The Cable

Exclusive: U.S. Foreign Aid Group May Ignore Its Own Rules and Give Cash to Corrupt Regimes

A U.S. government-funded foreign aid organization is considering sending hundreds of millions of dollars in grants to countries whose flawed, corrupt or undemocratic governments should almost certainly be ineligible for the money according to the agency's own internal guidelines.

The Millennium Challenge Corporation, or MCC, is an independent U.S. foreign aid agency dedicated to "advancing American values" by reducing poverty, advancing good governance, and weeding out corruption. But people familiar with the matter say that the MCC -- led by Colorado banker Daniel Yohannes (pictured above, left) -- is seriously contemplating giving money to Sierra Leone and Benin, which fail to meet its "control of corruption" requirements, and Liberia and Morocco, which meet less than half of the organization's 20 requirements for civil liberties, sound economic policies, and other measures. If approved, each country could receive hundreds of millions of dollars of U.S. government funding over the next few years.

At least one member of the MCC's eight-person board of directors has argued against giving money to the four countries, but it's not clear if that opposition will be enough to sway the rest of the board, which meets next month to review all of its current and potential projects. This is the first time in the MCC's nine-year history that so many potential recipients of its money have failed to meet the grant requirements. And it comes at a sensitive time for Yohannes; on Thursday, the Senate Foreign Relations Committee is considering his nomination to be America's representative to the Organization for Economic Cooperation and Development.

It's far from a simple issue of bureaucratic infighting. If everything breaks right, the MCC money could give a quartet of poor countries the money they need to build new airports and take other steps to juice their economies. If the MCC bets on the wrong countries, by contrast, huge amounts of American money could disappear into the pockets of corrupt government officials or business leaders.

An MCC official, speaking on condition of anonymity, said the four countries had met all of the requirements in past years but fallen short this time around. The official said the scorecard was the first thing the board would look at, but that the country's failures to pass the requirements wouldn't necessarily disqualify them from continuing the negotiations over future aid packages.

"The board has discretion," the official said. "They scorecard is always the starting point, and its very important to the process, but nothing is automatic."

The MCC's internal debate over whether to provide funding to the four countries highlights the low-profile organization's unusual history and mission. Funded by Congress, the MCC is an independent aid agency that isn't part of the State Department or the U.S. Agency for International Development. That means that it does not provide general aid to countries like Israel or fund large-scale infrastructure projects in places like Afghanistan or Mali. Its sole mission, according to the agency's Web site, is to "reduce poverty through economic growth."

Countries that want a piece of the MCC's roughly $2 billion in annual funding have to go through a laborious, multi-year process that requires repeatedly passing a set of fairly stringent criteria.

The first hurdle is a scorecard of 20 measurements of things like a country's fiscal and trade policies, immunization rates and educational spending. Countries need to score above 50 percent on at least 10 of those indicators. Liberia and Morocco each only passed 9 of them.

The second requirement is that applicants notch scores of at least 51 percent on a subset of specific measurements of their levels of corruption, rule of law, civil liberties and other democratic rights. Benin and Sierra Leone failed to hit those targets.

The four countries' failings pose a difficult policy choice for the MCC's board, whose members include high-ranking members of the Obama administration like Secretary of State John Kerry and Treasury Secretary Jack Lew and outside experts like Lorne Craner, the president of the International Republican Institute. The board had opened formal negotiations with the governments of Benin, Liberia, Morocco and Sierra Leone over the past two years. The question the MCC's leadership will face next month is whether to continue their work with those governments despite their failures to meet the MCC's internal guidelines.

One member of the board has already urged his colleagues to sever the MCC's relationships with the four countries, but it's not yet clear what the rest of his colleagues think. The board operates by simple majority, and an official familiar with the matter said the December meeting would culminate in one of the toughest votes in the MCC's history. Asked to predict the outcome, the official had a blunt response: "ask me at the end of next month."

AFP/Getty Images

The Cable

“I’m Not Buying It For a Second”: Congressman Dings Kerry’s Account of Iran Talks

The U.S. and Iran blamed one another for imperiling political talks aimed at ending the West's nuclear standoff with Tehran, leaving allies and U.S. lawmakers with a choice: believe Washington's version of the story, or put their faith in Tehran's.

Back in D.C., a number of U.S. members of Congress weren't sure who to trust, with some openly doubting the American account. Secretary of State John Kerry told reporters that France and the other members of the so-called "P5+1" powers were united in their offer to Iran -- and that it was Tehran that "couldn't take" the deal.

But Rep. Adam Kinzinger (R-IL), a member of the House Foreign Affairs Committee, told The Cable he's skeptical.

"I'm not buying it for a second," he said. Kinzinger found the initial reports that France torpedoed the deal despite American support for it "more credible." 

"This looks like administration face-saving in wake of the French showing more spine than they had," he said. "And when the French are showing more spine than the Americans, that's scary."

Rep. Steve Israel, (D-NY), chairman of the Democratic Congressional Campaign Committee, said he wasn't sure which account was more accurate.

"What's important is that the initial deal didn't go through because it was not a good deal," Israel, a staunch hawk on Iranian issues, told The Cable.

A little more than a day after a nuclear agreement seemed so close, major signs of trouble in landmark negotiations appeared on Monday. During a stop-off in Abu Dhabi, Kerry said that Iran's nuclear negotiating team, led by Iranian Foreign Minister Mohamed Javad Zarif, had balked at the prospect of accepting a proposal that would place constraints on uranium enrichment and Iran's construction of a heavy water reactor.

Zarif struck back, accusing Kerry on Twitter of misrepresenting the outcome of the talks, and suggesting that Washington had backtracked on a proposal it had floated as early as Thursday.

Zarif's account suggests that the West's draft was substantially altered during the talks. Interestingly, Britain's Foreign Secretary William Hague appeared to give credence to this sequence of events in remarks to Parliament on Monday. Hague did not single out France for raising objections to a deal. But he conceded that the initial draft of the interim agreement "had been amended in light of comments from various of the parties concerned." Ultimately, Hague said "a completely united position was put to the Iranians at the close of our discussions, so reports of vetoes by one country, or of obstruction by any country, should be seen in that light. We were all arguing for the same position and the same deal."

Despite the squabbling, senior diplomats said that they remained upbeat about the prospects for progress. Hague characterized two days of negotiations on an interim pact as "intensive" "complex" and "detailed."

"Our aim is to produce an interim first step agreement with Iran that can then create the confidence and space to negotiate a comprehensive and final settlement," he said. "The talks broke up without reaching that interim agreement, because some gaps between the parties remain. While I cannot go into the details of the discussions while the talks continue I can say that most of those gaps are now narrow, and many others were bridged altogether during the negotiations."

There were other signs of progress. Yukiya Amano, the director general of the International Atomic Energy Agency, reached a "roadmap for cooperation" with Iranian leaders in Tehran that would provide inspectors "managed access" to the country's uranium mine at Gachine and to a facility that helps cool a heavy water reactor currently under construction at Arak. Western governments fear that reactor could be used to produce plutonium for a nuclear bomb. But the accord does not guarantee IAEA inspectors access to several military installations, including the military complex at Parchin, where Iran conducts atomic research.

"I think its really significant that they are getting managed access to Gachine" and the heavy water facility, said David Albright, a physicist who heads the Institute for Science and International Security, adding the IAEA deal shows that Iran is prepared to show greater transparency. "The downside is they didn't deal at all with the main issue with Iran: addressing IAEA concerns about past and possible ongoing work on military nuclear programs."

Kerry and other senior diplomats with Britain, China, France, Germany and Russia abruptly flew to Geneva last week with the hope of signing an interim agreement that would require Iran to cap its enrichment of high grade uranium and pledge to pause any future plans to operate a heavy water reactor in Arak. "The fact is the draft was almost agreed between the Iranians and the Americans, the Germans, [and] the Brits. The Russians and the Chinese said they had no problem, they were ready to sign it," said a source close to the Iranian delegation. "It was the French who brought unexpected issue about heavy water at Arak. We don't know what happened."

Fabius, who made it clear he couldn't support the draft under consideration, pressed Kerry in a late Saturday night meeting to toughen the Iranian terms, according to the Guardian.  "Fabius insisted on two key points in the drafting of an interim agreement with Iran: there should be no guarantees in the preamble about the country's right to enrich uranium; and work would have to stop on a heavy-water nuclear reactor," the Guardian reported. "Western officials conceded that unity had been achieved only on the last night of the negotiations, leaving little time for the Iranians to respond; much of the preceding 60 hours of talks had been among the P5+1 group seeking a common position."