US embassy cable - 05KUWAIT2926

UNCLAS KUWAIT 002926 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON, EAID, KU, IZ 
SUBJECT: GOK AND GOI CONTINUE TO MEET ON DEBT REDUCTION 
 
This cable is sensitive but unclassified; please protect 
accordingly.  Not for Internet distribution. 
 
1.  (SBU) Ministry sources tell us that the Kuwaiti Minister 
of Finance Bader Al-Humaidhi met with Iraqi Prime Minister 
Jaffari on June 29 immediately prior to attending the final 
National Assembly session and then leaving the country for a 
short trip to Lebanon.  We understand that debt reduction was 
discussed at the meeting but were unable to ge a read out 
prior to the Minister's departure.  Responding to reports 
that the Government of Iraq is pressing the UN Compensation 
Commission to "reduce the amount of payments into the 
compensation fund", Chairman of the Public Authority for 
Assessment of Compensation for Damages Resulting from the 
Iraqi Aggression (PAAC) Khaled Ahmad Al-Mudhaf told the UNCC 
on June 28 that Kuwait expects to see uninterrupted payments 
to the fund and "ensure full and swift payments to all 
successful claimants."  His statements were carried in all of 
the local press and will likely be followed by similar 
statements by MPs and other Kuwaitis.  Comment:  The public 
outcry from interrupting UNCC payments would probably scuttle 
the chances of getting National Assembly support for pre-Gulf 
War debt forgiveness.  End Comment. 
 
2.  (U) Kuwait claims between $8 and $12 billion in debt owed 
from loans made to Iraq during the Iraq-Iran war, the largest 
of any country.  The GOK has said that it is committed to 
providing comparable treatment to the Paris Club reduction 
(80%), but that the issue must go before the National 
Assembly.  The Foreign Minister has confirmed that the GOK 
would meet the Paris Club commitment.  Ambassador LeBaron has 
discussed this issue with the Foreign Minister, the Minister 
of Finance, Bader Al-Humaidhi, and other high-level 
interlocutors.  The GOK has made clear that any reduction or 
forgiveness of Iraqi debt will only involve pre-Gulf War 
debts and will not include United Nations Compensation 
Committee claims, which Kuwait considers off-limits.  The GOK 
and its citizens have been paid approximately $9.5 billion in 
UNCC awards, and have an additional $29 billion in awarded 
but unpaid claims.  There are over $15 billion in unresolved 
Kuwaiti claims pending before the UNCC, as well. 
 
3.  (U) The National Assembly will likely oppose any debt 
write-off for Iraq.  Feelings about Iraq's 1990-91 invasion 
and occupation of Kuwait are at the forefront of any argument 
against a debt write-off, but other reasons are voiced as 
well.  Islamist MP Fahd Al-Khannah wanted "agreements that 
would enhance Kuwait's role in Iraq's reconstruction" in 
order for him to agree to debt reduction, while MP Waleed 
Al-Tabtabaei did not want to see any "government promises or 
plans to reduce the Iraq debt until after free elections (in 
Iraq) bring an elected government to negotiate the debt 
with."  Al-Tabtabaei and other MPs also linked the reduction 
of Iraqi debts to a cancellation by the GOK of housing and 
other debts owed by Kuwaiti citizens to their own government. 
 MP Ali Al-Deqbasi has said that the government should first 
be generous to its citizens before thinking of debt 
write-offs.  "Such moves cannot be accepted," he said.  In 
the latest National Assembly session, which ended June 29, 
the Assembly had voted to provide a salary increase to all 
government employees, and to forgive every citizen KD 2000 
($6800) in unpaid utility bills dating paid to the Gulf War. 
The next National Assembly session will not start until 
October 2005. 
 
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