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Viewing cable 08PARIS2003, UNEXEPCTED DIFFICULTIES IN PARIS CLUB NEGOTIATION WITH

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Reference ID Created Released Classification Origin
08PARIS2003 2008-10-31 17:41 2011-08-24 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Paris
VZCZCXRO0486
RR RUEHDE
DE RUEHFR #2003/01 3051741
ZNR UUUUU ZZH
R 311741Z OCT 08
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC 4710
INFO RUEATRS/DEPARTMENT OF TREASURY WASHDC
RUEKJCS/SECDEF WASHINGTON DC
RUEHRL/AMEMBASSY BERLIN 6870
RUEHSW/AMEMBASSY BERN 2154
RUEHBS/AMEMBASSY BRUSSELS 6832
RUEHCP/AMEMBASSY COPENHAGEN 1614
RUEHLO/AMEMBASSY LONDON 7011
RUEHMD/AMEMBASSY MADRID 2882
RUEHMO/AMEMBASSY MOSCOW 6208
RUEHNY/AMEMBASSY OSLO 1663
RUEHRO/AMEMBASSY ROME 8951
RUEHSM/AMEMBASSY STOCKHOLM 1680
RUEHTC/AMEMBASSY THE HAGUE 3037
RUEHKO/AMEMBASSY TOKYO 2853
RUEHBS/USEU BRUSSELS 2421
RUEHTH/AMEMBASSY ATHENS 0802
RUEHKU/AMEMBASSY KUWAIT 0263
RUEHAD/AMEMBASSY ABU DHABI 0295
RUEHDE/AMCONSUL DUBAI 0115
UNCLAS SECTION 01 OF 02 PARIS 002003 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EEB/IFD/OMA 
TREASURY FOR DO/IDD AND OUSED/IMF 
SECDEF FOR USDP/DSCA 
PASS EXIM FOR CLAIMS - MPAREDES 
PASS USDA FOR CCC -- ALEUNG/WWILLER/JDOSTER PASS USAID FOR CLAIMS -- 
WFULLER 
PASS DOD FOR DSCS -- PBERG 
 
E.O. 12958: N/A 
TAGS: EFIN ECON EAID FR DJ
SUBJECT:  UNEXEPCTED DIFFICULTIES IN PARIS CLUB NEGOTIATION WITH 
DJIBOUTI 
 
1. (SBU) Summary. What should have been easy negotiations with 
Djibouti during the second day of the October 2008 Paris Club 
meeting turned out to be unexpectedly difficult due to a knotty 
problem of inter-creditor equity and to Djibouti's last-minute 
desire to exclude some loans that had already been reconciled. 
Creditors agreed to provide a fairly generous Evian Terms treatment 
to Djibouti.  After spirited discussion, creditors agreed to include 
a sentence indicating that certain debts could be removed from the 
agreement, but only by mutual consent.  The Finance Minister did not 
appear for the negotiation, and the Finance Ministry's Secretary 
General appeared clearly uncomfortable assuming negotiating 
authority in his absence.  He ended the long day after signing the 
agreement by stating this was only the first step and that the real 
negotiations would begin during completion of bilateral agreements. 
End Summary. 
 
2. (SBU) The second day of the meeting was occupied with 
negotiations of Evian Terms treatment to support Djibouti's new 
PRGF.  It had been expected that the negotiations would be very 
straightforward, but this proved not to be the case.  Part of the 
problem was that the Djiboutians were ill-prepared.  Their letter to 
the Club requesting treatment had not specified the treatment they 
sought, and they seemed not to know what was expected of them.  The 
Finance Minister did not appear all day, despite the fact that he 
was in Paris and strenuous efforts were made to reach him.  Instead 
the negotiations were conducted by the Finance Ministry 
Secretary-General, who clearly felt that he lacked the needed 
authority. 
 
3. (SBU) Agreement on terms was reached fairly easily, with the 
country being granted Houston terms on pre-cut-off debt, with 100% 
deferral on post cut-off and short term debts and on moratorium 
interest.  The major sticking point was one of inter-creditor equity 
- Djibouti had requested that debts of Djibouti's port authority - 
guaranteed by the Netherlands - be excluded, on the grounds that the 
port dominated the economy, was financially viable, and was current 
on its debts.  The Djibouti delegation raised a fear that a 
restructuring could threaten the viability of the port or have a 
negative impact on its operator, Dubai Ports Authority, the major 
investor in the country. 
 
4. (SBU) Spain objected on the grounds that all of the Netherlands' 
claims would be excluded from rescheduling, while its own claims - 
most of which were in arrears - would be treated.  This would be in 
clear violation of the principles in the new working paper on 
seniority.   (Germany was in a similar position to Spain, with even 
larger arrears, but was relatively quiet.)  The Secretariat 
reiterated that the seniority principles were to be flexibly 
applied, and all agreed that there was tension between the desire to 
help Djibouti and the principle of inter-creditor equity.  After a 
spirited discussion, Spain conceded.  (The amounts involved were 
small, but Spain argued on principle.) 
 
5. (SBU) The Djibouti delegation balked at signing the Agreed 
Minute, arguing that they wanted to exclude some debts to Spain and 
Germany, even though they had signed reconciliations that included 
these debts.  The delegation stated that the loans were "odious", 
though the IMF Mission Chief indicated in a side conversation that 
they meant "invalid". 
 
6. (SBU) After a very lengthy discussion, involved creditors agreed 
to a sentence indicating that debts could be removed from the 
agreement by mutual consent.  When the Secretariat invited 
 
PARIS 00002003  002 OF 002 
 
 
observers' comments, the U.S. delegation expressed misgivings about 
the sentence, as it would allow reopening numbers after a 
negotiation was completed - meaning that creditors could never be 
sure the Club was not being overly generous.  (Note: On the other 
hand, agreeing to any exclusion after the fact could be seen as 
providing more generous treatment than the Club, which the U.S. has 
always supported. End note.)  The Secretariat indicated that the 
sentence had been included before, in an agreement with Brazil, and 
that in any case the mutual consent provision made it legally 
ineffective. 
 
7. (SBU) The Djiboutians refused to sign until the IMF told them 
that, if they did not, Djibouti's PRGF would be deemed off-track. 
In his concluding remarks, the Djiboutian Secretary-General 
indicated that the Agreed Minute represented only the first phase of 
the negotiations, and that they looked forward to clarifying issues 
in negotiations to complete the bilateral agreements. 
 
STAPLETON 
 
 
 
2