Viewing cable 06PARIS2362
Title: PARIS CLUB - APRIL 2006 TOUR D'HORIZON

IdentifierCreatedReleasedClassificationOrigin
06PARIS23622006-04-11 10:02:00 2011-08-30 01:44:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Paris
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RR RUEHWEB

DE RUEHFR #2362/01 1011002
ZNR UUUUU ZZH
R 111002Z APR 06
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC 6169
INFO RUEATRS/DEPARTMENT OF TREASURY WASHDC
RUEKJCS/SECDEF WASHDC
RUEHRL/AMEMBASSY BERLIN 5950
RUEHSW/AMEMBASSY BERN 1742
RUEHBR/AMEMBASSY BRASILIA 1537
RUEHBS/AMEMBASSY BRUSSELS 5653
RUEHBY/AMEMBASSY CANBERRA 1584
RUEHCP/AMEMBASSY COPENHAGEN 1327
RUEHHE/AMEMBASSY HELSINKI 1166
RUEHLO/AMEMBASSY LONDON 6037
RUEHMD/AMEMBASSY MADRID 2295
RUEHMO/AMEMBASSY MOSCOW 5192
RUEHNY/AMEMBASSY OSLO 1355
RUEHOT/AMEMBASSY OTTAWA 1911
RUEHRO/AMEMBASSY ROME 7556
RUEHUL/AMEMBASSY SEOUL 1283
RUEHSM/AMEMBASSY STOCKHOLM 1377
RUEHTC/AMEMBASSY THE HAGUE 2425
RUEHKO/AMEMBASSY TOKYO 2270
RUEHVI/AMEMBASSY VIENNA 1537
RUEHBS/USEU BRUSSELS 1592
RUEHBUL/AMEMBASSY KABUL 0345
RUEHAS/AMEMBASSY ALGIERS 0710
RUEHLU/AMEMBASSY LUANDA 0729
RUEHBU/AMEMBASSY BUENOS AIRES 1195
RUEHYD/AMEMBASSY YAOUNDE 0867
RUEHWN/AMEMBASSY BRIDGETOWN 0238
RUEHRY/AMEMBASSY CONAKRY 0901
RUEHGB/AMEMBASSY BAGHDAD 0438
RUEHMV/AMEMBASSY MONROVIA 7200
RUEHCH/AMEMBASSY CHISINAU 0301
RUEHUJA/AMEMBASSY ABUJA 1046
RUEHOS/AMCONSUL LAGOS 1180
RUEHPL/AMEMBASSY PORT LOUIS 0714
UNCLAS PARIS 002362 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EB/IFD/OMA 
TREASURY FOR DO/IDD AND OUSED/IMF 
SECDEF FOR USDP/DSAA 
PASS EXIM FOR CLAIMS -- EDELARIVA 
PASS USDA FOR CCC -- ALEUNG/DERICKSON/KCHADWICK 
PASS USAID FOR CLAIMS 
PASS DOD FOR DSCS -- PBERG 
 
E.O. 12958: N/A 
TAGS: EFIN ECON EAID XM XA XH XB XF FR
SUBJECT: PARIS CLUB - APRIL 2006 TOUR D'HORIZON 
 
 
SENSITIVE BUT UNCLASSIFIED.  NOT FOR INTERNET DISTRIBUTION 
 
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SUMMARY 
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¶1. (SBU) At the April 5 Paris Club meeting, creditors 
accepted in principle Algeria's offer to prepay at face 
value its previously rescheduled Paris Club debt.  The US is 
the third largest creditor with $1.2 billion in claims, just 
over half of which are pre-payable without penalty.   The US 
stressed the importance of international support for 
Liberia's efforts to normalize relations with the 
international financial institutions (IFIs) and pledged to 
mobilize necessary resources for debt relief.  Creditors 
provided financing assurances for Moldova's new Poverty 
Reduction and Growth Facility (PRGF) with the IMF.  Moldova 
and Grenada are tentatively scheduled to come to the Club 
next month to negotiate the terms of non-concessional debt 
reschedulings.  The final phase of Nigeria's October 2005 
Paris Club agreement will enter into force later this month 
provided that the first review of Nigeria's Policy Support 
Instrument (PSI) is approved by the IMF's executive board, 
as anticipated.  Other countries on the agenda included 
Afghanistan, Angola, Argentina, Brazil, Cameroon, Guinea, 
Iraq, and Seychelles.  End Summary. 
 
AFGHANISTAN 
----------- 
¶2.  (SBU) The IMF has reached an agreement ad referendum on 
a PRGF covering the period April 2006 to March 2009.  The 
program will be brought to the executive board at the end of 
May, if Paris Club creditors provide assurances of debt 
relief at the May 10-12 meeting, which in turn depends on 
Afghanistan reaching an agreement with Russia on the amount 
of its bilateral debt.  The US reported that it met on March 
22 with Afghan Deputy Finance Minister Shahrani, who 
promised to reach an agreement with the Russians by the May 
Paris Club meeting. 
 
ALGERIA 
------- 
¶3.  (SBU) Creditors accepted in principle Algeria's offer to 
prepay at face value its previously rescheduled Paris Club 
debt, which totals $7.7 billion.  Most creditors announced 
their intention to participate in the transaction; a few 
have yet to decide.  The USDEL said only debt owed to Exim 
(around $665 million) could be prepaid without penalty. 
Some creditors (Belgium, Finland, France, Italy, UK) 
reported small arrears and/or unreconciled debt but said 
they did not intend to block the prepayment.  The 
authorities hope to complete the transaction by end-May. 
Italy is the largest creditor ($1.7 billion), followed by 
France ($1.6 billion) and the United States ($1.2 billion). 
 
¶4.  (SBU) Separately, the United States, supported by Canada 
and France, characterized as troubling Russia's recently 
concluded agreement with Algeria linking debt cancellation 
with trade.  Under the terms of the agreement, Russia will 
freeze Algeria's debt as of February 1, 2006 - a stock of 
$4.7 billion - and will cancel the debt once Algeria has 
granted commercial contracts to Russia equal to this amount. 
The USDEL pointed out that such a linkage amounts to managed 
trade and would not be appropriate in the context of a Paris 
Club debt treatment.  Russia responded that most of the 
commercial contracts had already been signed. 
 
ANGOLA 
------ 
¶5.  (U) Paris Club Chairman Musca's meeting with the Angolan 
finance minister has been postponed until late April.  As a 
result, it is still unclear at this stage how Angola will 
react to the Club's proposal that Angola resume payments in 
excess of scheduled debt service so as to begin paying down 
arrears.  In preliminary discussions with the Secretariat, 
the authorities expressed a willingness to resume payments 
to the Paris Club as part of a coordinated solution aimed at 
restoring commercial ties.  The IMF reported that Angola is 
finalizing a $10 billion credit line with China's Exim bank, 
in addition to a $2 billion credit line that already exists. 
 
ARGENTINA 
--------- 
¶6.  (SBU) At the request of Germany, the Secretariat will 
seek a meeting with the Argentine authorities on the margins 
of the IMF-World Bank spring meetings to remind them of 
Argentina's arrears to the Paris Club and the process for 
normalizing relations.  The Secretariat, however, expressed 
doubt that such a meeting would produce a positive result, 
noting that the authorities are already well aware of the 
current situation. 
 
BRAZIL 
------ 
¶7.  (U) At the January 2006 meeting, creditors accepted 
Brazil's offer to prepay previously rescheduled debt.  Debts 
to the US, Austria, Belgium, Italy, Spain, Switzerland, and 
the UK have now all been fully prepaid.  Japan's debt has 
been partially prepaid and the balance is expected to be 
prepaid later this month.  Canada, France, Germany, and the 
Netherlands reported that arrears still haven't been 
cleared, although discussions with Brazil are ongoing.  The 
Secretariat will contact the authorities by telephone and 
 
SIPDIS 
remind them of their commitment to clear these arrears by 
end-March 2006. 
 
CAMEROON 
-------- 
¶8.  (U) The IMF and World Bank expect completion point under 
the Heavily Indebted Poor Countries (HIPC) initiative to be 
reached by the end of April.  In light of outstanding data 
reconciliation issues, the Secretariat will invite Cameroon 
to come to the Club in June, rather than May, to negotiate 
the terms of the debt treatment it will receive at 
completion point. 
 
GRENADA 
------- 
¶9.  (SBU) Grenada is scheduled to come to the Club for 
negotiations next month.  The UK noted that the authorities 
were likely to seek a concessional debt treatment (i.e., 
involving some debt reduction); therefore it was important 
to manage their expectations.  The Secretariat asked the IMF 
to pass the message to the authorities that a concessional 
treatment was not in the offing.  Both the UK and Belgium 
reported short-term credits that may need to be rescheduled, 
depending on Grenada's capacity to pay. 
 
GUINEA 
------ 
¶10.  (U) Guinea's new PRGF could come to the IMF executive 
board in the first half of June.  Given arrears to Paris 
Club creditors, the IMF will request assurances of debt 
relief, possibly at the next Paris Club meeting.  HIPC 
completion point could be reached by the end of the year. 
 
IRAQ 
---- 
¶11.  (SBU) Australia expects to conclude its bilateral with 
Iraq the week of April 10-14.  Russia, on the other hand, 
reported no progress since last month's discussion. 
Although Russia and Iraq have agreed on the text of a 
bilateral, the data reconciliation process remains 
incomplete.  Russia said it was waiting for a response from 
Ernst & Young, who are representing the Iraqis. 
 
LIBERIA 
------- 
¶12.  (U) The IMF summarized the long and challenging road to 
debt relief under the HIPC program, and called on creditors 
to provide documentation of their claims to the authorities. 
At the suggestion of the US, the Secretariat agreed to 
launch a data call.  The USDEL said it is committed to help 
mobilize necessary resources for debt relief and new 
financing from the IFIs. 
 
MOLDOVA 
------- 
¶13.  (SBU) Paris Club creditors (US, Germany, Italy, Japan, 
Russia) provided assurances of debt relief for Moldova's 
three-year PRGF, which is expected to come to the executive 
board in early May.  The IMF projects a financing gap of $48 
million in 2006, taking into account IMF disbursements and 
the government's partial settlement of arrears to the Club. 
Based on the latest debt sustainability analysis, Moldova's 
debt dynamics appear to be comfortably sustainable.  In this 
context, the Secretariat has proposed a non-concessional 
rescheduling on Houston terms.  Comparability of treatment 
is not expected to be an issue, since Moldova has already 
restructured much of its non-Paris Club debt.  Moldova is 
tentatively scheduled to come to the Club next month. The US 
has $58.1 million in claims. 
 
NIGERIA 
------- 
¶14.  (U) The Secretariat has prepared a letter to the 
authorities announcing that the final stage of the October 
2005 Agreed Minute has entered into force.  The letter will 
be sent once the first review of Nigeria's PSI has been 
approved by the executive board (anticipated for April 17). 
The date by which Nigeria must make its final payments to 
Paris Club creditors will be fixed at 20 business days after 
the date of approval of the PSI review. 
 
SEYCHELLES 
---------- 
¶15.  (SBU) The Secretariat asked if any creditors were 
negotiating bilaterally with the Seychelles.  Belgium 
acknowledged that, following a meeting between the two 
countries' finance ministers, it had agreed to reschedule 
the Seychelles' ODA debt, which had fallen into arrears. 
The UK said it had spoken with the authorities, but there 
was no prospect for an agreement at this time.  The UK added 
that it was important to continue to press the Seychelles to 
pursue a multilateral solution in the Paris Club.  The 
Secretariat will send a letter to the authorities reminding 
 
SIPDIS 
them of the Club's principles and urging them to seek an IMF 
program as a first step toward a Paris Club treatment.  (The 
US is not a creditor.) 
 
METHODOLOGICAL DISCUSSION:  SHORT-TERM DEBT 
------------------------------------------- 
¶16.  (U) There was broad agreement that short-term debt 
should be considered senior to other categories of debt and 
therefore should be excluded from most Paris Club 
treatments.  There were differing views, however, as to 
whether creditors had the right to reschedule short-term 
claims on a bilateral basis.  Germany and Japan stressed the 
need to maintain flexibility in order to preserve the 
financing of essential imports.  The USDEL, joined by 
Denmark, Italy, Norway, Spain, Sweden, and Russia, argued 
that the Club as a whole, not individual creditors, should 
judge the consistency of such bilateral reschedulings with 
the principle of creditor solidarity.  In the end, creditors 
agreed to modify the Secretariat's working paper to require 
prior notification of bilateral short-term debt 
reschedulings. 
 
STAPLETON#