23916 12/10/2004 15:40 04BUCHAREST3413 Embassy Bucharest CONFIDENTIAL 04STATE261021 This record is a partial extract of the original cable. The full text of the original cable is not available. C O N F I D E N T I A L SECTION 01 OF 02 BUCHAREST 003413
STATE FOR EUR/NCE - WILLIAM SILKWORTH
E.O. 12958: DECL: 12/10/2014 TAGS: ECON, EFIN, PGOV, PREL, RO SUBJECT: IRAQ DEBT: ROMANIA WANTS ITS MONEY BACK
REF: A. A) STATE 261021
B. B) WARSAW 5191 (NOTAL)
Classified By: ECONOMIC SECTION CHIEF JOHN RODGERS FOR REASONS 1.4 B AND D
1. (C) Summary: Joint U.S. and British Embassy discussions with Romanian government (GOR) officials reveal little enthusiasm for debt reduction for Iraq. Instead, Romania is aiming for a &flexible8 solution that could involve oil deliveries, equity in joint ventures or debt restructuring. GOR officials will meet with Iraq officials next week to discuss the debt issue. End Summary.
2. (C) Embassy Econoffs on December 9 and 10, joined with the British Economic First Secretary to encourage the Romanian government to look favorably on the recent Paris Club debt reduction agreement to determine if, in its discussions with Iraqi officials, Romania could also grant Iraq relief from its Ceaucescu-era debt. In approaches to Catalin Ionita, Deputy Director General of UN and Global Affairs in Ministry of Foreign Affairs (MFA), and Paul Ichim, State Secretary in the Ministry of Finance (MOF), the answer was the same: The Romanian government is still examining its position and options, but does not believe it can afford to forgive or reduce the debt Iraq owes to it. Mr. Ionita mentioned some of the preliminary ideas that Foreign Minister Geoana had advanced during his visit to Iraq this summer, including debt restructuring, oil deliveries or equity in joint ventures as alternatives to debt reduction or forgiveness.
3. (SBU) Romanian officials point out, that for their country, the Iraqi debt is significant. According to the Romanian MOF, as of December 31, 2003, Iraq is indebted to Romania in the amount of approximately $2.6 billion, including total principal of over $1.7 billion and total interest of approximately $1.1 billion. This amount includes the following:
- $1.19 billion, of which $927 million is principal, and $262 million is interest calculated up to February 1, 1996. - $537 million of additional principal, which includes $98 million under verification and registration, as well as $439 of non- rescheduled debt. - $845 million, which consists of additional interest penalties from February 1, 1996 to December 31, 2003. The MPF calculated these penalties according to the same contractual rates of interest established in 1990 in the deferred payment agreement made with the Iraqis.
Note: These claims are based on goods and services delivered to Iraq before December 31, 1989, when Romania was still controlled by communist dictator Nicolae Ceaucescu. The debt owed by Iraq to Romania has been rescheduled on three separate occasions, in 1987, 1988 and 1999. In Baghdad on February 1, 1990, the GOR signed a &Financial Agreement between the Government of Romania and the Government of the Republic of Iraq8. This agreement stipulated that the principal debt would be deferred for six years, of which three were defined as a grace period beginning on February 1, 1990. The total amount of debt covered by this agreement was $1,190 million. Although the claims recovery began in February 1990, it was halted on August 30, 1990 in conformity with United Nations Security Council Resolutions. Three years later Romania submitted a claim for the debt to the United Nationals Compensation Commission (UNCC), which was charged with handling claims related to Iraq,s invasion of Kuwait. However, this claim was withdrawn when the UNCC deemed the debts too old to be within its jurisdiction.
4. (C) Mr. Ichim volunteered that MOF Minister Tanasescu had recently sent a letter to other non-Paris Club creditor nations to urge them to develop a common position on Iraq,s debt (see Ref B). He claimed that no country had yet replied formally to the letter, although Romania,s embassies were reporting some discussions with host country governments on the subject. Ichim also mentioned that Romanian Ambassador to the United States, Sorin Ducaru, had discussed the Iraq debt issue with a (not further identified) USG official, who reportedly stressed that Romania was ¬ being put under any pressure8 to adhere to the Paris Club arrangement. Econoff replied that we were not/not trying to pressure the Romanians, but merely encouraging them to be as flexible as possible when talking to the Iraqis.
5. (C) Comment: Romanian officials stress that they want Iraq to succeed and point to Romanian efforts on the ground to stabilize the country. As a poor country itself, however, Romania does not seem at all inclined to accept that an oil-producing country could not eventually repay a significant portion of its debt in some way. Embassy will follow up with Romanian officials after they discuss the debt issue with Iraqi officials next week in Bucharest. End Comment.