three
alternative mechanisms described in the OFF Working Group
Report of June 30 (covered by the SYG,s letter of July 25).


4. (SBU) Because our French colleagues here had been
pressing for some weeks to join us in an OFF demarche on
behalf of the P5, we scheduled a joint follow-on approach
with them to Antonio Alarcon, FM Bruno Stagno,s COS, on
August 21. As a courtesy (and as suggested in Ref A), we
alerted our British, Russian and Chinese counterparts. All
decided to join in what became the first-ever collective P5
demarche to the GOCR. (The Chinese had instructions to do
so. The Brits and the Russians did not have explicit
instructions, but believed their absence would weaken the
message. The Russians had initially told us that they
preferred to leave this issue to their UN team to manage.)
Collectively, we decided for a Counselor-level demarche,
instead of involving DCMs or COMs. (This proved to be a wise
decision, see below.)

5. (SBU) Instead of just Alarcon, however, Stagno received
us, along with most of the MFA,s UNSC team. He listened
politely as we noted the historic nature of our collective
demarche, which highlighted our five governments, interest
in finally closing down the OFF Program. We also reiterated
the points in Ref A, and urged Costa Rica to support the
draft letter to the SYG.

6. (SBU) Then, Stagno let fly, in a passionate, even stern
40-minute dissertation (without notes) explaining why the
GOCR continued to oppose closing the OFF Program. He
reminded us that Costa Rica had long been deeply concerned
about irregularities in the OFF Program, well before
returning to the Security Council in 2008. He reiterated
Costa Rica,s strong support for the Volcker Commission,s
report, complaining that the report had still to be
circulated as an official UN document. The Volcker Report,
Stagno said, was a "lost opportunity," but at least it was a
serious effort to begin to correct the flaws in the OFF
Program. Even the SYG had concerns about possible legal
action if OFF were closed down prematurely, Stagno insisted,
pointing to paragraph 17 in the Working Group,s report from
June (which Stagno read to us, in Spanish).

7. (SBU) Given the continued irregularities in the OFF
Program, Stagno strongly counseled &caution8 to avoid
compounding the error by closing OFF prematurely, before a
better mechanism was in place. He implied that "commercial
interests" in some UNSC member countries seemed to be driving
the campaign to close OFF too quickly. Under the
circumstances, the GOCR strongly preferred continuing the
current practice (of periodic Working Group reports to the
Security Council) instead of creating a new dispute mechanism
or giving OFF authentication responsibilities to the GOI (and
the companies involved).

8. (SBU) Stagno frostily said that the GOCR would review the
current and still "inadequate" text of the proposed P5
letter, and he signaled that the GOCR would not/not accept a
UNSC Resolution on the issue. Worse than closing down OFF
without correcting its irregularities would be to do so
without Council consensus, he warned. He concluded our
meeting by providing a four-page non-paper (in Spanish)
reviewing the GOCR,s concerns about the OFF Program since
2005. (Note: Stagno provided the same non-paper, in
English, to A/S Hook. See below.)

--------------------------------------------- -------
--------------------------------------------- -------

9. (SBU) Stagno reprised much of this presentation (in less
confrontational terms) during IO A/S Brian Hook,s visit on
August 28. The Minister reiterated that OFF was a "personal"
issue for him, which he had followed closely for a long time.
He had studied the Volcker report carefully, and had
concluded that although it was imperfect, it remained the
best baseline for correcting the OFF problems. He and the
GOCR therefore were "uncomfortable" by the pressure to close
down the OFF program, when there were still many unanswered

10. (SBU) The point was not the "minimal" amount of
outstanding bills, Stagno stressed, but the principle. The
GOCR thus wanted to be "very careful" before supporting the
OFF closure. Stagno acknowledged that Costa Rica was "a bit
alone" on the issue, but he reiterated that the GOCR would
not acquiesce to shutting down OFF without a clearer picture
of the way ahead, and he referred again to the SYG,s
concerns as listed in paragraph 17 of the Working Group
Report. The GOCR had already received a number of Russian
demarches on the issue, but these had not been persuasive.
Stagno said the Russians offered "no solutions." He
concluded that Costa Rica might have to stand firm on
principle, even in the face of a possible 14-1 UNSCR.

11. (SBU) Hook acknowledged that the Costa Rican concerns
about the integrity of OFF contracts were "reasonable," but
he stressed that the "political realities" were changing.
Momentum was clearly building to close down OFF. Now was not
the time for "the perfect to become the enemy of the done."
Stagno supported the idea of a Secretariat briefing, but in
response to Hook,s questions, he did not offer detailed
additional suggestions. A lengthy contract-by-contract
review (as under the old 661 Committee format) was a
non-starter, according to Stagno, but the SYG had to be able
to evaluate the OFF contracts in some way; the Council could
not rely on GOI assurances alone. For this reason Costa Rica
favored continuing with the existing mechanism (periodic
Working Group reports) as the &least worst8 option.


12. (U) The operative concluding paragraph of the English
language non-paper follows. Full text emailed to WHA and
IO on August 29:

"Hold on (OFF) Programme Closure:

Although we (Costa Rica) have been non-permanent members of
the Security Council since January 1, 2008, it was not until
very recently that we obtained a list of companies that still
have unpaid letters of credit for goods or services offered
under the Oil-for-Food Programme. The coincidence between
the companies on that list and those listed in Tables VII and
VIII (Actual and Projected Illicit Payments on Contracts for
Humanitarian Goods) of the Independent Investigative
Committee,s report of October 27, 2005, makes it even more
appropriate to undertake a detailed study of the eventual
closure of the Programme. Therefore, Costa Rica considers it
timely to keep its hold on the definitive closure of the
Programme while there is no full certainty that the payment
of goods and services that have not been duly and promptly
delivered pursuant to the contracts signed, or the payment of
surcharges or commissions, are not being endorsed."

--------------------------------------------- -----
--------------------------------------------- -----

13. (SBU) Our MFA contacts told us later that Stagno had
decided at the last minute to receive our "historic" P5
demarche himself. Perhaps; but he and his team were
certainly well prepared. Even with the helpful background
information provided by IO/UNP (Ref B), we were in no way
equipped to tackle Stagno on this issue, and we were better
"prepared" than any of our P5 colleagues. We were
eviscerated by a master, who knows this subject intimately,
and has for some time. Far from persuading Costa Rica to
back down, in fact, our collective demarche may have
stiffened the Ticos, resolve. For future such demarches, we
recommend having much more comprehensive preparation from
Washington, or better still, that the Department and USUN
work this sort of issue directly with the Costa Rican
delegation in New York. We readily acknowledge that we are
not the experts on issues as arcane and deep-seated (to the
GOCR) as oil-for-food.

14. (C) OFF clearly is a deeply-felt personal issue to
Stagno and the GOCR, but there is more at work here, in our
view. Stagno was clearly frustrated (and he used that word a
few times with the P5) that Costa Rica,s OFF concerns had
not been taken seriously, and now the P5 were &ganging up8
on Costa Rica. This incident underscores what we have
increasingly detected this year. What the GOCR really wants,
especially in the UNSC, is respect, genuine partnership and
to be taken seriously in areas it has expertise and something
to offer. Costa Rica does not want to merely serve on the
Council; it wants to improve it. For better or for worse,
we expect this will continue to shape Costa Rica,s stance on
many UNSC issues.

15. (U) A/S Hook did not clear this message before departing
Costa Rica.

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