Background Briefing by a Senior State Department Official on Board Plane En Route Tel Aviv/Jerusalem

SENIOR STATE DEPARTMENT OFFICIAL: (In progress).…for palace tiles, it ain’t gonna go through. There is another roughly two and a half billion dollars in that escrow account that has contracts applied against that money, but the contract hasn’t been consummated, and no money has been obligated against it. So there is two and a half billion dollars that belongs to the Iraqi people, when we figure out how to get access to it and use it.

And then the coalitions are picking up money, I mean, a billion here in a cellar, you know. And so there are other assets, and there are frozen assets. So there’s money there. We have sent in cash to start paying civilians, for police functions, for the people working in the waterworks. So we’re starting to distribute greenbacks, as a way of getting money flowing in the economy.

There is something of an economy. The oil for food program provided a basic ration. When you look at street scenes of Basra and elsewhere, there are markets. I mean, there is trade. They had a pretty good growing season, so food will be in the markets, and if people are getting twenty bucks for being a cop for a month, that gets the economy going.

Now when the oil starts, that money will come into accounts, and we’ll have to figure out how it can be spent and who has the authority to write the checks – doing it in a transparent way. And we hope that ultimately, that will take up the beat from the oil for food program as it phases out, and get the thing back to the government of Iraq, the people of Iraq, and the economy of Iraq starting to function again, so people are not on the dole.

The biggest problem right now is with all the food they have been receiving through these distribution centers has been in the form of a ration card that they had. So in effect, they have been subsidized by the government, and how do you get out of that subsidized system into something that is a free market, free standing. That’s tricky. What’s interesting, and this surprised me, the currency that is on the streets is still the Swiss dinar, and the Saddam Hussein dinar, and I thought all of that would have been burned up right away. No. It’s currency. And if you look at what’s happened to the currency, the Saddam Hussein dinar, with his picture on it, initially went “shapunk,” and now it’s appreciating and it’s stabilized, and it’s even shown some stability, and you scratch your head. The Treasury guys were talking to us about it yesterday, and I was thinking to myself, okay, and there’s even an exchange rate between the Swiss dinar and the Saddam Hussein dinar, between dollars and Swiss dinars and Saddam Hussein dinars. So we were all set to print new money. And we said, why? Let’s just wait a while, let them figure it out. And somebody said, what’s underneath it? Why would anybody use it? And the answer is, because it works. I mean, it works. People make a judgment. Does this have value? And it has some value. Because people think it has some value, there is the basis of an economy. You now know everything I learned in my MBA school.

QUESTION: You said there was no deadline, but you also described a situation that was an effective deadline. Would you be willing to consider letting the oil for food program, which is already experienced and up and running, continue for another month or so while you work out the technical problems that you described?

SENIOR STATE DEPARTMENT OFFICIAL: That’s an option. As you know, the oil for food program is good to the third of June, and the new resolution extends it for four more months as a phasing-out, but it can stay as long as – there are debates about this – but my own personal view is let it stay in place as long as it’s serving a purpose. Let’s not theologically kill it just for the sake of killing it. If it’s serving a purpose, keep it, and it’s serving a purpose right now, certainly through the third of June, and with the new resolution for another four months. I hope we would have spent it out, or transitioned it to something else in that four months, but as long as it’s there, you do have system that is functioning.

Thank you.