US embassy cable - 05KUWAIT4318

C O N F I D E N T I A L SECTION 01 OF 02 KUWAIT 004318 
 
SIPDIS 
 
STATE FOR NEA/ARPI SWALKER, LONDON FOR LTSOU, JEDDAH FOR 
AMBASSADOR JEFFREY AND MAGGIE HABIB 
 
E.O. 12958: DECL: 09/15/2015 
TAGS: PGOV, PREL, PINR, KU, IZ 
SUBJECT: KUWAIT FUND CLARIFIES STATUS OF GOK ASSISTANCE TO 
IRAQ 
 
REF: KUWAIT 3850 
 
Classified By: Deputy Chief of Mission Matthew Tueller.  Reasons 1.4 (b 
) and (d) 
 
1. (C) Summary.  In a meeting with Econ Counselor on October 
3, the Kuwait Fund's Regional Manager for Arab Countries 
reaffirmed the $1.575B in reconstruction assistance the GOK 
has allocated for Iraq, noting that $1B had been disbursed 
prior to 2003 and that the remaining $575M (in new funds) 
will be disbursed through concessionary loans ($440M) perhaps 
for power projects and humanitarian grants ($125M---$5M of 
which has already been disbursed to the Humanitarian 
Operations Center) for health, education, and other projects 
(Note: separately the GOK contributed $10M to the UN's 
International Reconstruction Fund Facility for Iraq). 
Al-Ghanem complained that changes in Iraqi priorities and 
lack of responsiveness on project specifications had 
contributed to disbursal delays, noting that while the offers 
were still valid, the GOK was concerned with oversight 
modalities in Iraq for such large funds given the country's 
unstable security situation.  End Summary 
 
2. (SBU) Econ Counselor met on October 3 with Marwan Abdullah 
Al-Ghanem, Regional Manager for Arab Countries at the Kuwait 
Fund for Arab Economic Development (KFAED), the GOK's main 
development assistance agency, to seek clarification on the 
status of outstanding GOK development assistance to Iraq. 
Al-Ghanem reaffirmed Embassy's figures identifying a total of 
$1.575 billion in GOK assistance to Iraq based on Madrid 
Conference pledges in 2003 and renewed offers by the GOK. 
 
3. (SBU) Al-Ghanem summarized the assistance details as 
follows.  He explained that in addition to the $1 billion 
already expended in support for Iraq prior to the Madrid 
Conference, the Council of Ministers (cabinet) had decreed to 
allocate $575M in assistance to Iraq in the following manner: 
 
  --$5 million  grant for the GOK's Humanitarian Operations 
Center (HOC) (all funds disbursed) 
  --$30 million grant for school construction in Basra region 
(funds not yet disbursed) 
  --$30 million grant for hospital construction in Basra 
region (funds not yet disbursed) 
  --$60 million grant for other humanitarian projects, 
possibly power projects (funds not yet disbursed) 
  --$440 million concessionary loans for power sector 
projects (funds not yet disbursed) 
  --$10 million for UN IRFFI (all funds disbursed) 
 
4. (C) Al-Ghanem lamented that funds for school and hospital 
construction had not been disbursed, despite the signing of 
an MOU in March, because the ITG had been slow in providing 
site locations and project specifications.  He pointed out 
that the Iraqi Planning Minister is the new ITG lead on 
reconstruction assistance coordination with the GOK.  He said 
that information on schools had finally been received last 
week and that Kuwaiti consulting firms were in the process of 
bidding on the project as part of a joint venture with Iraqi 
firms.  Al-Ghanem expects a final contract for school 
construction to be signed by April 2006.   Al-Ghanem added 
that the GOK was still working on defining the oversight 
modalities for the project, citing difficulty in managing 
such large budgets in Iraq's unstable operational 
environment.  In an effort to limit the GOK's liability 
exposure, Al-Ghanem said that KFAED "made it clear to 
consulting firms" that the GOK could not be held liable for 
any losses incurred as a result of agreements signed between 
Kuwaiti firms and Iraqi authorities for projects in Iraq. 
 
5. (C) With regard to the $30M for hospital construction, 
Al-Ghanem said that following Iraqi Prime Minister Jaafari's 
April visit to Kuwait, the ITG had changed its priorities and 
wanted the funds used for constructing mobile hospitals 
instead of the surgical complex in Basra, as originally 
planned (Note: see reftel for Kuwait Fund Director General's 
discussions with Ambassador on this issue.) 
 
6. (C) Al-Ghanem explained that the additional $60M grant 
would go toward funding health, education or power projects. 
Al-Ghanem pointed out that the ITG was eager to have the 
$440M in loans allocated toward the construction of a large 
power plant in northern Iraq (total cost estimated at $850M). 
 According to Al-Ghanem, the Iraqi proposal was rejected by 
the Kuwait Fund's Loan Committee on October 1 and the Kuwait 
Fund has been mandated to allocate the loan funds to more 
than one power sector project.  Al-Ghanem suggested that the 
Kuwait, Arab, Saudi and Abu Dhabi Funds' combined could not 
fund more than half the $850M total project cost. 
 
Bio Note 
-------- 
 
7. (C) Al-Ghanem attended the University of Portland in 
Oregon and speaks English very well.  He described himself as 
solidly pro-U.S. and enjoys traveling to the United States, 
having returned recently from a cross-country trip.  He 
considers it in Kuwait's best interest to stabilize Iraq and 
support the U.S. effort.  However, he appeared frustrated and 
was hesitant about discussing his apparent frustrations in 
dealing with Iraqi counterparts.  Al-Ghanem attended the 
recent annual IMF/WB meetings in Washington.  As KFAED 
Regional Manager for Arab Countries, he is responsible for 
all Arab states except Libya, Saudi Arabia, and Qatar. 
 
 
LEBARON