Communication from the Commission to the Council and the European Parliament - The European Union and Iraq - A Framework for Engagement
Date: 2004-06-09
Institutions: European Commission
Subjects: Iraq, economic and social cohesion, economic reconstruction, establishment of peace, humanitarian aid, the EU's international role

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 9.6.2004 
COM(2004) 417 final 

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND THE 
EUROPEAN PARLIAMENT 

The European Union and Iraq 

A Framework for Engagement 

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COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND THE 
EUROPEAN PARLIAMENT 

The European Union and Iraq 

A Framework for Engagement 

I. 

INTRODUCTION  

This  Communication  responds  to  the  16-17  October  2003  European  Council’s  request  for  a 
strategy  for  the  European  Union’s  relations  with  Iraq  and  contributes  to  the  EU  Strategic 
Partnership with the Mediterranean and Middle East. It aims to provide a basis for discussions 
with the incoming sovereign Iraqi government and broader Iraqi society. It seeks to convey to 
the  Iraqi  people,  who  have  suffered  from  years  of  successive  wars,  sanctions  and  brutal 
authoritarian rule, the European Union’s desire to see the emergence of a secure, stable and 
prosperous Iraq, at peace with its neighbours and integrated into the international community.  

The  Communication  is  being  adopted  against  the  background  of  acute  insecurity  since  the 
2003 war, which continues to afflict the Iraqi population in their day-to-day lives and hamper 
progress  in  the  country’s  political,  economic  and  social  recovery.  Nevertheless,  the 
appointment  of  a  new  Iraqi  Interim  Government  and  the  adoption  of  UN  Security  Council 
Resolution 1546 on 8 June 2004 confirming the full transfer of responsibility and authority to 
Iraqis  as  of  30  June  2004  and  reinforcing  the  central  role  of  the  United  Nations  offers  an 
opportunity for the EU to support Iraqi efforts to bring a new direction to their country.  

The  Communication  analyses  the  EU’s  fundamental  interest  in  seeking  greater  engagement 
with  Iraq  and  sets  out  medium-term  objectives  for  the  development  of  EU-Iraq  relations.  It 
argues  that  the  European  Union  should  offer  a  framework  which  allows  for  progressively 
closer EU-Iraq relations, at a pace determined by progress in the political transition and the 
security climate. In the light of the evolution of the situation on the ground, the EU should be 
ready to review its approach. 

II. 

THE EUROPEAN UNION AND IRAQ  

Under Saddam Hussein's 24-year regime, the EU had no political or contractual relations with 
Iraq  and  its  role  was  limited  to  implementing  United  Nations  Security  Council  (UNSC) 
sanctions.  The  EU  has,  however,  been  an  important  actor  in  the  humanitarian  field.  From 
1992 onwards, the European Community (EC) was the largest single donor of humanitarian 
assistance to Iraq after the United Nations (UN). EU-Iraq trade relations were also significant, 
particularly with respect to energy.  

In  addition  to  the  involvement  of  a  number  of  EU  Member  States  in  providing  security  in 
Iraq, the EU’s efforts since the war in 2003 have focused on providing humanitarian relief and 
political and financial support to launch the reconstruction process. In early 2003, the EC set 
aside  €100  million  for  the  European  Community  Humanitarian  Office  (ECHO)  to  provide 
humanitarian  aid  to  Iraq;  EU  Member  States  pledged  more  than  €731  million.  Following 
adoption of UNSC Resolution 1483 on 22 May 2003, the EU lifted its sanctions against Iraq.  

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The Madrid donors conference held on 23-24 October 2003 launched the multilateral effort to 
assist Iraq’s reconstruction. At the conference the EU as a whole pledged over €1.25 billion, 
including  the  EC  contribution.  The  conference  also  welcomed  the  UN  and  World  Bank’s 
intention to establish a multi donor trust fund for Iraq – the International Reconstruction Fund 
Facility for Iraq.  

Since  October  2003,  EU  assistance  for  Iraq  has  widened  in  scope.  While  the  humanitarian 
needs  of  the  population  are  declining,  resources  for  reconstruction  are  supplementing 
humanitarian work to rehabilitate core public services, and expanding to include the provision 
of  employment,  poverty  reduction  and  the  strengthening  of  Iraq’s  institutions  and 
administration. EC assistance has also been directed to supporting the UN role in the political 
process and the development of Iraqi civil society and democratic institutions. Since 2003 the 
EU has provided assistance amounting to €305 million from the EC budget to Iraq1. 

EU interest in a secure, stable, democratic and prosperous Iraq 

The  EU  has  substantial  interests  in  working  with  Iraq  to  re-build  its  political  and  legal 
institutions, reform its economy and revitalise civil society. These include:  

•  A  fundamental  interest  in  a  successful  political  transition  to  establish  a  stable,  pluralistic 
democracy,  underpinned  by  a  constitution  which  guarantees  respect  for  the  rule  of  law, 
human  rights  and  fundamental  freedoms.  This  will  offer  hope  to  the  people  of  Iraq  and 
help to ensure Iraq’s territorial integrity and internal security.  

•  An  equal  interest  in  helping  to  promote  economic  growth  and  diversification,  reduce 
poverty  and  unemployment  and  improved  living  standards  for  the  Iraqi  population.  A 
functioning,  competitive  and  diversified  market  economy,  the  reconstruction  of  Iraq’s 
infrastructure,  particularly  the  inter-connection  of  Iraq’s  transport  network  with  the  pan-
European  transport  corridors,  and  Iraq’s  economic  integration  into  its  region  will  help 
improve  the  distribution  of  wealth  in  the  country,  reduce  Iraq’s  susceptibility  to  external 
shocks  and  develop  the  potential  for  mutually  beneficial  EU-Iraq  trade  and  investment, 
human and cultural ties. Stability and greater prosperity should also facilitate the voluntary 
return of Iraqi refugees in Europe, strengthening social and professional ties between EU 
countries and Iraq.  

•  A further interest in Iraq’s potential contribution to security and stability in the region. The 
end of Saddam Hussein’s regime creates an opportunity for overcoming regional tensions. 
An Iraq at peace with its neighbours and its region will also contribute to the realisation of 
the objectives set out in the European Security Strategy. Turkey, an EU candidate country, 
also stands to gain from the emergence of a stable and democratic Iraq. 

•  A  strong  interest  in  the  establishment  of  a  fair,  transparent  and  non-discriminatory  legal 
framework  in  Iraq.  Predictability  and  legal  certainty  are  preconditions  for  the  very 
substantive investments required in the country, not least in the energy sector. Given Iraq’s 

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€100  million  was  committed  for  humanitarian  activities  in  2003,  €200  million  pledged  for 
reconstruction  in  2003-04  and  an  additional  €2  million  provided  in  2003  for  mine  action.  ECHO  has 
reduced its initial estimates for Iraq in 2004 to €3 million. However, additional funds can be mobilised 
for new emergency humanitarian needs. See  
http://europa.eu.int/comm/world/iraqsit/reconstruct/index.htm  for  further  details  of  the  sources  and 
destination of EC assistance for Iraq in 2003-2004  

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significant contribution to the Union’s security of energy supply and the potential for the 
EU and Iraq to mutually benefit from increased Iraqi production of oil and natural gas, a 
level  playing  field  for  investment  and  regulatory  convergence  in  the  energy  sector  is  of 
strong interest to both the EU and Iraq.  

III. 

OBJECTIVES FOR THE DEVELOPMENT OF EU-IRAQ RELATIONS 

The stability and prosperity of Iraq will require not only the support of the EU, but also the 
combined efforts of the international community and, above all, of the Iraqis themselves. The 
EU should therefore engage with the new Iraqi administration and Iraqi society to discuss the 
role  they  see  the  EU  playing  in  Iraq  and  develop  its  presence  and  engagement  with  Iraq 
progressively as the transition process evolves. The aim should be to lay the foundations for 
broad-based  and  mutually  beneficial  relations  over  the  medium-term.  In  its  dialogue  with 
Iraq, the EU could propose to focus its strategy towards Iraq on the following medium-term 
objectives: 

–  The development of a secure, stable and democratic Iraq, with a parliament and a 
government,  elected  on  the  basis  of  a  constitution  that  guarantees  respect  for 
human rights and fundamental freedoms of the Iraqi population as a whole. 

–  The establishment of an open, stable, sustainable and diversified market economy 
and  society  as  a  basis  for  human  security,  economic  growth,  employment 
generation  and  poverty  reduction,  with  resources  used  to  promote  equitable 
economic and social development. 

–  Iraq’s economic and political integration into its region and the open international 

system. 

A secure, stable and democratic Iraq  

There  is  now  an  opportunity  for  Iraq  to  set  aside  its  history  of  authoritarian  control  and  to 
build  stable  democratic  institutions  that  guarantee  the  rights  of  all  Iraqis,  including  women 
and ethnic, religious and tribal minorities. The resolution of issues such as the role of religion 
in the state, an effective and democratically controlled security sector and the organisation of 
relations between provincial and central administrations will be central to the success of the 
political process. Equally, the establishment of democratic institutions will require a process 
of national reconciliation and consensus building.  

As  confirmed  by  UNSCR  1546,  the  UN  will  draw  on  its  considerable  experience  in  Iraq 
before the war and and on the work begun by UN Special Envoy Sergio De Mello before the 
tragic  attack  on  UN  headquarters  in  Baghdad  last  year  and  continued  by  Special  Envoy 
Lakhdar  Brahimi,  to  play  a  key  role  in  helping  the  Iraqis  to  move  through  their  political 
transition The EU should therefore continue to support the UN in playing this leading role and 
ensure that its actions to assist Iraq are well coordinated with that organisation.  

Given  the  EU’s  own  successful  experience  in  supporting  processes  of  transition  from 
authoritarian systems of government to systems based on democracy, as well as EU Member 
States diverse experience with federalism and decentralisation, the EU could:  

–  Welcome  UNSC  Resolution  1546  confirming  the  sovereign  status  of  the  Iraqi 

interim government from 30 June 2004 and support its implementation. 

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–  Enter into dialogue with the incoming Iraqi authorities to demonstrate EU support 

for the political and constitutional processes. 

–  Prioritise EU assistance for elections, good governance, the development of Iraqi 

civil society and the protection and promotion of human rights.  

–  Consider  expanding  its  assistance  to  include  measures  to  support  security,  in 

particular to implement the rule of law, justice and security sector reform. 

An open, sustainable and diversified Iraqi market economy  

Until 2003 the Iraqi economy was characterised by extensive government intervention, both 
directly through state owned enterprises (SOEs) and indirectly through heavy regulation, price 
restrictions and subsidies. The government-dominated oil sector has been the most important 
engine  of  the  economy  and,  in  the  short-term,  will  need  to  expand  rapidly  to  finance 
reconstruction. Over the medium-term, however, Iraq faces a triple economic transition to an 
economy based on peaceful development, a functioning market economy and more diversified 
and sustainable sources of domestic income.  

Poverty  and  unemployment  are  widespread  in  Iraq,  creating  political  and  social  tension. 
Measures  to  mitigate  the  social  effects  of  the  reforms  that  are  required  to  raise  living 
standards  over  the  medium-term  are  essential,  particularly  in  relation  to  price  liberalisation, 
SOE restructuring and public services. In the short-term, the creation of effective social safety 
nets, efforts to increase employment using local skills for reconstruction projects2 and rectify 
regional imbalances in the distribution of resources will all be necessary. In the medium-term, 
the question of a constitutional framework for the distribution of Iraqi oil revenues needs to be 
addressed.  

Resolving the issue of Iraq’s external debt obligations, currently estimated at $1203 billion, is 
a  pre-condition  for  Iraq’s  return  to  financial  viability  and  sustained  economic  and  social 
recovery and the content of an eventual Paris Club agreement is likely to have a broad impact 
on  all  aspects  of  economic  activity  in  Iraq.  The  Paris  Club  group  of  creditor  nations  have 
committed  themselves  to  work  towards  a  solution  in  the  course  of  2004  but  comparable 
treatment will be needed from non-Paris club official creditors and private lenders. Reducing 
Iraq’s financial overhang also requires steps to address the status of the claims granted by the 
UN Compensation Commission after the first Gulf war, and those that are still pending.  

The EU has a substantial record of working with the transition economies as well as expertise 
from  its  own  experience  of  combining  social  cohesion  with  building  strong  market 
institutions, liberalisation and integration. It also has a large internal market ready to receive 
flows of Iraqi goods and services. In this context, the EU could: 

–  Promote  resolution  of  Iraq’s  external  debt  by  developing  a  common  view  and 

recommendations on economic policy conditionality. 

–  Continue EC assistance to build the capacity of Iraqi administrative and economic 
institutions in transition issues, in particular the creation of a functioning customs 

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E.g the rehabilitation of electricity and other essential infrastructure. 
Excluding claims granted by the UN Compensation Commission. 

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administration  which  would  allow  for  the  Generalised  System  of  Preferences 
(GSP) to be applied. 

–  Help  Iraq  develop  judicial  capabilities  and  regulatory  and  legal  frameworks  to 
encourage economic activity and international investment, including in the energy 
sector, and deter corruption, organised crime and criminality.  

–  Emphasise the need to address issues related to unemployment and poverty, help 
to  put  in  place  effective  safety  nets  and  address  regional  imbalances  in  the 
distribution of resources.  

–  Stress that Iraq’s significant mineral wealth should be used to support these goals, 
to diversify Iraq’s economy, generate employment, build the necessary physical, 
institutional and human capital and reduce income disparities.  

An Iraq at peace with its neighbours and integrated into the international community 

Iraq’s transformation offers an opportunity to address the legitimate security concerns of the 
different actors in the region and to ensure that the emergence of a new political order in Iraq 
is  perceived  positively  by  neighbouring  states.  It  also  gives  scope  for  Iraq,  the  Gulf 
Cooperation  Council  (GCC)  and  Iran  to  foster  a  community  of  views  on  how  the  region 
should  tackle  common  economic  challenges.  In  addition,  progress  in  the  transition  process 
should pave the way for Iraq to assume a greater role in international political and economic 
affairs and increase its participation in international fora.  

The decision of Iraq’s neighbours to organise a common forum - the Neighbours’ Meetings - 
after  the  2003  war,  to  discuss  Iraq’s  situation  demonstrates  a  shared  recognition  of  the 
opportunity  for  increased  intra-regional  cooperation.  Over  the  long-term,  the  progressive 
establishment of a regional politico-economic cooperative framework, reducing tensions and 
moving gradually to involve security cooperation, could provide a mechanism for improving 
stability in the broader region and tackling the legacy of unresolved regional disputes.  

Through  its  close  relations  with  Iraq’s  neighbours,  its  own  history  of  post-conflict 
reconciliation,  as  well  as  its  efforts  to  promote  regional  integration,  the  EU  has  acquired  a 
breadth of contacts, experience and expertise that could benefit Iraq and the broader region. In 
line with the principles set out in the EU Strategic Partnership with the Mediterranean and the 
Middle  East  and  the  support  the  EU  has  already  given  for  Iraq’s  application  for  observer 
status at the World Trade Organisation (WTO), the EU could: 

–  Use its influence and existing dialogues with the countries of the region, particularly Iraq’s 
neighbours,  to  encourage  constructive  engagement  with  Iraq  and  increased  intra-regional 
cooperation. 

–  Invite  Iraq  to  participate  in  the  EU  Strategic  Partnership  for  the  Mediterranean  and  the 

Middle East. 

–  Consider  Iraq’s  future  membership  of  the  WTO  in  a  positive  light,  once  the  necessary 
conditions  are  met  in  line  with  the  EU  position  on  applications  from  other  countries, 
including in the region and encourage its participation in other international fora  

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IV. 

A FRAMEWORK FOR PROGRESSIVE ENGAGEMENT  

The realisation of the objectives set out in Section III will depend on the degree to which they 
are  shared  by  a  future  Iraqi  government  and  the  evolution  of  the  security  and  political 
situation in Iraq. The following proposals for action are therefore options, structured to reflect 
the  three  distinct  phases  anticipated  by  UNSCR  1546,  and  to  be  developed  further  in 
consultation with the future Iraqi government. 

It will also be especially important to ensure that, in implementing actions, the EU Member 
States,  the  European  Commission  and  High  Representative  work  together,  and  in  full 
coordination  with  the  United  Nations,  both  on  the  ground  and  in  international  fora.  Close 
coordination with the World Bank, the IMF and other international financial institutions will 
also be essential.  

Phase I - Immediate Actions 

On  30  June  2004,  the  Iraqi  interim  government  will  assume  sovereignty  and  the  Coalition 
Provisional Authority will be dissolved. In addition to the on-going provision of assistance for 
reconstruction, in the period leading up to elections for a Transitional National Assembly, the 
EU could consider the following initiatives: 

EU support for elections: Elections for a Transitional National Assembly which will form a 
new government and draft a new constitution, a referendum to approve a new constitution and 
general  elections  are  all  due  to  take  place  before  31  December  2005.  The  EU  should  be 
prepared to play a significant role in the preparation of elections in Iraq, if a request is made 
by the interim government or the UN. The EU will also need to assess whether further efforts 
are needed, and whether conditions on the ground particularly security, are such as to make 
deployment of an EU Election Observation Missions advisable. 

Informal  political  dialogue:  The  EU  should  aim  to  engage  with  the  sovereign  Iraqi  interim 
government as early as possible. If security conditions permit, a political dialogue meeting in 
Troika  format  at  ministerial  level  could  be  held  in  Baghdad  or  in  the  margins  of  the  UN 
General  Assembly  in  September  2004.  Ad  hoc  meetings  at  senior  officials  level  could  also 
take place.  

EU Missions could play an important role in preparing these contacts, and in canvassing the 
views of the Iraqi authorities. Building on the financial support for human rights, civil society 
development,  voter  education  and  the  constitutional  process  being  provided,  EU  Missions 
could  also  be  asked  to  launch  informal  dialogue  with  broader  Iraqi  civil  society,  including 
NGOs, religious groupings, trade unions, and nascent political parties.  

Rule  of  law  and  civil  administration.  Efficient  institutions  and  effective  rule  of  law  are  of 
paramount  importance  to  realise  and  sustain  a  secure  environment  in  Iraq.  The  EU  has 
experience  in  other  regions  of  the  world  of  supporting  institutional  capacity-building  in  the 
justice  and  security  sectors  and  has  also  experience  in  areas  critical  to  post-conflict 
stabilisation  such  as  training,  monitoring  and  mentoring  of  police.  In  this  context,  and  if 
deemed  necessary,  the  European  Commission  and  the  EU  Member  States  could  reflect  on 
whether the mechanisms offered by the EU’s civilian crisis management capabilities might be 
employed in Iraq, alongside EC instruments.  

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Encourage positive engagement on the part of Iraq’s neighbours. The EU should support the 
Neighbour’s Meetings and any resulting cooperation initiatives and invite Iraq to participate 
in the implementation of the EU Strategic Partnership with the Mediterranean and the Middle 
East. In addition, the EU could discuss the future of Iraq regularly with Iran, Syria, Turkey, 
Jordan  and  the  GCC  countries.  EU  Missions  in  these  countries  could  be  invited  to  ensure 
continuity. The EU could offer to extend this support to include concrete confidence-building 
measures  for  Iraq  and  its  neighbours,  for  example  in  border  management  and  customs 
administration.  

involved 

A coordinated view on debt and related economic policy conditionality. While a final decision 
on  the  terms  of  such  an  arrangement  is  for  the  creditor  countries  themselves,  several  EU 
Member  States  are 
the 
rescheduling/forgiveness  of  Iraq’s  debt.  Since  the  likely  use  of  the  new  Paris  Club  “Evian” 
approach,  developed  for  intermediate  income  countries,  will  have  implications  for  the  EU’s 
future  relations  with  Iraq,  efforts  could  be  made  to  coordinate  views  on  the  appropriate 
economic  conditionality  to  be  attached  to  an  agreement.  A  regular  dialogue  between  the 
European  Commission,  IMF,  World  Bank  and  European  Investment  Bank  could  also  help 
coordinate views and activities on this issue.  

the  current  Paris  Club  negotiations  on 

in 

GSP trade preferences. Iraq is a beneficiary of the European Community Generalised System 
of Preferences (GSP) but the system has not been applied in practice since the first Gulf War 
due  to  sanctions  and  subsequent  conflict.  As  soon  as  conditions  allow,  the  European 
Commission  should  work  together  with  the  Iraqi  administration to  set  up  the  administrative 
cooperation system which is a requirement for the system to operate. 

On-going  implementation  of  humanitarian  and  reconstruction  assistance.  The  EC  assistance 
strategy in 2003/04 focuses on monitoring the situation in Iraq, responding to new emergency 
humanitarian  needs  as 
they  arise,  providing  rapid  additional  resources  for  Iraq’s 
reconstruction,  with  a  particular  emphasis  on  creating  employment,  and  supporting  the 
development  of  a  multilateral  framework  under  the  auspices  of  the  United  Nations  and  the 
International Financial Institutions. As a consequence, the €200 million pledged from the EC 
budget at the Madrid Conference for Iraq’s reconstruction in 2003-04 has been transferred to 
UN  agencies  and  the  International  Reconstruction  Fund  Facility  for  Iraq  and  disbursement 
should accelerate in this phase. 

EC  office:  The  opening  of  a  full  European  Commission  delegation  in  Iraq  depends  on  the 
security situation and on the availability of Community resources. However, as a first step, the 
Commission  is  establishing  an  office  covering  Iraq  in  the  premises  of  its  delegation  in 
Amman 
local  coordination  of 
reconstruction  assistance  with  EU  Member  States.  The  office  will  also  provide  for  liaison 
with  the  United  Nations  Assistance  Mission  for  Iraq  and  the  International  Reconstruction 
Fund Facility for Iraq. When conditions permit, this office could move to Baghdad. 

to  help  prepare  political  representation  and  ensure 

Phase II – Post Elections 

The  elections  for  a  Transitional  National  Assembly  should  lead  to  the  formation  of  a 
Provisional Government and see an intensification of work to draft a new constitution, to be 
ratified  by  referendum  later  in  2005.  This  phase  will  therefore  open  the  way  for  further 
cooperation and dialogue with Iraq in a number of fields. In addition to activities launched in 
Phase I, initiatives could include the following: 

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EU contribution to rehabilitation and reconstruction. The European Commission has proposed 
a  further  €200  million  EU  contribution  to  Iraq’s  reconstruction  in  20054  and  expects  that  a 
similar amount could be required in 2006, subject to budgetary constraints and the ability to 
spend committed funds during 2005. The majority of funds will continue to be directed to the 
International Reconstruction Fund Facility for Iraq, however a portion could be reserved for 
the direct provision of technical assistance programmes and capacity building support.  

Such  programmes  could  support  institution-building  in  a  number  of  sectors,  depending  on 
Iraqi interests. In the political and security sphere, in full coordination with the UN, the EU 
could  provide  advice  for  the  constitutional  process  as  well  as  further  assistance  for 
democratisation,  civilian  law  enforcement,  the  rule  of  law  and  the  justice  sector  and  human 
rights.  Focal  sectors  in  the  social  and  economic  field  could  include:  policy  formulation  and 
good governance, including fiscal and monetary issues, the development of national statistics; 
the  creation  of  a  functioning  trade,  customs  and  investment  regime;  energy  and  transport; 
environmental  remediation  and  protection;  the  promotion  of  the  private  sector,  small  and 
medium sized enterprise development and a non-discriminatory public procurement system. 

In addition to reconstruction assistance, the use of other instruments could be envisaged from 
this phase onwards to help alleviate external financing needs resulting from the transition, and 
to  support  reform.  This  would  be  subject  to  progress  on  external  debt  relief  and  Iraq’s 
agreement on a comprehensive macro-economic programme supported by the IMF. 

Formal  political  dialogue.  The  EU  could  propose  to  agree  an  EU-Iraq  Joint  Political 
Declaration in order to institutionalise political dialogue. This might encompass discussion of 
human  rights,  regional  stability,  the  fight  against  terrorism  and  non-proliferation.  The 
European Parliament and EU Member State parliaments could also be encouraged to pursue 
contacts with the Transitional National Assembly.  

Joint working groups in sectors of mutual interest. EU/Iraq working groups could be set up to 
discuss cooperation in areas such as economic,  statistics and trade issues, energy (including 
electricity), transport, technical regulations and standards, information society, human rights 
and rule of law, migration and counter-terrorism. An informal EU/Iraq energy dialogue could 
be rapidly established and the EU could support Iraq’s participation in other regional energy 
and transport fora. Bilateral dialogue could lead to future regional dialogues.  

Phase III – Medium Term 

The appointment of a democratically elected government and the adoption by Iraq of a new 
constitution  and  elections  for  an  executive  and  legislature  should  allow  for  the  EU  to 
normalise relations with Iraq. In this phase, the EU could take the following additional steps: 

Negotiations for a bilateral agreement. A bilateral agreement between the EU and Iraq would 
reflect the mutual interest in developing a partnership and support Iraq’s political, economic 
and  social  reforms.  A  trade  and  cooperation  agreement,  similar  to  those  in  place  with  other 
countries east of Jordan would be an appropriate first step. A more wide-ranging agreement 
could be considered subsequently.  

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€190 million on budget line 19 08 07 – ‘Aid for the rehabilitation and reconstruction of Iraq’ and €10 
million  earmarked  on  budget  line  19  04  03  –  ‘Development  and  consolidation  of  democracy  and  the 
rule of law – respect for human rights and fundamental freedoms’. 

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Assistance  for  economic  diversification  and  poverty  reduction.  As  Iraq’s  own  sources  of 
revenue  increase,  in  particular  through  higher  oil  production  levels,  its  requirements  for 
external donor assistance should decline. The EU could target EC assistance on technical and 
capacity  building  programmes,  and  promoting  economic  diversification  and  poverty 
reduction/livelihoods. 

Creation  of  a  regional  framework.  The  EU  could  explore  ways  in  which  the  Barcelona 
Process  experience  in  promoting  cooperation  in  sectors  such  as  energy,  transport, 
environment,  science  and  technology,  education,  dialogue  of  cultures  and  support  for  civil 
society, might contributing to enriching regional cooperation between Iraq and its neighbours. 
The EU could also consider ways in which Iraq can be associated with the EU’s dialogue with 
other partners in the region, particularly with those East of Jordan.  

Sustained  assistance  for  the  rule  of  law,  democratisation  and  human  rights.  The  process  of 
democratisation in Iraq will not end with general elections. The EU should therefore continue 
to  prioritise  assistance  over  the  medium-term  which  helps  increase  the  capacity  of  the  Iraqi 
government  and  civil  society  to  strengthen  democracy,  ensure  respect  for  human  rights, 
including the rights of women and minorities, the rule of law, combat corruption and promote 
transparency, accountability and good governance. 

European Investment Bank lending. As the focus of external assistance shifts away from grant 
contributions,  European  Investment  Bank  (EIB)  loans  could  help  bridge  the  period  between 
grants  and  private  sector  involvement  following  resolution  of  Iraq’s  external  debt,  starting 
with  capital-intensive  projects  such  as  infrastructure.  A  mandate  for  the  EIB  to  lend  to  Iraq 
could  be  considered  in  the  context  of  the  new  Financial  Perspectives,  possibly  as  part  of  a 
regional mandate to include countries east of Jordan. 

European  Commission  delegation.  The  opening  of  a  delegation  in  Baghdad  could  be 
considered. 

V. 

CONCLUSION 

This  Communication  sets  out  initial  reflections  on  how  the  EU  might  advance  its  relations 
with Iraq, based on a policy of progressive engagement which lays the foundation for a more 
substantial and sustained relationship in the medium-term. Its recommendations will need to 
be kept under constant review and adapted to the circumstances as the situation evolves on the 
ground. The Council of Ministers is invited to consider these recommendations with a view to 
the  European  Council  sending  a  clear  signal  concerning  the  EU's  commitment  to 
strengthening  its  relations  with  Iraq  in  the  framework  of  UNSCR  1546  and  to  help  lay  the 
foundations for a secure, stable, democratic and prosperous Iraq, at peace with its neighbours 
and its region, and a full and active member of the international community. 

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Annex I 

Summary of Proposals 

PHASE I – IMMEDIATE 
ACTIONS 

PHASE II – POST 
ELECTIONS 

PHASE III – MEDIUM-
TERM 

Support for elections, 
including assistance for 
civil society 
development, rule of law 
and voter education 

Troika visit and launch 
of EU/Iraq informal 
political dialogue 
including HoMs 
dialogue with interim 
government and Iraqi 
civil society.  

Encourage positive 
engagement on the part 
of Iraq’s neighbours, 
including launching 
possible confidence-
building measures  

Administrative 
cooperation towards 
application of GSP 
preferences, as 
circumstances permit. 

Consultation and 
coordination on debt 
forgiveness/restructuring 
and related economic 
policy conditionality 

On-going 
implementation of €305 
million package of 
humanitarian and 
reconstruction assistance 

Opening of European 
Commission office  

On-going assistance for 
democratisation and human 
rights 

Sustained assistance for 
democratisation and human 
rights and rule of law 

Launch of a formal political 
dialogue with the Provisional 
Government including an 
EU/Iraq Joint Declaration  

Open negotiations for 
EU/Iraq contractual relations 

Creation of working groups 
in sectors of mutual interest 

Continued support to 
regional dialogue and 
confidence-building 
measures 

Support creation of a 
regional framework 

Potential use of other EC 
instruments to alleviate 
external financial needs and 
implement reform 

EIB lending 

Additional EC contribution 
to reconstruction, including 
expansion of bilateral 
technical assistance and 
capacity building 
programmes 

Assistance for economic 
diversification and poverty 
reduction 

Opening of European 
Commission delegation  

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EN 

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