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C O N F I D E N T I A L SECTION 01 OF 03 KUWAIT 001104

SIPDIS E.O. 12958: DECL: 11/05/2018

TAGS: PREL EFIN ECON EINV KTFN IZ IR KU

SUBJECT: TREASURY DEPUTY SECRETARY KIMMITT MEETS KUWAITI PRIME MINISTER AND FOREIGN MINISTER REF: A. A: KUWAIT 947 B. B: KUWAIT 1088

Classified By: Ambassador Deborah Jones for reasons 1.4(b) and (d).

1.(C) Summary: During his October 30 meeting with Kuwaiti Prime Minister Shaykh Nasser Al Sabah and Foreign Minister Shaykh Dr. Mohammed Al Sabah, Deputy Treasury Secretary Robert Kimmitt described USG efforts against Iranian banks supporting proliferation activities and explained the details of the U.S. financial rescue legislation and the expectations for the upcoming G-20 Summit. The Kuwaiti leaders sought clarification of the November 15 economic summit, and specifically whether they might be asked to contribute to some kind of 'international bail-out fund.' The PM expressed disappointment with Iraqi recalcitrance on resolving outstanding bilateral issues on the border, compensation claims and settlement of the Kuwait Airways legal judgment. The FM sought clarification of the U.S. position on OPEC's recent recommendation for an oil production cut. End summary.

Iraq Concerns -------------

2.(C) Deputy Secretary of the Treasury Robert Kimmitt opened an October 30 meeting with Kuwaiti Prime Minister Shaykh Nasser Al-Mohammed Al-Ahmed Al-Jaber Al Sabah and Foreign Minister Shaykh Dr. Mohammed Sabah Al-Salem Al Sabah by thanking the Government of Kuwait for sending its new Ambassador to Baghdad and establishing a Kuwaiti diplomatic presence in Iraq. The PM responded by noting the difficulty Kuwait has had in gaining the cooperation of the GoI on resolving a host of issues including border issues, settling the Kuwait Airways legal judgment against the GoI and resolving Kuwait's United Nations compensation claim. The FM described the GoI's failure to meet the UN Border Maintenance team's visit requirements, which included provision of security protection and elimination of all obstacles along the border. The FM said meeting these requirements would enable the UN team to finish its work along a still unmarked portion of the Kuwait Iraq border. The FM said the GoI had also failed to show up for a meeting in Geneva to discuss resolution of Kuwait's UN Compensation Commission claims, and had reneged on an agreement to pay $500 million to settle a judgment arising out of Iraq's destruction of Kuwait Airways aircraft during the 1990-91 Iraqi occupation of Kuwait. Noting the long-standing failure of the GoI to implement the 1993 UNSCR 833 which authorized the demarcation of the Kuwait-Iraq border and recognized the precise coordinates of the border as settled by a 1963 agreement between Kuwait and Iraq, the PM asked "How can I visit Iraq with the border demarcation still in dispute?" The PM said he believed Iraqi PM Maliki was willing to cooperate on some of these issues but was unable to get his ministries to implement his intentions. (Note: This is a kinder interpretation of the Iraqi PM's intentions than offered previously by the FM (Ref A). End note.)

Proliferation and Terror Finance --------------------------------

3.(C) Kimmitt described current USG actions against Iranian banks involved in activities contributing to Iran's nuclear proliferation efforts and added that the USG would also direct similar actions against other financial institutions that engaged in suspect activities with these targeted institutions. Kimmitt underscored the importance of having a vigilant, well regulated financial system in competing for foreign investment. He said that Kuwait had laid a good foundation in this regard but that it was essential for Parliament to follow through and enact legislation criminalizing terror finance. The PM agreed but offered no specifics.

4.(C) Turning the terror finance discussion to Pakistan, the PM inquired "How is Osama Bin Laden able to continue to finance his operations; how is he able to pay his supporters while in hiding in Pakistan?" Kimmitt explained that there was a steady flow of illicit money to Pakistan, much of it from Gulf countries, through the banking system and charities. He said it could be tracked into Pakistan but then it was converted into cash and moved through hawalas and by hand and that this movement was very difficult to track. The PM persisted, noting that passing $100 bills or even $10 bills would be very noticeable in Pakistan and again asking "They (Al-Qaeda) have families, which need to receive money. How do they do KUWAIT 00001104 002 OF 003 it?" Kimmitt responded that these adversaries exploit whatever avenues are available, noting that one part of the problem was Al-Qaeda's ability to take advantage of some corrupt Pakistani officials. (Comment: The PM's point, which he routinely makes in this context, was not entirely clear. The likely intended message was "If you can't track funds in Pakistan, where even a $10 bill cannot pass unnoticed, how can we be expected to track terror finance flow here?" End comment.)

November 15 Meeting of the G-20 -------------------------------

5.(C) Following Kimmitt's presentation on the upcoming G-20 Summit on the global financial system, the PM asked why the G-20 had been chosen for this dialogue, as well as about the expected outcomes of the summit. (Note: Kuwait earlier had requested to participate in this summit (Ref B). End note). Kimmitt explained that the G-20 was selected because, given the short preparatory time frame, it already existed and was fairly representative. He noted that, as this was only an initial meeting, the number of participants could evolve and expand to include other important financial players, such as Kuwait. He said the outcome of the meeting would likely include guiding principles for future meetings, an action plan and discussion of appropriate future participants in the meetings. Kimmitt allayed Kuwaiti concerns about post-election continuity in the USG approach to the global financial crisis, saying that he had never seen such excellent preparation for the transition from outgoing to incoming administrations. In response to the FM's question about the likelihood of a Global Rescue Fund or establishment of a global regulatory system being discussed at the Summit, Kimmitt said that he did not believe either was likely to be adopted at the Summit and agreed that it would not be fair to expect the GoK to contribute to a process it had no say in shaping.

7.(SBU) In response to GoK questions, Kimmitt described the particulars of the current capital infusion to the U.S. banking system and the planning and coordination already underway to ensure a smooth transition from the current U.S. administration to the next. Kimmitt stressed that the priority is to encourage and facilitate renewed lending by banks to other banks and to the real economy. He said there would be discussion of dividends and executive compensation by recipient institutions in the near term. Kimmitt said that while he did not expect further financial rescue legislation, there was a possibility of Congress passing an economic stimulus package.

OPEC Quota Reduction --------------------

8.(C) The FM noted the Organization of Petroleum Exporting Countries(OPEC) recent reduction of its offer of oil production by 1.5 million barrels a day and stated that the action had been taken to avoid volatility and uncertainty in the market. He referred to a recent White House statement calling the move "anti-competitive." The FM requested a better understanding of the USG's position on the current level of oil prices. Kimmitt responded that the USG believed that prices should be set by open, competitive markets not unduly influenced by speculators. He added that low oil prices were helpful in that lower prices at the pump helped U.S. consumers during these difficult economic times.

9.(C) Comment: The GoK focus was clearly on the upcoming summit, its implications for its balance sheet (in terms of contributions to any global bail-out fund), and the staying power of any decisions made during a transition in U.S. administrations. End comment. ********************** ************************ For more reporting from Embassy Kuwait, visit: XXXXXXXXXXXX Visit Kuwait's Classified Website: XXXXXXXXXXXX ********************** ************************ ********************************************* * For more reporting from Embassy Kuwait, visit:XXXXXXXXXXXX cable s Visit Kuwait's Classified Website: KUWAIT 00001104 003 OF 003 XXXXXXXXXXXX ********************************************* * JONES