Cablegate: Gok and Goi Continue to Meet On Debt Reduction

This record is a partial extract of the original cable. The full text of the original cable is not available.

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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