US embassy cable - 05KUWAIT4265

S E C R E T SECTION 01 OF 02 KUWAIT 004265 
 
SIPDIS 
 
STATE FOR NEA/ARPI SWALKER, LONDON FOR LTSOU, CAIRO FOR 
AMBASSADOR JEFFREY AND MAGGIE HABIB, PARIS FOR ZEYA 
 
E.O. 12958: DECL: 10/01/2015 
TAGS: PGOV, PREL, KU, IZ 
SUBJECT: KUWAIT SCENESETTER FOR AMBASSADOR JEFFREY AND 
DELEGATION 
 
 
Classified By: Ambassador Richard LeBaron.  Reasons 1.4 (b) and (d) 
 
1. (SBU) Prime Minister Al-Sabah and the government of Kuwait 
remain committed to the Coalition and the ITG's success in 
Iraq, recognizing the mutual benefits afforded by a stable 
Iraq.  The Government has demonstrated a willingness to 
contribute financial and political resources to help address 
Iraq's reconstruction needs and resolve outstanding political 
and security matters impacting their bilateral relationship. 
While the Iraqis will open their Embassy in Kuwait soon, the 
GOK has expressed concern over security and has told Post 
that a Kuwaiti Embassy will open in Baghdad only when the 
situation improves. 
 
Iraq Assistance 
--------------- 
 
2.  (U) At the 2003 Madrid Conference, GOK pledged $1.5B and 
announced that $1B had already been distributed through 
in-kind and other assistance (no further detail provided). 
Of the remaining $500M, $440M is expected to be disbursed 
through soft loans administered by the Kuwait Fund for Arab 
Economic Development.  The remaining $60M will be disbursed 
for education (schools) and health projects (rural hospitals) 
in Basra.  The GOK is awaiting ITG responses to requests for 
site locations and construction requirements before funds can 
be disbursed.  Kuwait Fund Director General Al-Bader met on 
September 25 with USAID officials in Washington to discuss 
GOK assistance to Iraq, noting that security concerns and the 
lack of ITG responsiveness had contributed to GOK aid 
implementation delays.  USAID has offered to facilitate 
Kuwait Fund projects through local liaison officers in Basra. 
 
 
3.  (U) In addition to Madrid pledges, the GOK announced in 
June that it would provide an additional $60M in humanitarian 
grants, and the Council of Minister (cabinet) is deciding on 
the appropriate source from which to draw these funds.  These 
funds will also be allocated for health and education 
projects in Iraq.  The ITG Planning Minister Al-Saleh is 
supposed to visit Kuwait in the coming weeks to discuss steps 
forward on grant disbursement, although this needs to be 
firmed up.  The Embassy remains in frequent contact with the 
GOK on its aid disbursements.  The GOK has also provided $10M 
to the International Reconstruction Fund Facility for Iraq 
(IRFFI) and $5M for the its Humanitarian Operations Center 
(HOC).  To date, the total GOK assistance (pledged and 
dispursed) is $1.575B, $560M of which has yet to be 
disbursed. 
 
4.  (S) Over the past two years, the total value of Kuwait's 
support for operations under the DCA and OIF is $2.51B.  As 
part of its generous $500M Hurricane Katrina assistance 
offer, the GOK has included $100M in jet fuel to meet U.S. 
operational requirements in Iraq.  The modalities remain to 
be worked out pending formal parliamentary approval of the 
assistance offer.  Parliament is scheduled to resume on 
October 17. 
 
Iraqi Debt and Frozen Assets 
---------------------------- 
 
5. (SBU) The GOK holds between $8 and $14 billion (depending 
on interest payment obligations) in Iraqi debt, the largest 
of any country.  The GOK has yet to determine the actual 
amount.  Kuwait's Finance Minister Bader Al-Humaidhi 
discussed debt relief with visiting PM Jaafari on June 29; 
however, no substantive outcome was reached, we understand. 
The GOK has publicly committed to 80% or higher debt 
reductions consistent with Paris Club terms, and wants to use 
the Paris Club international "cover" to sell debt relief to a 
skeptical National Assembly.  The GOK has been, therefore, 
unresponsive to prodding for 100% relief. 
 
6. (C) On numerous occasions, the Embassy has raised with the 
GOK the question of frozen Iraqi assets owed to the 
Development Fund for Iraq (DFI).  Approximately $78-$80M in 
frozen Iraqi assets remain at the GOK Mission in New York. 
The GOK asserts that a private Kuwaiti company, Al-Ghanim 
(note: not the large Al-Ghanim conglomerate) involved in 
doors and shutters has an outstanding claim against the 
funds.  According to the MFA, the Ministry's Legal Department 
is seeking a resolution through the legislative office of the 
Council of Ministers (cabinet).  The MFA also informed the 
Ambassador that the claim was unlikely to amount to the 
frozen sum and that a portion would likely be held back while 
the rest of the money was released.  (Comment: The GOK is 
concerned that the UN Compensation Commission funds will be 
further eroded and that their outstanding claims related to 
the 1990-1991 Gulf War will not be honored.  This justified 
fear may be the root of their hesitation to act on the DFI 
release.) 
 
Political Update 
---------------- 
 
7. (S) Post, in cooperation with CENTCOM, will provide the 
GOK with satellite imagery of the shared border area.  There 
is concern within the GOK of violation of UNSCR 833 and that 
the security situation in southern Iraq will re-create 
tensions along the border.  In July, there were small violent 
Iraqi demonstrations in the Umm Qasr area in response to 
Kuwaiti construction of a border pipe barrier within Kuwait 
which parallels the border markers.  The UN, responding to 
repeated GOK requests, is supposedly sending a team to 
observe the border area later this month, but Iraqi agreement 
may not be achieved yet. 
 
8. (S) Local press reports that the ITG will re-open the 
Iraqi Embassy in Kuwait in a matter of weeks.  The GOK has 
paid for the renovation and refurbishment of the building 
located at the site of the previous Iraqi Embassy which also 
served as headquarters for the 19th province during the Iraqi 
invasion and occupation.  Embassy Baghdad has also confirmed 
that a Charge d'Affaires has been chosen, but no further 
details have been provided.  Kuwait is committed to 
establishing a diplomatic presence in Iraq and has reportedly 
selected an envoy.  The GOK is waiting for better security 
conditions before assigning an Ambassador. 
 
 
 
LEBARON