US embassy cable - 04THEHAGUE765

UNCLAS SECTION 01 OF 02 THE HAGUE 000765 
 
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):  WEEKLY WRAP-UP 
FOR 19 MARCH 2004 
 
This is CWC-38-04. 
 
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ARTICLE IV/V CONSULTATIONS COLLAPSE 
----------------------------------- 
 
1.  (U) The facilitator for consultations on improving the 
funding mechanism for Article IV and V verification costs, 
Johan Verboom (Netherlands), told us on March 18 that he 
hoped to reach consensus on a decision document for 
consideration at Executive Council Session 36 the following 
week.  Instead, that day's discussion revealed that 
delegations were far from consensus.  With obvious 
frustration, Verboom cancelled the meeting scheduled for the 
following day and said work would resume after EC-36. 
 
2.  (U) Initial comments on the March 15 draft decision 
(e-mailed to AC/CB) were generally positive, and the extent 
of delegates' unease with the draft only became evident 
gradually over three hours of consultations.  USDel noted 
that it was a considerable improvement over earlier drafts, 
and would likely be acceptable once questions over the 
financing and exact level of the Working Capital Fund (WCF) 
were addressed.  At USDel's request, the Technical 
Secretariat (TS) provided figures on how much of previous 
 
SIPDIS 
years' surpluses could be used to plus-up the WCF to a higher 
level.  The TS explanation was that 2 million Euros from 
2001, 3 million from 2002, and an anticipated 5 million from 
2003 would be available to fund the WCF. 
 
3.  (U) Further queries and misgivings voiced by other 
delegations halted the momentum of the discussion and 
ultimately forced the issue off the agenda of EC-36. 
 
- Mark Matthews (UK), Ian Mundell (Canada), and several 
others called for strengthening the draft formulation that 
the costs of verification must be "paid in a timely manner" 
by possessor states.  Peter Beerwerth (Germany) called for 
language requiring repayment within 60 or 90 days of the 
receipt of invoices for verification costs.  (There followed 
discussion about the length of the window and whether the 
clock should begin ticking upon carrying out verification 
activities or invoicing them.)  USDel cautioned that language 
imposing a specific deadline for Article IV/V repayments 
would require us to hold up and possibly block consensus. 
Russia also put down a marker opposing specific deadlines. 
 
- Gianpaolo Malpaga (Italy), seconded by Brazil and France, 
persisted in questioning the need to increase the WCF to the 
new target level of 10 million Euros.  Although Malpaga had 
raised this objection in all previous discussions, Verboom 
had thought that he was persuaded by the increasingly 
detailed explanations of OPCW Director of Administration Herb 
Schulz that it was necessary to ensure adequate funding for 
OPCW activities over and above the one-month operating 
expenses that most organizations' Working Capital Funds 
covered.  Instead, Malpaga indicated that he would block 
consensus on both that point and on doubling the WCF cap from 
one-twelfth to two-twelfths of the budget. 
 
- Yu Dunhai (China) re-iterated questions he had raised in 
earlier sessions about how the draft decision would resolve 
the problem of "fictitious income," payments anticipated from 
possessor states for verification activities that were 
planned but ultimately not carried out.  Canada, Austria, and 
others amplified those concerns, despite the fact that the 
group had deliberately chosen to focus only on the cash-flow 
dimension of the Article IV/V issue at the onset of the 
consultations, and not to address the broader problem of 
fictitious income. 
 
- Chiho Komuro (Japan) who had voiced support for the draft 
decision, asked how replenishment of the WCF would affect the 
rule that budget surpluses should be returned to States 
Parties.  India drew on Verboom's answer to question the 
formula by which States Parties would be refunded from the 
surplus.  This seemingly esoteric issue led to the collapse 
of the discussion, as Beerwerth seized on it, discovering "an 
inherent problem of inequity."  Since some countries failed 
to pay their assessments, he explained, they had thereby 
reduced past years' surpluses that were to be used to fund 
the WCF.  Beerwerth insisted that the current draft decision 
"will not work" we need to look at the decision in much more 
detail," to prevent this inequity.  The response was 
bewilderment and resignation.  Ambassador Marc Vogelaar 
(Netherlands) opined to us that delegations were "hiding 
behind the complexity" of the issue to block a deal. 
Although Verboom and Schulz appealed to delegates not to 
derail the "good current proposal in pursuit of a perfect 
solution," the consultations collapsed on that note. 
Beerwerth told DelOff that he would take the issue up with 
AC/CB during his participation in Quad talks in Washington. 
Verboom said he would work with the TS and interested 
delegations to draft a new text for consideration in April. 
 
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FINANCIAL REGULATIONS 
--------------------- 
 
4.  (U) On March 16, facilitator Peter van Brakel (Canada) 
held discussions on proposed changes to the financial 
regulations.  During discussion of regulation 12.1, USDel 
raised the proposed language on Rule 12.2.01 provided by 
Washington.  Russia spoke out in support of the proposal, and 
there was general support.  Italy, however, expressed an 
initial, negative reaction and said it would have to refer 
the proposal to Rome.  With suggestions from the facilitator 
and other delegations (in caps), the consensus was for Rule 
12.2.01 to read: 
 
"The primary responsibility for monitoring rests with 
management.  OIO's role is to assist THE PROGRAM MANAGERS in 
improving the monitoring function INITIALLY through the 
issuance of policies, guidelines and performance indicators, 
and REGULARLY through regular assessment of the quality of 
management reports concerning monitoring activities." 
 
5.  (U) There were no objections to the proposed change to 
regulation 12.3.  On regulation 12.4, USDel noted that the 
existing language provides the External Auditor full access 
to all documents, and any change would imply less than full 
access.  That met with agreement from all delegations.  Italy 
suggested one small modification, so that the existing 
language is modified to read "Reports on each separate audit, 
inspection, evaluation, investigation AND MONITORING shall be 
submitted..." 
 
6.  (U) Turning to regulation 6.2, USDel noted the proposed 
changes to reflect the use of the accrual basis.  The FRG 
proposed a variation on the first option provided by 
Washington.  However, there was inconclusive discussion over 
whether the proposed change regarding miscellaneous income 
should be " ... received during and for the financial period 
..." or whether it should simply be "for the financial 
period." 
 
7.  (U) On regulation 6.3, the FRG proposed Washington's 
change to drop the word "assessed" and add a reference to 
regulation 5.1.  However, Russia raised the issue of 
"arrears" under regulation 6.3(c), noting that if there are 
disputes on Article IV/V bills, they remain outstanding.  The 
TS may consider them "arrears," but Russia does not.  Several 
 
SIPDIS 
delegations expressed appreciation for that view. 
 
8.  (U)  Javits sends. 
SOBEL