US embassy cable - 04ROME1805

C O N F I D E N T I A L SECTION 01 OF 02 ROME 001805 
 
SIPDIS 
 
 
SECDEF FOR OSD/AJTORRES 
JOINT STAFF FOR SYIKE 
 
    E.O. 12958: DECL: 05/06/2014 
TAGS: EAID, IT, IZ, PGOV, PREL, IRAQI FREEDOM 
SUBJECT: IRAQ: ITALY LIKELY TO DISPERSE E30 MILLION OF 
MADRID PLEDGE IN 2004 
 
REF: ROME 355 
 
CLASSIFIED BY: ECONOMIC MINISTER-COUNSELOR SCOTT F. KILNER, FOR REASONS 
 1.5(B)(D). 
 
1. (C) SUMMARY: GIANNI GHISI, DEPUTY DIRECTOR GENERAL OF 
DEVELOPMENT COOPERATION AT THE MFA, TOLD ECONOFFS THAT ITALY 
WILL DISBURSE EURO 30 MILLION OF ITS EURO 200 MILLION MADRID 
PLEDGE IN 2004.  EURO 10 MILLION WILL GO TO THE INTERNATIONAL 
RECONSTRUCTION FUND FACILITY, WHILE THE REMAINING 20 MILLION 
WILL GO TO IRAQ IN THE FORM OF A BILATERAL SOFT LOAN.  ITALY 
IS CLEARLY FAVORING SOFT LOANS OVER GRANTS AS THE BULK OF ITS 
MADRID CONTRIBUTION, ACCORDING TO GHISI.  THE GOI, HE SAID, 
MIGHT NOT BE ABLE TO DISTRIBUTE THE ENTIRE AMOUNT WITHIN THE 
THREE-YEAR SCHEDULE.  END SUMMARY. 
 
EURO 10 MILLION FOR FUND FACILITY 
---------------------------------- 
 
2. (C) ECONOFFS SPOKE RECENTLY WITH GIANNI GHISI, MFA DEPUTY 
DIRECTOR GENERAL OF DEVELOPMENT COOPERATION, ABOUT THE LIKELY 
STRUCTURE OF THE 2004 DISTRIBUTION OF ITALY'S EURO 200 
MILLION MADRID PLEDGE.  GHISI SAID THAT THE GOI HAS DECIDED 
TO DISPERSE APPROXIMATELY EURO 30 MILLION OF ITS MADRID 
PLEDGE IN 2004.  ITALY, HE SAID, WILL GIVE EURO 10 MILLION TO 
THE UN/WORLD BANK INTERNATIONAL RECONSTRUCTION FUND FACILITY, 
    ENOUGH TO GIVE ITALY A SEAT ON THE FACILITY DONOR'S COMMITTEE. 
 
3. (C) THE GOI WILL ASK THAT THE UN PORTION OF ITS DONATION 
TO THE FACILITY BE CHANNELED TO THE UNITED NATIONS INDUSTRIAL 
DEVELOPMENT ORGANIZATION (UNIDO).  IN GENERAL, GHISI SAID, 
THE GOI WANTS TO FOCUS ITS IRAQ ASSISTANCE ON INDUSTRIAL 
REHABILITATION AND PRIVATE-SECTOR DEVELOPMENT.  ITALY, HE 
SAID, HAS GOOD EXPERIENCE IN SMALL AND MEDIUM BUSINESS 
DEVELOPMENT AND THIS EXPERIENCE WILL BE ONE OF THE THEMES OF 
ITALY'S CONTRIBUTION TO IRAQ RECONSTRUCTION. 
 
ANOTHER EURO 20 MILLION AS SOFT LOAN 
------------------------------------- 
 
4. (C) IN ADDITION TO THE EURO 10 MILLION DONATION TO THE 
FACILITY, GHISI ADDED, THE GOI WILL OFFER A EURO 20 MILLION 
SOFT LOAN TO IRAQ.  THE GOI IS PRESENTLY TRYING TO DETERMINE 
WHETHER THE PROVISIONAL IRAQI GOVERNMENT WILL ACCEPT SUCH A 
SOFT LOAN.  DUE TO RESTRICTIONS IN ITALIAN LAWS, THE MFA MAY 
HAVE TO WAIT UNTIL AFTER THE JUNE 30 HANDOVER OF SOVEREIGNTY 
BEFORE ISSUING THE LOAN, HE EXPLAINED.  GHISI DESCRIBED THE 
TERMS OF THE PROPOSED LOAN AS "VERY SOFT" WITH A 20-YEAR 
GRACE PERIOD ON REPAYMENTS. 
 
5. (C) GHISI SAID THE SALARIES AND OTHER COSTS ASSOCIATED 
WITH THE ITALIAN CIVILIAN EXPERTS WORKING IN THE CPA 
(CURRENTLY NUMBERING AROUND 40) WOULD NOT/NOT BE COUNTED AS 
PART OF THE MADRID DONATION. 
 
MADRID PLEDGE MAY STRETCH TO FOUR YEARS 
--------------------------------------- 

6. (C) ITALY, GHISI REMARKED, MUST GIVE THE BULK OF THIS 
YEAR'S TRANCHE IN THE FORM OF A SOFT LOAN BECAUSE OF BUDGET 
CONSTRAINTS AND PRE-EXISTING AID COMMITMENTS.  HE SAID NO 
DECISION HAS BEEN MADE ON THE SIZE OF THE 2005 TRANCHE, BUT 
INDICATED THAT SOFT LOANS WILL REMAIN THE PREFERRED VEHICLE 
FOR FULFILLING ITALY'S MADRID PLEDGE.  GHISI EXPRESSED A HOPE 
THAT THE GOI WILL PASS A SPECIAL BUDGET FOR IRAQ AID, SIMILAR 
TO A SPECIAL BUDGET CREATED PREVIOUSLY FOR THE BALKANS, TO 
RELIEVE THE STRAIN ON MFA RESOURCES.  GHISI ADDED THAT WHILE 
THE GOI REMAINS OFFICIALLY COMMITTED TO DISPERSING THE ENTIRE 
EURO 200 MILLION WITHIN THREE YEARS, THIS TIME FRAME IS 
PROBABLY UNREALISTIC AND THE DISPERSAL WILL LIKELY TAKE FOUR 
YEARS. 
 
7. (C) AMONG THE VARIOUS PROJECTS ITALY HAS PROPOSED FOR IRAQ 
(REFTEL), THE BUKHME DAM PROJECT WAS THE MOST LIKELY TO GO 
FORWARD, GHISI SAID.  GHISI EXPLAINED THAT PART OF ITALY'S 
MADRID PLEDGE WILL GO TO FUNDING A FEASIBILITY STUDY FOR THE 
BUKHME DAM PROJECT.  (NOTE: TELECOM ITALIA'S MED/NAUTILUS 
PROJECT TO LINK IRAQ TO ITS INTERNATIONAL FIBER OPTIC 
BACKBONE APPEARS UNLIKE TO WIN APPROVAL FROM IRAQI 
AUTHORITIES BECAUSE IT WOULD MAKE THE CONNECTION VIA ISRAEL. 
 
ROME 00001805  002 OF 002 
 
L-FOR-FOOD PROGRAM USING SMART 
CARD TECHNOLOGY ALSO SEEMS UNLIKELY TO BE IMPLEMENTED.  END 
NOTE.) 
 
COMMENT 
------- 
 
8.  (C) WHILE GHISI APPEARED CONFIDENT THAT ITALY WILL 
DISPERSE ITS ENTIRE MADRID PLEDGE, THERE IS STILL 
CONSIDERABLE UNCERTAINTY ABOUT THE TIME FRAME AND THE RATIO 
OF LOANS TO GRANTS (WITH LOANS THE CLEAR FAVORITE).  SO LONG 
AS ITALY LACKS A SPECIAL BUDGET FOR IRAQ ASSISTANCE, AND THE 
MFA AND OTHER AGENCIES ARE FORCED TO SCRAPE MONEY TOGETHER IN 
AN AD-HOC FASHION, ITALY MAY BE VERY SLOW IN DISTRIBUTING THE 
ENTIRE EURO 200 MILLION.  END COMMENT. 
 
VISIT ROME'S CLASSIFIED WEBSITE: 
HTTP://WWW.STATE.SGOV.GOV/P/EUR/ROME/INDEX.CF M 
 
SEMBLER 
 
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 2004ROME01805 - Classification: CONFIDENTIAL