US embassy cable - 04ABUDHABI3484

UNCLAS ABU DHABI 003484 
 
SIPDIS 
 
SENSITIVE 
 
DEPARTMENT FOR NEA/ARP AND EB/IFD/OMA 
TREASURY FOR DEBT POLICY 
 
E.O. 12958: N/A 
TAGS: EFIN, ECON, PREL, IZ, TC 
SUBJECT:  CONSULTING WITH IRAQ'S NON-PARIS CLUB CREDITORS 
 
REF: A) STATE 206295 
 
1. (SBU) Summary: MFA U/S Al-Noaimi told the Ambassador 
that the UAE is not currently asking the Iraqis to repay 
their debt and was not raising it with the IIG.  He said 
that the IIG had asked to send a team to the UAE to discuss 
debt, but had not done so yet.  Ministry of Finance 
Assistant U/S Khalid Al-Bustani subsequently told Econchief 
that he had discussed the IMF's request for financing 
assurances with the UAE executive director to the IMF and 
didn't see any problems with giving those assurances.  He 
emphasized, however, that he had not seen a formal request 
from the IMF.  Al-Noaimi stated that it was premature to 
negotiate a debt restructuring/forgiveness deal with the 
Iraqis before their election.  End Summary. 
 
2. (SBU) Ambassador raised Iraqi debt with MFA U/S Abdullah 
Rashid Al-Noaimi while discussing Iraqi reconstruction and 
other issues.  Al-Noaimi said that the UAEG was not 
currently asking the Iraqis to repay their debt and wasn't 
raising it with the IIG.  When Ambassador asked whether the 
IIG had raised it with the UAEG, Al-Noaimi said that the 
UAEG had responded positively to an IIG request to send a 
team to the UAE to discuss debt issues.  Al-Noaimi added 
that he IIG team had not yet visited the UAE.  He 
emphasized that the Iraqis had higher priorities: obtaining 
new assistance. 
 
3. (SBU) Al-Noaimi said that it was premature to negotiate 
with the Iraqis about debt forgiveness and rescheduling. 
He explained that the IIG would be replaced shortly with an 
elected government and asked, rhetorically, whether anyone 
in the IIG could commit themselves to a debt agreement 
before the election.  He then reiterated that the UAEG was 
not interested in debt repayment at this time and that the 
priority for both the Iraqis and the UAEG was rebuilding 
Iraq. 
 
4. (SBU) Econchief followed-up on the Ambassador's 
conversation and raised reftel demarche on Iraqi debt with 
Ministry of Finance Assistant U/S Khalid Al-Bustani.  Al- 
Bustani said that the UAE's executive director at the IMF 
had told him informally that the IMF was interested in 
obtaining financing assurances from creditors.  He said 
that he didn't see any problem with the IMF's request, 
since the UAEG was not looking for any near term debt 
repayment from Iraq.  He added, however, that he had not 
yet seen a formal IMF request and that the MFA had the lead 
on Iraqi issues.  He suggested that econchief approach MFA 
with the demarche.  Econchief delivered the demarche to MFA 
Assistant U/S Mohammed Abdul Jaleel on September 27. 
Abudul Jaleel reiterated Al-Noaimi's remarks about Iraqi 
debt.  The UAEG was not interested in asking the Iraqis to 
repay the debt in the near future, but stated that it was 
premature to negotiate debt reduction with the Iraqis. 
Abdul Jaleel emphasized that the UAEG had told the IIG that 
they were welcome to visit the UAE to discuss debt, but 
that the IIG had not yet done so. 
 
5. (SBU) Comment:  The clear message from the UAEG is that 
they are not interested in obtaining any debt repayment 
from the Iraqis in the near future (if ever).  That being 
the case, we believe that they intend to respond positively 
to the IMF's request.  On the issue of reducing Iraqi debt, 
the UAEG has publicly agreed to forgive most Iraqi debt, 
and it appears as if both the UAEG and the IIG have tacitly 
decided to ignore or postpone any discussion on this issue. 
Senior IIG officials have visited the UAE several times 
over the last few months to discuss assistance.  As far as 
we have been able to tell, they have not discussed debt 
repayments, rescheduling, or forgiveness with the UAEG. 
From the UAEG's (and possibly the IIG's) point of view, the 
UAE is a fairly minor creditor (USD 7-8 billion), 
especially as compared with Saudi Arabia and Kuwait.  Since 
the UAEG is already providing the Iraqis with generous 
assistance and is much less concerned about either 
repayment or "balancing the books" on Iraqi debt than other 
creditors, neither they nor the Iraqis seem to feel any 
urgency to resolve this issue for the time being.  Both 
sides may decide to quietly ignore the whole debt question. 
End Comment 
 
Sison