Excerpt from document
(S/NF) Mr. Vice President, your upcoming trip to Iraq
comes at an important time in Iraq's political calendar. As
the Islamic month of Ramadan draws to a close, Iraqi
political leaders are furiously at work negotiating potential
alliances in advance of the January 2010 parliamentary
elections. As evidenced by the strong showing of his
coalition in the 2009 provincial elections, Maliki has
boosted his national popularity by assembling a commendable
security record and is now weighing whether to challenge his
Shia rivals and form his own coalition to try to recapture
the post of Prime Minister.

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Content
S E C R E T SECTION 01 OF 04 BAGHDAD 002463

NOFORN
SIPDIS

NSC/WHITE HOUSE FOR THE VICE PRESIDENT FROM AMBASSADOR
CHRISTOPHER R. HILL

E.O. 12958: DECL: 09/12/2019
TAGS: PGOV, PREL, ENRG, KDEM, IZ
SUBJECT: SCENESETTER FOR VISIT OF VICE PRESIDENT BIDEN TO
IRAQ (SEPTEMBER 14-17, 2009)

Classified By: CDA Robert Ford for Reasons 1.4 (b, d)

INTRODUCTION
------------

1. (S/NF) Mr. Vice President, your upcoming trip to Iraq
comes at an important time in Iraq's political calendar. As
the Islamic month of Ramadan draws to a close, Iraqi
political leaders are furiously at work negotiating potential
alliances in advance of the January 2010 parliamentary
elections. As evidenced by the strong showing of his
coalition in the 2009 provincial elections, Maliki has
boosted his national popularity by assembling a commendable
security record and is now weighing whether to challenge his
Shia rivals and form his own coalition to try to recapture
the post of Prime Minister. Iraq's Sunnis, recognizing that
they disadvantaged themselves by boycotting the January 2005
national polls, are increasingly active in the political
process, although Sunni parties remain fragmented. The
Kurds, meanwhile, are setting up the newly-elected Kurdistan
Regional Government (KRG) as President Talabani (PUK) and KRG
President Barzani (KDP) try to convince the two upstart
parties (the Change List, and Service and Reform) to build a
unified Kurdish electoral list for the January vote.

AUGUST 19 BOMBINGS
------------------

2. (S/NF) Two events in particular have shaken the political
landscape here since your July visit. First, the August 19
bombings in Baghdad put Maliki on the defensive, and he has
since scrambled to uphold his security credentials. His
political opponents were quick to criticize the PM for
security lapses while internal finger-pointing within the
Cabinet led Maliki to consider sacking ministerial-level
officials. Our engagement helped avoid such a hasty move,
but Maliki, under public pressure to respond decisively,
instinctively saw a Ba'athist plot behind the attacks, even
as al-Qaeda claimed responsibility, and subsequently accused
Syria of harboring two individuals who allegedly helped
orchestrate the bombings. When Damascus refused to extradite
them, Maliki withdrew Iraq's ambassador to Syria and sent a
letter to UNSYG Ban requesting the formation of an UN-led
effort to investigate foreign intervention in and support for
terrorist attacks inside of Iraq. Maliki has personally
requested active U.S. support for such an exercise even
though this could hinder our strategy for engaging Syria on
key regional issues. We're now looking at ways that we can
work with the Iraqis to support them at the UN, without
jeopardizing our broader agenda.

3. (S/NF) Regarding our obligation to help the Iraqis exit
from Chapter VII status, a key GOI preoccupation, it is not
clear that we have a way forward at present on the
Kuwait-related resolutions. Maliki has made clear repeatedly
that he will not at present re-affirm 833 in its entirety,
especially the maritime border. We continue to urge the GOI
to appoint an Ambassador to Kuwait, empowered to raise these
issues with the Kuwaitis directly and to begin a dialog with
Kuwait on the broader tenets of their relationship. Going
forward, we will need to think creatively about formulas that
express a re-affirmation of 833 without precluding the
ability of sovereign states to peacefully discuss adjustments
on demarcation of borders. For more immediate progress, we
should also look at lower-hanging fruit, such as the
Qshould also look at lower-hanging fruit, such as the
WMD-related resolution (currently hung up over Iraq's
inability to quickly implement the IAEA-required Additional
Protocol) and the Oil-for-Food resolution. We need to press
the Iraqis to take the necessary steps on their end to close
the books on both these resolutions.

BUILDING ELECTORAL COALITIONS
-----------------------------

4. (S/NF) The second major political event was the August 24
announcement of the formation of the Shia-led Iraqi National
Alliance (INA), minus Maliki's Da'wa party. Apart from some
token Sunni representation, the INA closely resembles the
Shia coalition that helped bring Maliki to power. While
Maliki would likely have preferred to join the INA, he opted
out due to disagreements over the share of parliamentary
seats for his party and his demand to be the group's PM
nominee. Now that he is unencumbered by his former sectarian
partners, Maliki is seriously considering pursuing a

BAGHDAD 00002463 002 OF 004

national, non-sectarian strategy, not a Shia one, although
his sectarian leanings still surface from time to time and
are carefully scrutinized by potential Sunni and secular Shia
allies. He is accordingly trying to form a broad-based,
cross-sectarian electoral coalition and is actively reaching
out to Sunni groups, particularly tribal leaders, in the
process. Whether he will succeed in his quest is uncertain.
Many Iraqis profess a desire to move beyond sectarian
politics, but may still be tempted to stick to their old
allegiances at the ballot box. An upwards trend in terrorist
attacks in the elections run-up may reinforce sectarian
identities and hurt Maliki's electoral showing. Fortunately,
recent attacks have not sparked reprisal violence as most
Iraqi groups, including the Islamist Shia factions, recognize
this is not in their interests.

HOLDING TIMELY ELECTIONS
------------------------

5. (S/NF) Regardless of pre-election maneuvering, our
political priority remains the holding of credible and
legitimate national elections in January, as required by the
Iraqi constitution. Parliament has yet to adopt a national
elections law despite pleas for prompt action from the
Independent High Electoral Commission (IHEC), but has
committed itself to passing such legislation by October 15.
Parliament reconvened from its summer break on September 8;
however, it likely will not get down to serious business
until after the week of the Eid al-Fitr holiday, which will
begin on or about September 21. This does not leave much
time, especially given the differing views within parliament
on election mechanics and the electoral treatment of Kirkuk,
which have so far stymied forward progress. I recommend that
you emphasize the need for passage of an electoral law and
the holding of elections on schedule in all appropriate
meetings during your visit.

ARAB-KURD ISSUES
----------------

6. (S/NF) Maliki's August 2 meeting with KRG President
Barzani and other Kurd leaders has led to agreements in
principle to integrate two Peshmerga brigades into the Iraqi
Army, which would be a major step in building Arab-Kurd
security cooperation and reducing the risk of military
confrontation. The Iraqi Interior and Defense ministers met
face-to-face for the first time with their Kurdish
counterparts at a meeting hosted by General Odierno on
September 5. The two sides have also agreed to establish a
joint committee to discuss the pending hydrocarbons and
revenue-sharing laws, disputed internal boundaries (DIBs),
and the Arab-Kurd standoff in the Mosul Provincial Council.
Much work remains, however, and this recent progress may not
reflect a commitment to reaching lasting Arab-Kurd
accommodation as much as it represents a tentative step
towards a post-election political alliance that Maliki
believes could help him retain the PM slot and which Barzani
hopes will enhance his influence in Baghdad. Both sides are
also mulling over the potential impact that the coming U.S.
drawdown could have on their respective leverage. We plan to
work closely with UNAMI to push forward the DIBs
negotiations, while recognizing that continued movement on
Arab-Kurd issues will have to await the seating of a new
Iraqi government following the January elections.

STATUS OF KIRKUK
QSTATUS OF KIRKUK
----------------

7. (S/NF) The Embassy is ramping up our diplomatic engagement
with the GOI and the Kurds on Kirkuk, as MNF-I works to
increase U.S.-GOI-KRG security coordination and establish a
cooperative security architecture in disputed areas. The
United States has never had a publicly stated policy on the
final status of Kirkuk, other than to say we support the
UNAMI process for a negotiated DIBs settlement that includes
Kirkuk.

8. (S/NF) As Iraq enters into the volatile electoral season,
the United States will need to take a more visible and
muscular role to defuse Kirkuk as a potential security
flashpoint and divisive campaign issue. UNAMI's new SRSG
strongly agrees that the United States should adopt a more
directive and hands-on approach. We have accordingly
submitted a detailed policy and related strategy

BAGHDAD 00002463 003.2 OF 004

recommendation that, consistent with UNAMI's views, will help
steer Arab and Kurd negotiators toward an outcome on Kirkuk
that is sustainable, consensus-based and contributes to
Iraq's national unity. Rather than an up or down referendum
on whether Kirkuk should be a part of the KRG, which Barzani
steadfastly wants and which UNAMI thinks will lead to civil
war, we believe the United States should quietly advocate a
negotiated interim "special status" arrangement making Kirkuk
a distinct administrative territory for 10 years, renewable
by agreement of the KRG and GOI, with special guarantees and
protections for all communities. The arrangement would
include a power-sharing formula for the Kirkuk provincial
council among Arabs, Kurds and Turkomen. This will be a very
difficult message for the Kurds, and Barzani in particular,
to hear. If we don't make clear now where we stand, the
Kurds may harden a negotiating position based on a misreading
of our policy. To help make our message more palatable, we
should be prepared to give the Kurds continued assurances
related to security (consistent with the U.S.-Iraq Security
Agreement) and re-double our ongoing efforts to facilitate an
agreement on hydrocarbon legislation to resolve differences
on the management of Iraq's oil and gas resources. Messaging
of the Kurds, however, needs to be done for now in private
rather than as a matter of public policy.

TRANSFORMING IRAQ THROUGH OIL
-----------------------------

9. (SBU) Oil is the lifeblood of the Iraqi economy, providing
65 percent of GDP and 90 percent of annual revenues to the
government. For July 2009, oil production was 2.5 million
barrels per day (bpd), down from its 1979 peak of 3.5 million
bpd, including 2 million barrels in exports. If Iraq is to
modernize and develop, it must exploit its vast oil reserves,
thought to be the third largest in the world. Unfortunately,
Iraq's first oil licensing round ) held on June 30 ) was a
mixed success. The GOI awarded only one field, though its
planned expansion should increase Iraq's oil production over
the next six years by 1.8 million bpd ) a nearly 75 percent
increase over today's levels. The June 30 bid round also
demonstrated Iraq's willingness to engage (for the first time
in decades) in competitive and market-oriented oil sector
development, and to take advantage of international oil
companies' (IOCs) technical capabilities and financial
resources.

10. (C) At the same time, the GOI made many mistakes during
the bid round. Primarily, the GOI offered unreasonably low
rates of return that failed to compensate IOCs for the
political and security risks in doing business in Iraq.
Seven of eight oil and gas fields were left on the table, as
many top IOCs walked away from some of the world's largest
oil fields. If Iraq had awarded just two more fields, the
resulting investment would have added 2.9 million barrels per
day of oil production, more than doubling current production.
And the investment to develop just one oil field could have
generated up to $50 billion in investment, $600 billion in
revenues to the GOI, and 200,000 direct and indirect jobs.

11. (C) Iraq cannot afford to miss such enormous
opportunities. Investment on this scale takes years to
implement, and could transform the economy and society of
Qimplement, and could transform the economy and society of
Iraq. In your discussions with government officials, you
should emphasize that the GOI learn from its missteps and
offer appropriate rates of return in the next oil bid round,
in November 2009. Iraq must also invest aggressively in the
physical and financial infrastructure that will make
spectacular gains in oil production and national income
possible. Even under the best of circumstances, it will take
several years before revenue from newly awarded fields begins
to flow significantly. During that time, Iraq ) with
continuing support from the USG and the international
community ) must focus on improving its investment climate,
clarifying and streamlining its tax code, and passing key
legislation (such as the hydrocarbons framework law). These
efforts will reduce risk, attract more investment, and raise
Iraq's national revenues.

CONCLUSION
----------

12. (C) As you know, Mr. Vice President, we face many
challenges in achieving the President's vision for Iraq as a
stable, sovereign and self-reliant nation. Internal

BAGHDAD 00002463 004 OF 004

political considerations related to the upcoming national
elections will make our job even more complicated. But there
is a way ahead and your visit will help us to exploit
opportunities for progress on key issues. My team and I look
forward to your arrival.
FORD