04BUCHAREST3413 / 2004-12-10 15:40:00
Embassy Bucharest
                C O N F I D E N T I A L SECTION 01 OF 02 BUCHAREST 003413 
E.O. 12958: DECL: 12/10/2014 
REF: A. A) STATE 261021 
     B. B) WARSAW 5191 (NOTAL) 
D 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 

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