US embassy cable - 03KUWAIT1416

UNCLAS SECTION 01 OF 02 KUWAIT 001416 
 
SIPDIS 
 
STATE FOR IO - WILL IMBRIE 
STATE FOR EB - TONY WAYNE 
TREASURY FOR OASIA - MCDONALD 
USDOC FOR BERNARD CARREAU 
 
E.O. 12958: N/A 
TAGS: ETTC, ETRD, ECON, EFIN, PREL, IZ 
SUBJECT: THE IMPORTANCE TO IRAQS POST-WAR ECONOMY 
OF ENDING SANCTIONS NOW 
 
1. SUMMARY AND ACTION REQUEST:  ORHA believes that 
its success in administering the newly liberated 
Iraq will depend significantly on stimulating 
early economic activity and sending a message of 
hope for their economic future to the Iraqi 
people.  ORHA proposes to encourage trade with, 
and investment by, historic neighboring trade 
partners as part of an effort to help "jump start" 
Iraq's economy.  This cannot occur without lifting 
United Nations and U.S. bilateral sanctions that 
bar imports and exports to and from Iraq except 
under the provisions of the Oil for Food program. 
Accordingly, ORHA requests that Washington 
agencies work with the international community to 
end sanctions on Iraq's economy as soon as 
possible. END SUMMARY AND ACTION REQUEST. 
 
2.  The strategic end state we seek in Iraq is: 
 
"A unified Iraq, with an Iraqi national identity 
that respects tribal, ethnic and religious 
heritages.  Governed by a broad-based, freely 
elected government that adheres to the rule of 
law, Iraq is neither a threat to the region nor a 
supporter of WMD or terrorism.  The nation will 
adopt and develop a viable, free market-based 
economy." 
 
3.  ORHA (The Office of Reconstruction and 
Humanitarian Assistance), led by LTG (R) Jay 
Garner, and initially a component of the Coalition 
Provisional Authority will work to return the 
control of Iraq back to a duly constituted 
government of Iraq as soon as possible.  ORHA may 
be viewed as the first step in that process.  ORHA 
is establishing itself in Baghdad and elsewhere in 
Iraq as circumstances permit.  ORHA will address 
immediate humanitarian assistance requirements and 
will establish civil administration and 
reconstruction priorities. 
 
4.  As noted above, a key reconstruction priority 
is setting the stage for a free market-based 
economy in Iraq.  ORHA recognizes that creating an 
institutional and policy framework conducive to 
the development of a free market-based economy, 
led by the private sector, will require short, 
medium and long-term efforts.   Many of the medium 
(90 days to six months) and long-term efforts (six 
months to two years) will entail international 
assistance programs that will last beyond ORHA's 
mandate.   In the short-term ORHA will focus on 
actions that can stimulate activity in the Iraqi 
economy and send a message of hope to the Iraqi 
people for their economic future and enable Iraq's 
private sector to start to contribute. 
 
5.  ORHA has developed an "Iraq Economic Jumpstart 
Program."  The objective of the program is to 
allow Iraqis to realize an immediate improvement 
in their lives and to allow normal economic 
activity to begin to operate during the first 90 
days.  The elements of the program include trade, 
finance, investment, and other measures as 
follows: 
 
-- Work with the international community to 
quickly lift sanctions on trade, commerce, and 
investment. 
 
-- Issue emergency payments of USD20 to all civil 
servants who return to work. 
 
-- Place top priority on supplies of water, 
electricity and fuel. 
 
-- Open borders to traditional trade partners. 
 
-- Declare a 90-day tariff holiday. 
 
-- Challenge all international assistance donors 
to use Iraqi businesses and workers whenever 
possible. 
 
-- Remove all barriers to internal trade except 
safety and security standards. 
 
-- No currency will be denied validity including 
the Iraqi Dinar, Old Iraqi (liberation) Dinar and 
US Dollars with exchange rates determined by the 
market. 
 
-- Immediate attention to restoring a functioning 
banking system. 
 
-- Immediately assist Iraq in restoring relations 
with the IMF and World Bank. 
 
-- Implement USAID and other USG assistance to 
Iraqi businesses - e.g. USAID micro credit 
programs. 
 
6.  Trade and investment will be a key source of 
reconstruction resources for Iraq.  To that end, 
several of the elements of ORHA's "Economic 
Jumpstart Program" focus on trade - open borders 
for trade, a 90-day tariff holiday, removing 
internal barriers, etc. 
 
7.  U.S. and United Nations sanctions against Iraq 
make all trade with Iraq except as allowed via the 
cumbersome mechanism of the Oil for Food program 
contrary to international law.  Yet the 
justification for such sanctions no longer exists 
in the post Saddam regime era.  Economic sanctions 
are central to the average Iraqis daily 
perceptions.  Further, maintaining sanctions sends 
the worst possible message to the average Iraqi 
regarding the intent of the Coalition, the United 
States and the international community. 
Accordingly, ORHA urges that Washington agencies 
work with the international community to end the 
application of sanctions to trade by Iraqi 
business and citizens as soon as possible. 
 
JONES