US embassy cable - 03THEHAGUE2979

UNCLAS SECTION 01 OF 03 THE HAGUE 002979 
 
SIPDIS 
 
STATE FOR AC/CB, NP/CBM, VC/CCB, L/ACV, IO/S 
SECDEF FOR OSD/ISP 
JOINT STAFF FOR DD PMA-A FOR WTC 
COMMERCE FOR BIS (GOLDMAN) 
NSC FOR CHUPA 
WINPAC FOR LIEPMAN 
 
E.O. 12958: N/A 
TAGS: PARM, PREL, CWC 
SUBJECT: CHEMICAL WEAPONS CONVENTION (CWC): ARTICLE IV/V - 
WIDESPREAD SUPPORT FOR ABAF PROPOSAL 
 
REF: THE HAGUE 2944 
 
This is CWC-129-03. 
 
-------------------------- 
SUMMARY AND ACTION REQUEST 
-------------------------- 
 
1. (U) There is widespread support for the proposal submitted 
by the Advisory Body on Administrative and Financial Matters 
to address the issue of Article IV and V payments.  No 
delegation has spoken out against the ABAF recommendation. 
Guidance request at para 11 on whether the proposal is 
acceptable to the U.S.  End Summary and Action Request. 
 
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FOCUS ON ABAF PROPOSALS 
----------------------- 
 
2. (U) At informal consultations November 25 on finding a 
structural solution for Article IV and V payments, 
delegations voiced broad support for the proposal put forward 
by the Advisory Body on Administrative and Financial Matters 
(ABAF) the week before (Reftel).  The proposal combines the 
first two of seven options presented for consideration by the 
facilitator (Johan Verboom of the Netherlands) on November 17 
(faxed to AC/CB; see main points in para 4 below).  The 
entire discussion focused on the ABAF proposal; no delegation 
addressed any other option in the discussion paper except in 
passing, or objected in principle to the ABAF proposal.  Del 
noted that the USG had not endorsed the proposal, and several 
other delegations said that they would have to seek guidance 
from their capitals.  Most others expressed confidence that 
they could join consensus around the ABAF concept.  Verboom 
and OPCW Director for Administration Herb Schulz fielded many 
questions. 
 
3. (U) Verboom opened by briefly describing the seven options 
outlined in his discussion paper.  He then added that ABAF 
had come forward with its own proposal, based on options one 
and two of his paper, which he endorsed as a "very sensible" 
solution.  Schulz also strongly supported the ABAF 
formulation, saying it would go "80-90% toward solution" of 
the recurring budgetary problems caused by late repayment of 
Article IV and V inspection costs.  (Schulz acknowledged that 
no solution was perfect, as uncertainties about future 
destruction activities was unavoidable.  Thus the phenomenon 
of "fictitious income" would remain, but was already being 
addressed by discounting projected repayments.) 
 
4. (U) The ABAF proposal consists of five elements: 
 
- allowing repayment of the Working Capital Fund "as soon as 
feasible" rather than by the end of the next financial year; 
 
- increasing the cap on the WCF to perhaps 14% of the budget, 
or roughly 10 million Euros; 
 
- funding this initially out of the remaining cash 
"surpluses" from 2001-2003; 
 
- using future late payments by possessor states to replenish 
the WCF; and 
 
- allocating any additional funds from Article IV/V payments 
to the cash surplus to be returned to States Parties. 
 
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WIDESPREAD SUPPORT AMONG DELEGATIONS 
------------------------------------ 
 
5. (U) Most of the twenty-four delegations participating in 
the consultation spoke in support of the ABAF-proposed 
solution.  Germany described it as "very appealing," noting 
that it largely solved the late payment problem without 
adding extra costs for States Parties.  France called it "a 
good combination" of measures to make better use of the 
existing WCF.  The UK representative said his government had 
not examined the proposal in detail, but said he too "liked 
the idea of using the Working Capital Fund."  The ROK 
endorsed it as "attractive and practical."  Canada said it 
"joined the chorus," but that it also needed to run the idea 
by its capital.  China observed "there is no simple solution" 
to Article IV/V payments, but ABAF's formulation "solves many 
difficulties."  Australia agreed that this proposal was "in 
principle quite attractive" although there were other 
possible solutions as well.  Switzerland said it would join 
consensus on the issue. 
6. (U) Japan also indicated support, while commenting that it 
should in no way reduce the obligation of possessor states to 
pay for the verification of destruction activities, and 
saying it still required Tokyo's endorsement.  Italy said it 
was "a good solution," while expanding on Japan's point that 
there must be incentives for possessor states to pay their 
obligations quickly.  The Russian representative commented 
that Moscow had expected that the Special Account established 
by the Eighth Conference of the States Parties would be used 
to address the same problem.  But he voiced no objection to 
the ABAF proposal, saying "judging from the ABAF 
recommendation and the sense of this group," Moscow would 
look at it very seriously. 
 
7. (U) India's delegate said he was "open to mixing options 
one and two" (i.e., the ABAF proposal) but needed to check 
with his capital.  Mexico had no objection to using the WCF 
as a stabilization fund, but added that using late payment of 
Article IV and V costs to refund the WCF should be 
conditional on these payments being removed from the 
"miscellaneous income" category of the budget and there being 
no increase in Mexico's assessments.  Argentina seconded this 
point.  There followed some debate over whether using cash 
surpluses to initially fund the WCF up to 14% in effect 
increased member states' contributions, since those surpluses 
would otherwise be returned to the States Parties. 
 
8. (U) Several delegates specified that their support would 
be contingent on the WCF capitalization not increasing their 
contributions to the budget.  Several others followed the 
lead of Japan, Italy, and Canada, in calling for the need to 
retain incentives for timely payment of Article IV and V 
invoices.  Some advocated allowing only a one-year window for 
repaying the WCF as a means of keeping up the pressure on 
possessors to repay the cost of inspections.  Others, 
however, countered that threatening the financial stability 
of the organization was not an ideal incentive for any State 
Party.  Canada proposed that late payment of these 
obligations should be treated legally the same as other 
arrears (i.e., result in loss of voting privileges). 
 
9. (U) Questions were raised about how the proposed WCF cap 
of 14% of the budget was derived.  Schulz said the figure 
reflected "operational requirements ... to cover salaries, 
expenses, and the Article IV and V shortfall" totaling just 
over 10 million Euros.  After the meeting, Schulz noted to 
USDel that the amount requested for the proposed cap exceeded 
the standard for such funds (normally 1/12 of the budget), 
but emphasized that the extra amount sought was the 
approximate annual total of Article IV/V receipts.  He 
explained that those unique up-front costs to the OPCW were 
what necessitated a slightly larger WCF than the one-month 
operating expenses of other international organizations. 
There were other questions about what financial regulations 
would have to be amended to achieve the proposed changes. 
(Article 6.6 is the principal regulation involved, but not 
the only one affected). 
 
10. (U) There was general agreement that the scheduled second 
day of consultations on Article IV/V was not necessary. 
USDel repeated a cautionary note that the United States had 
not yet examined the proposal in detail or given its assent. 
Delegates were requested to seek their capitals' views on the 
ABAF proposal in the coming weeks.  Verboom told Del after 
the meeting he had been surprised by the chorus of support 
for the ABAF proposal, having expected a systematic 
discussion of all options on the table.  However, he was 
pleased with the outcome. 
 
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ACTION REQUEST 
-------------- 
 
11. (U) Del would appreciate guidance on whether the ABAF 
proposal is acceptable to the USG.  Given ABAF's endorsement 
and the overwhelming support of other delegations, U.S. 
objections might result in blocking consensus on this issue. 
 
12.  (U)  Javits sends. 
SOBEL