Special Briefing on Financing Reconstruction in Iraq and Donors Conference Held in Brussels
Alan P. Larson,
Under Secretary for Economic, Business and Agricultural Affairs
Remarks at Special Briefing
Washington, DC
September 4, 2003
MR. ERELI: Welcome back, everybody, wonderful to have you. I'm Adam Ereli, the Deputy Spokesman for the State Department, very pleased to welcome Under Secretary Al Larson today, who is fresh from a trip to Brussels, where he attended a meeting of the -- preparatory meeting for the donors conference of Iraq reconstruction that will be taking place in Madrid next month.
He is here to brief us on his meetings there, and on the subject of Iraq reconstruction in general. We'll start with a short statement by Under Secretary Larson followed by your questions. Thank you very much. Thank you, Under Secretary Larson.
UNDER SECRETARY LARSON: Good afternoon. We thought it could be helpful to give a little bit of background about how the effort to raise political support and funds for reconstruction in Iraq has been moving forward, get into a little bit of the mechanics of this to whatever extent it may be of interest to you.
The starting point is that we have been working on this for several months, and it's basically been a team effort between the State Department, the Defense Department and the Treasury, were -- and especially my counterparts in each of those agencies.
Over the summer, we reached agreement that the commission of the European Union would host in early September, a face-to-face meeting of something called a "core group." The core group was established at a meeting sponsored by the United Nations Development Group in New York in June.
And the core group has included the United States, the European Union, Japan, the United Arab Emirates and three international institutions -- the World Bank, IMF and United Nations Development Group, and, of course, the CPA. And over the course of the summer, we have been coordinating through conference calls basically, working out issues related to preparations for a successful donors conference.
One of the things that was commissioned over the course of the summer were needs assessments surveys, 14 of them, each one led by one of the multilateral organizations, but every one of them having multiple membership, certainly from difference of the international organizations. In some cases, bilateral donors like Japan or the European Union had members on these teams.
There also has been going on over the course of the summer work led by the World Bank on trust funds. Trust funds are something that have been used in many post-conflict situations. Most recently, in Afghanistan we have had great success with something called the ATRF.
The issues you have to analyze, in terms of trust funds, is how did he manage them? What purposes can these monies be used for? Who decides how the monies are used? It's sort of governance issues, and there are a number of options on that.
We also reached agreement over the course of the summer that Spain would host a ministerial level donors meeting on the 23rd and the 24th of October. So the meeting yesterday in Brussels was an opportunity to take stock of the status of preparations on all of these issues.
One of the very encouraging outcomes of the meeting yesterday was to learn that the work on these 14 assessments, these 14 needs assessments has been going on quite successfully. There was concern that the bombing of the United Nations headquarters in Iraq might have set some of that work off course. Some of the people that had been working on these assessments were injured, in some cases, seriously in that incident.
But it is a real inspiration and encouragement to see that, notwithstanding that while the work has continued and we received very good reports, 12 out of 14 of them in writing; in other cases, the written reports weren't quite ready, but they look as if they are going to be prepared fairly soon.
The meeting also resulted in a work program, a very intensive work program for this month to continue preparations. I'll give you a little bit of the detail on that, just to give you the flavor of what needs to be done.
Tomorrow in New York, the United Nations is convening a meeting of something called the "Liaison Group." This is the broader group of countries that are potential donors and interested in the issue of Iraq reconstruction. It's an opportunity for them to be brought up-to-date on the results of yesterday's meetings to offer their suggestions and inputs into preparation for the conference, issues related to the trust fund, things of that sort.
There will be meetings going on around the 15th, that will be designed to refine and review some of the financial estimates that are associated with needs. And here, one of the things that had -- there are a couple of things that have to go on. One is that these 14 needs assessments need to be synthesized. They need to be stitched together and made coherent, and the financial implications of them need to be tallied up.
As that is going on, that will be an input to work that has been going on in Baghdad very intensively over the summer on a budget for the year 2004. It's very important. And this is something that the authorities in Baghdad feel strongly about. But also others like the International Monetary Fund, feel very strongly that the budget should be the core mechanism for setting priorities on expenditure, not just for operating expenses like salaries and things of that sort, but also reconstruction priorities.
And so there is going to be a very intensive effort to dovetail the emerging results of the needs assessments that have been led by the international organizations with the analysis and assessments going on in Baghdad with respect to the budget.
I was encouraged yesterday that, based on the reports we heard, that synthesis process is already well underway and many of the estimates that we heard from the international organizations were very, very consistent with the estimates that we heard from the team from Baghdad.
I might add, just by way of brief digression, that there was quite high level and effective participation from the participating countries. The CPA was represented by Marek Belka, who is the former Deputy Prime Minister of Poland, and is serving as the head of the CIC, which is the assistance coordination mechanism there, and they also had Iraqi representatives from some of the ministries. They had a Deputy Foreign Minister from Japan.
The meeting was chaired very capably by the commission of the European Union. We will need to have another meeting of the group that met yesterday. That would be in early October. One of the things, I think we will want to do at that meeting is see whether we can reach conceptual agreement on what this trust fund should look like.
If I can, I'll just add one more comment on the trust fund, so you can see how it fits into things. You all know that under the existing Security Council resolutions, there is something called, "The Development Fund for Iraq." And this is the fund into which all proceeds, all export proceeds and tax revenues from within Iraq fall; and then those monies are expended according to priority set out by the CPA and the Governing Council, and now the new team of ministers that has just been stood up this week in Iraq.
Alongside of that, it is expected that there would be this trust fund, or, perhaps, two trust funds that would be receptacles for donors to put funds that they want to contribute to Iraq reconstruction, and would be used for high priority areas that are identified in the process of preparing for the donors conference.
I think that sets out everything I wanted to let you know about, in terms of the mechanics of how these processes work. The one point I would emphasize in closing is that it was very encouraging to have strong participation and leadership from both the Europeans and from the Japanese. There has been very, very strong interest and support for this work in each of the international organizations as well.
We left the meeting determined to keep to the timetable for the Madrid conference, and I think are quite confident that the work is fairly well advanced. Obviously, there is a lot of big political decisions that lie ahead, in terms of the size of contributions that countries are going to be prepared to make. It was neither the intention nor the result of yesterday's meeting to take pledges or to get a sense of how much countries are prepared to contribute, but there is a definite multilateral effort underway to prepare for the conference.
QUESTION: Where is that second meeting going to be held, Brussels again?
UNDER SECRETARY LARSON: The second meeting will be in Madrid.
QUESTION: Madrid. Before the -- late October -- early October, I mean.
UNDER SECRETARY LARSON: Yes, the early October, Madrid preparatory meeting for the late October ministerial meeting.
QUESTION: Can I ask you -- and I have all sorts of questions, but I'll try to hold -- keep them down. I'm trying to translate this somehow into something that Americans might want to read about.
UNDER SECRETARY LARSON: Mm-hmm.
QUESTION: And I was wondering, the U.S.'s -- Americans, the taxpayer, simply, is bearing a heavy burden for reconstructing Iraq. There are figures like $60 and $70 billion floating around, and as money the U.S. will have to spend on reconstruction.
Number one, I have lost track of the argument the Administration made before and during the war that Iraq is an immensely rich country, rich resources, very skillful people, and if they could just get out from under Saddam Hussein -- it isn't like Afghanistan, you know, poor country -- they'd be off and running.
And all of a sudden, I find, you know, we're raising -- we're spending $60-$70 billion on this allegedly, potentially very rich country which produces oil, and we've looked at the gas station price -- the prices at the gas station. So here -- let me boil it down.
UNDER SECRETARY LARSON: Okay. Let me work backwards.
First of all, we have made the case everywhere, including in testimony before the Congress and in meetings like the one we had yesterday, that this is about a responsibility the international community has to the Iraqi people; and that if you look at the hole that they find themselves in, it was not the result of a 25- to 30-day war, it's the result of a long period of neglect, misrule and so forth. And I think that argument is fairly substantially accepted by our friends in the international community.
Secondly, we have expressed the view that Iraq does, because Iraq has oil and other resources including a fairly well educated elite, that one can shoot for a reconstruction process that very quickly is financed predominantly by their own resources and by foreign investment and domestic investment. But there is no doubt that in the very short run there is going to need to be substantial requirement for foreign government assistance.
Now, the numbers you quoted -- the Secretary -- I'm not going to add -- the Secretary commented on the numbers today, basically, by saying he wasn't going to comment. I'm not going to go any further than --
QUESTION: Well, we have the numbers. You don't have to disclose them.
UNDER SECRETARY LARSON: Well, but --
QUESTION: We've had it on our wire, the Post has had it in the newspaper, everybody knows them. When you tell the Hill something, it doesn't take long to find out what's going on.
UNDER SECRETARY LARSON: But what I want to encourage you not to do is assume that any of the numbers you've read in the papers are numbers about the first year reconstruction requirements in Iraq. That's still being -- those numbers are being scrubbed.
Yeah.
QUESTION: But, I mean, can you talk about the proportion? Will the U.S. still bear the brunt or the burden, most of the burden of reconstruction, or do you feel that - (inaudible) about the Japanese and some rich European countries -- maybe the taxpayer will get a bit of relief from all this?
UNDER SECRETARY LARSON: We are going to push for as much burden-sharing as possible. In the case of Afghanistan, when we went through a similar exercise, we found it possible to get very substantial contributions from the European Union, Japan and some of the multilateral institutions, and we continue to cooperate with the European Union in particular on raising additional money for Afghanistan.
Now, Iraq, each case is different. I am sure that Iraq will be different. I think it will be a very substantial political lift to get contributions on the proportionate scale that we were able to do in Afghanistan. But we do very firmly believe that this is something that is an international responsibility and we are going to work very hard to get strong contributions.
QUESTION: Was the issue of the lack of security in Iraq mentioned by some of your counterparts as an obstacle to providing help and pledges moving forward with the reconstruction?
UNDER SECRETARY LARSON: Sure. Now, we have, over the course of our conversations in the summer, had regular discussions of the security issue. And yesterday we arranged for a security briefing at the beginning, so as to respond to the natural interest on the part of other potential donors about how we -- how we size things up. And we have a commitment on an ongoing basis to be sharing our information assessments so that the organizations that have people on the ground or are considering putting people on the ground, you know, can make their own decisions about the risks that may be there.
QUESTION: When you talk about trying to get donors for specific projects, and perhaps they could bring in their own personnel and run a project, how is that going to coalesce with all of the political discussions that are going now in terms of UN role, U.S. in command of security? And who is going to be the ultimate --
QUESTION: Coordinator.
QUESTION: -- coordinator -- thank you -- coordinator and chooser, I guess, if you will, of who does what project?
UNDER SECRETARY LARSON: The process we have underway is designed to get international acceptance of an agreed set of priorities. The reason we're having the Bank and the UN and the IMF in there is to make sure that, as they do their assessments and do them in consultation with the authorities on the ground, the Iraqis and the CPA, that there emerges from that a great set of priorities, but this is what needs to be done.
Those priorities should inform, both the budget that is developed in Baghdad, as well as the priority -- priorities that are embedded in this trust fund, so that to the extent that you are using budget money under the development fund for Iraq or donor contributions that flow into this multilateral trust fund, it's the same set of priorities that are going to animate them. In some cases, you may have a government that says we would prefer to act, you know, on our own through our aid agency rather than just write a check.
I am sure there will be an opportunity for that sort of activity provided it is consistent with the priorities that have been set out. And so that's a case where it is in the budget as an investment or capital expenditure that the authorities would like to make, but the money may not actually flow through the budget. In that instance, a country may come in and build a road or build some schools.
QUESTION: Are you encouraging that type of participation like, let's say, the Germans can take over education or roads, or are you looking more to put money in the pie and distribute it as you will?
UNDER SECRETARY LARSON: I think it's fair to say that you feel you can get the maximum amount of coherence if you put money into a common pool and spend it according to some common priorities. But at the same time, donor conferences often have a little bit of character of a potluck supper. And countries, you know, bring their favorite dish, and as long as that favorite dish is something that can make a contribution, people are going to accept it.
QUESTION: If I could just follow up one more. On this large pot of money, who is going to dole out the contracts for the various projects?
UNDER SECRETARY LARSON: The trust fund that is under consideration would have multilateral contracting rules. So, for example, if it were a trust fund that was administered by the World Bank or the World Bank was essentially the fiduciary agent and there was an administrator, then the likelihood would be that World Bank procurement rules would pertain to that money. It's possible that you could have a separate trust fund that was administered by the UN to deal with other issues and similarly you'd have UN procurement rules.
Jonathan.
QUESTION: Is the United States also proposing to put its funds into this trust fund, and therefore, abiding by these multilateral contracting rules or?
UNDER SECRETARY LARSON: No decision is made on that. But in the past, we have participated in trust funds, both to show our support for the multilateral approach; and also in some trust funds you have a governance structure that requires that you contribute money to be involved in the governance, and so that sometimes is an incentive. But in this instance, no decision has been made.
QUESTION: Well, I am a little confused as to why, if you already have a mechanism at the UN for money, some place to put money to help the Iraqi people, why you need to go through the exercise of setting up these trust funds, unless, perhaps, it's because you don't want to work through the UN mechanism for all expenditures.
UNDER SECRETARY LARSON: Well, by the UN mechanism you're talking about the development fund for Iraq?
QUESTION: Right.
UNDER SECRETARY LARSON: Yeah. From the very, very beginning, and based on the experience of many, many post-conflict situations where there were trust funds, we felt that it was likely that donors would like to see a trust fund here.
I think for some donors, the fact that there could be a trust fund where there would be a governance structure that would be negotiated, where they could be able to tell their legislatures, "Here are the agreed set of priorities into which our monies are flowing. Now we can't earmark it, but we do know that our money is going for one or another of these types of reconstruction expenditures," that that's more appealing to them than saying that we are putting this money into the pool of revenues, like oil proceeds, that are being used to, in the first instance, pay salaries in Baghdad and cover other general governmental expenditures. And so our view has been a very practical one. If that elicits more contributions for reconstruction, then we're for it.
QUESTION: A very basic question. You said there were 14 different needs assessments going on. Could you explain a little bit more about how those are divided? Are they different groups within your donors that are doing the needs assessment, or based on different elements of influence? You didn't explain anything about that.
UNDER SECRETARY LARSON: Sure. Let me -- I should have. Let me give you some examples. I don't propose to list all 14 of them. But, for example, there is one overarching one that's called "Macroeconomic," and that's the one that tries to get an overall handle on the budget, inflows and outflows, the balance of payments, things of that sort. There's a second one, and most of them are sectoral.
We had a fairly detailed briefing by a gentleman from the World Health Organization, who was leading the health survey or needs assessment, and they -- you know, they did a fairly detailed analysis of the types of public health problems in Iraq, how much expenditures there were, the state of the hospitals, what needed to be done physically and otherwise to rehabilitate the hospitals. There's a report on agriculture. There's another report on telecommunications and transportation. So most of these are sectoral, and a few of them are more overarching, like the one on macroeconomics.
QUESTION: And who conducted them?
UNDER SECRETARY LARSON: The United Nations led several, but with participation by the World Bank, and, in some cases, participation with bilateral donors who had a particular interest or expertise in that area. The World Bank led a number on the same basis and the IMF led one, the one on macroeconomics.
QUESTION: Sir, I am just a little puzzled. I just -- I don't have any idea how much this is going to cost. The closest any administration official has come to say is Mr. Bremer to The Washington Post, tens of billions of dollars. We don't know what percentage the American taxpayers will have to pay, in terms of burden-sharing, which you had talked about.
How much is this going to cost? Is this going to be north of 70 billion for just the first year after the Saddam regime fell? I mean, we just don't know. And --
UNDER SECRETARY LARSON: It's going to be south of 70 billion. But the point is this, the work -- I'm not going to be dodgy on this, but I'm also not going to give you a number that hasn't been developed yet.
The work that we have going on over the next month will produce either an estimate or a range of what that need is. One of the things that I began to hear yesterday is that when you look at the operating costs of the government and the expected revenues from oil and tax receipts, that's a picture that's -- comes into focus fairly sharply. It still needs to be refined quite a bit, but that's a relatively straightforward number.
The number that is harder to pin down in a meaningful way is the number on what needs to be done and can be done in the area of reconstruction. And the reason that's a difficult number to pin down is, first of all, you do need to add together these needs that have been identified in each of the sectoral studies, and we have some estimates in some sectors but we don't have the aggregate.
Secondly, you do need to prioritize to some extent, both within sectors and across sectors.
Third, you need to do an assessment of what the absorptive capacity is in the country. How much money can you effectively spend? And one of the things we heard from the World Bank yesterday is that in the history of post-conflict situations, there has been a tendency to overestimate absorptive capacity, to be too optimistic about how much money you can effectively spend.
So the assignment that we have collectively, the international organizations and the core group that's trying to move this process forward, is to develop the best -- and the CPA being in the middle of all this -- is to develop the best possible estimate of what those reconstruction needs are. And that's what we'll have going into the donors conference.
QUESTION: When you mean -- when you say "it's" going to be south of 70 billion, define the word "it."
QUESTION: Is that U.S. --
QUESTION: Is it U.S. as the American taxpayer or -- and who is going to pay for that south of 70 billion, and for what, as part of the reconstruction costs?
UNDER SECRETARY LARSON: What I'm saying is that the -- it is my guesstimate that the first year budget including reconstruction, as well as operating expenses, is south of the number you gave.
QUESTION: It's not about the U.S. contribution then at all?
UNDER SECRETARY LARSON: Well, the --
QUESTION: Overall, you're saying?
QUESTION: You're saying overall?
UNDER SECRETARY LARSON: I am not getting into these. I am talking about reconstruction. I am not talking about the whole range of other things. I am not talking about -- I am not talking about expenditures on U.S. forces. I am not talking -- I am talking about reconstruction expenditures.
QUESTION: The 70 -- forgive me for interrupting -- includes the military, so it would have to be south if it didn't include the military. Isn't that logical?
UNDER SECRETARY LARSON: You're agreeing with me, then. Thank you.
QUESTION: Well, I'm trying to -- get you to clarify it, not to --
UNDER SECRETARY LARSON: No, I'm just -- my intention is not to get involved in the numbers because they haven't been refined, but a specific number was thrown out and that's --
QUESTION: Well, isn't that why you said it was south of that number?
UNDER SECRETARY LARSON: And that's certainly one reason.
QUESTION: May I ask my question?
UNDER SECRETARY LARSON: Yeah.
QUESTION: To what extent in Brussels, did you hear other donor organizations or countries express the view that many are saying in public, which is that the current structure, aside from these trust funds for the funds, but the current governing structure in terms of UN involvement in Baghdad, is not appetizing for them and not something that they feel comfortable with if they have to be coming up with this kind of money?
I mean, they are saying it publicly. To what extent was that discussed in Brussels?
UNDER SECRETARY LARSON: A consistent theme in the comments from some of our partners all through the summer has been that their ability to raise money and raise political support for reconstruction would be enhanced to the extent that there is a more visible United Nations role, for example.
They have said, and I commented in the context of the question about the trust funds, that for a lot of donors being able to have a trust fund mechanism is an element that they believe enhances their ability to contribute political and financial support. And, you know, we certainly heard that idea expressed yesterday as well.
QUESTION: I am trying to understand how these potential trust funds would work. You mentioned there might be one or two. After that, you mentioned that the UN might run one, the World Bank might run one.
UNDER SECRETARY LARSON: Right.
QUESTION: Does this mean that the Bush Administration does not intend to be in charge of these funds or how that money would be spend, but would simply be one among many participants in whatever governing process there were for those funds?
UNDER SECRETARY LARSON: Yeah, I think the best way to answer this is that we believe, as do development experts, most especially those in the International Monetary Fund, that for assistance to be effective it has to be spent within the context of an integrated, cohesive plan, and that that plan is usually reflected in the budget itself. And so we believe very strongly that it is important to develop a shared view of what the priorities are and what money should be expended on.
The process that we have had underway over the summer and will be continuing for the next month is designed to achieve that sort of coherence. And the way that it's done is by having experts from these respected international institutions go in, survey needs and come up with their own reports, but to do so in dialogue with the authorities in Baghdad, with the CPA, with the interim ministers and the Governing Council, and to basically achieve a consensus that would be reflected both in the reports of the international institutions and the budget that would be available in draft form from Baghdad at the time of this donors conference.
And so just to finish the thought, so you have these agreed priorities, you have this plan. You will need to have -- Commissioner Chris Patten commented yesterday or the day before that the idea of the trust fund is to have something that is separate but coordinated with the Development Fund for Iraq, and that is our view as well. It would be separate but it would be coordinated, and therefore consistent with the priorities that are set out in the expenditures of the DFI.
QUESTION: That's helpful. If I might follow up, once those -- once that consensus is developed, if indeed it is, and the money exists in these trust funds, would the United States control those trust funds and how that money is spent? Would those decisions be made by a board or by the World Bank agreement itself?
UNDER SECRETARY LARSON: It would be made by a board. The basic governance structure -- and the details, of course, will be refined over the next month or two -- but how it works is that you typically have an administrator who makes decisions, and the administrator reports to a management committee or a management board.
And so one of the discussions will be who should be on that management board -- you know, presumably some of the other international organizations that are involved, possibly some major donors, possibly Iraqis representing the interim ministries. I mean, that would be worked out.
But it would be -- it would not be controlled by the United States. The United States would want to have its voice in that. And, most particularly, we'd want to make sure that it was set up in a way that there was coherence in the priorities. And this is how past trust funds have operated. This is sort of a well developed model.
QUESTION: And that person, that administrator, would not be Jerry Bremer or the person in the Bremer job, it would be separate from that?
UNDER SECRETARY LARSON: That's correct.
Yes.
QUESTION: I'm assuming you -- that donations come through in October, what's the earliest you could actually have these trust funds up and running? How soon is this going to become a significant contributor to reconstruction in Iraq?
UNDER SECRETARY LARSON: Well, I think -- the World Bank reported yesterday they don't believe that there are real obstacles to setting up a trust fund quickly. They need to be given the guidance about what the donors want, how should it look, so that the donors are prepared to contribute money.
But they don't see -- that's not the long pole in the tent. The long pole in the tent will be actually getting legislatures to appropriate the money, getting the money, moving from the commitment, to the disbursement, to the expenditure of that money on the ground in Iraq. That's the thing that we've had to work on very hard in Afghanistan.
We had tremendous outpouring of support in Tokyo, reflected by commitments. Since then, we have been pounding on countries to actually disburse that money, including into the Afghan reconstruction trust fund; and then, once it's in the fund, you have to pound on the fund to make sure that it moves from the fund to expenditures on the ground.
QUESTION: How much of the Afghan money has actually been allocated at this point?
UNDER SECRETARY LARSON: Well, a lot. If you want a figure, I can, sir, go back and get it. It's an important question. And one of the things that we're trying to do in the Afghan context is get countries to accelerate the implementation, disbursement of their programs. But, you know, let me follow up with you and give us our best estimate on that.
QUESTION: And just quickly, is this going to be all straight expenditures or are you looking at ways to leverage the money? I mean, is it going to be, you know, a hundred dollars in, a hundred dollars out, in a particular program, or are you going to try to leverage it in any way?
UNDER SECRETARY LARSON: Again, a good question. The focus of the meeting that we had yesterday was all on fairly straightforward, a dollar-in, a dollar-out, grant assistance. It will be important for Iraq to have a capacity to borrow. It is, as we began with, a country that has oil resources, and therefore does have a capacity to borrow, going forward. We will need to resolve the issue of outstanding debts which are very, very large.
For the time being, there has been an agreement among the G8, which, I think, broadly shared, that we shouldn't expect Iraq to pay any money on its external debt, at least until the end of 2004. There will need to be, over the next year, a formal resolution of Iraq's debt situation, just to absolutely clarify what the situation will be going forward, and that, among other things, will help open the door to responsible borrowing.
Go back, and then --
QUESTION: With all these countries now putting up a lot of money, theoretically, putting up a lot of money for Iraq, do you think these legislatures you mentioned will be a little bit less inclined to continue giving money to Afghanistan at the levels that were previously expected?
UNDER SECRETARY LARSON: I don't think so, and we are certainly going to work very hard to make sure that's not the case.
One of the things that we did yesterday was to take time out for a few minutes during lunch and at the end of the day to remind everyone that we can't forget Afghanistan to highlight the efforts that the United States is making, the way we're trying to redouble our efforts to move money into Afghanistan, and the fact that we are looking to them to do that sort of thing as well.
So we give a high priority to avoiding any scenario where Afghanistan gets crowded out, and we even took the occasion of yesterday's meeting to put a focus on it.
QUESTION: Is there any special effort to get Iraq's Arab neighbors in as a group, or will they just be separate individual countries working through the World Bank or something else?
UNDER SECRETARY LARSON: I'm sure we'll be approaching all significant donors on a bilateral basis. The United Arab Emirates is participating in the work of the core group. And I anticipate that we'll go to every major nation that has the capacity to contribute and ask them to do that, not to only contribute to multilateral organizations.
Last question.
QUESTION: The DFI is being used to pay the salaries of Iraqi civil servants, correct?
UNDER SECRETARY LARSON: Among other things.
QUESTION: How much money is in the DFI right now?
UNDER SECRETARY LARSON: I don't have a figure. We had Peter McPherson, when he came to the preparatory meeting in New York, gave some estimates that I can pull out for you. I believe he was estimating that they could get oil revenues this year of about $3.4 billion. I believe they have lowered their estimate for the oil proceeds that they expect to get over the rest of the year, but it's still a very substantial number.
Next year, they are refining their estimates of how much they'll be able to get next year based on the expected profile and the recovery of production and export volumes, combined with their best estimates of what prices are likely to be. And on that latter issue, they're getting some advice from the international institutions.
QUESTION: And the south of 70 billion, that refers specifically to American taxpayers. I just want to make sure that's correct, right?
UNDER SECRETARY LARSON: The question specifically was, or at least the way I interpreted the question was, what the actual budget for Iraq in 2004 was likely to be, the operating and the investment or reconstruction budget. But again --
QUESTION: Do you mean the Iraqi budget or the U.S. budget? Sorry.
UNDER SECRETARY LARSON: Well, I'm talking about Iraq. But what I want specifically do to is two things: One, make clear I'm making no comment whatsoever about the stories that you've been talking about in terms of request for the -- from the Congress; and also, making -- but also sort of stressing that what we are not talking about in this briefing is costs that relate to our troop presence in Iraq. In other words, we're just talking about paying salaries, operating budget in Iraq, economic reconstruction in Iraq.
QUESTION: Are you just responding to 70 billion by coincidence because it was mentioned to you; $70 billion has nothing to do with your assessments, is that right?
UNDER SECRETARY LARSON: Our assessments are being built from the ground up. I mean, the right way to look at this issue, in my judgment, is to -- is the way that the organizations that are working on it are. And the way they're working on it is they're starting from a base that says, "What are the operating expenditures going to be? And salaries, are the main one, but not the only one. And what are the likely revenues going to be? Oil being the main one, but there are other domestic tax revenues that will be coming in."
So that's sort of the starting point. But then when you get beyond that, you're looking at investment and reconstruction cost, and that is the part that is getting the most intensive review from the multilateral organizations and from the authorities in Baghdad. And it's that number that's going to be refined and scrubbed over the course of the next month.
QUESTION: In the first year, is what you're saying?
UNDER SECRETARY LARSON: And we're talking, the major focus of the meeting yesterday has been on 2004, recognizing that any investment budget implies starting projects that are likely to have expenditure requirements in the years that follow.
MR. ERELI: That will do it. I want to thank Under Secretary Larson joining us today.
[End]
Released on September 4, 2003
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