FUEL SUPPLY CHAIN INTO IRAQ BACKED UP; RISK OF

UNCLAS SECTION 01 OF 03 ANKARA 004367

SIPDIS

STATE FOR EUR/SE AND NEA

SENSITIVE

E.O. 12958: N/A
TAGS: EPET ETRD MOPS PREL TU IZ
SUBJECT: FUEL SUPPLY CHAIN INTO IRAQ BACKED UP; RISK OF
TRUCKER STRIKE FOR SUSTAINMENT FUELS

REF: Ankara 4166

This is an action request. See paragraphs 9 and 10.

1.(SBU) Summary: Trucks carrying fuel from Turkey to
Iraq-both to supply coalition forces and for civilian
use-are backed up to about 70 kilometers from the border.
The overwhelming majority of these trucks are contracted by
SOMO for civilian use but sustainment trucks are reportedly
experiencing problems getting priority treatment. The surge
in the backlog is probably due to some combination of: a) a
revival of shipping following SOMO's partial clean-up of
arrears; b) increased demand from end-users in Iraq; and c)
efficiency problems at Habur Gate. Meanwhile, drivers for
the sustainment trucks are reportedly threatening to go on
strike if they do not receive a substantial raise. End
Summary.

Big back-up on Turkish side of Border:
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2. (SBU) Adana PO, on the road from Mardin to Cizre near the
Turkey-Iraq border, called into Embassy Ankara July 27 to
report that trucks are backed up approximately 70 kilometers
from the border crossing at Habur Gate. Given that the
trucks are not allowed to park near villages, PO estimates
that the line is probably about 50 to 55 kilometers long,
which he estimated very roughly to represent something on
the order of 2500 trucks. The trucks are overwhelmingly
carrying supplies contracted by Iraqi state oil company
SOMO, and the PO believed almost all (perhaps 99%) of these
trucks were carrying either benzene or diesel. Only four
days earlier, when the Army Attache drove the same road, the
backlog was only about 16 kilometers.


3. (SBU) Though post does not yet have hard information, the
most likely causes of this sharp increase in the backlog are
some combination of the following: a) a revival of shipping
following a partial clean-up of arrears by SOMO; b)
increased demand from end-users in Iraq prompting increased
orders from SOMO; and c) a slight decrease in efficiency of
processing at Habur, possibly relating to the transition to
the Turkish Chamber of Commerce (TOBB) taking over operation
of the gate. Construction is expected to start in the
coming weeks on improvements on the Turkish side, which
could lead to further slowdown. The U.S. Military liaison
officer at the border reports that at night the rate of
processing on the Turkish side slows down. SOMO's current
needs are reportedly for 1000 trucks per day. In the most
recent 24-hour period for which we have information, 1700
total trucks were processed. However, since the U.S.
Military tracking unit at the border no longer tracks SOMO
trucks (see para 9 below),it is impossible to know how many
of the 1700 were SOMO trucks.

Sustainment Trucks Have Trouble Getting Priority.
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4. (SBU) Probably as a result of the intense pressure on the
gate from the backlog, DESC (Defense Energy Supply Command),
tell us the sustainment trucks are having difficulty getting
priority treatment to pass through the border and supply
coalition forces. DESC has requested Embassy assistance in
requesting the GOT return to its prior practice of according
sustainment trucks priority passage.

.and Sustainment Truck Drivers Threaten to Go on Strike:
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5. (SBU) Adana PO further reports that the MJLC unit at
Incirlik received a call from SHG, the overall contractor
for sustainment fuels, passing on that SHG's drivers are
threatening to go on strike July 28. The drivers are
reportedly pressing for a raise to match a recent raise
provided to drivers supplying SOMO, and to compensate for
the current conditions (backlog, intense heat, no
facilities). SHG has reportedly offered a raise but the
drivers say it is insufficient.

Even if the Backlog is Worked Through, SOMO Payment Issues
Still a Problem:
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6. (SBU) As reported reftel, SOMO came through in late June
and early July with $603 million of payments, leaving about
$200 million of arrears to Turkish petroleum product supply
companies outstanding. However, more recently, Turkish MFA
officials said the arrears had crept back up to about $250
million.


7. (SBU) On July 27, Econ specialist spoke with an official
at TPIC, a leading supplier, and, as a state-owned company,
the supplier the GOT is best able to pressure into keeping
supplies flowing despite arrears. The TPIC official said
SOMO currently owes about $1 billion in accounts receivable
(vice arrears) to Turkish suppliers, of which about $200
million is to TPIC. The GOT and TPIC are trying to be
helpful to Iraq, but he warned that the current slowness of
payments from SOMO cannot continue for an extended period.
Several suppliers have stopped shipping to SOMO for this
reason. The suppliers pay cash for the product but sell to
SOMO not knowing when they will actually get paid. Sooner
or later, even TPIC will not be able to keep selling on this
basis, and he specifically asked us to pass this message to
Baghdad.

A Longer-Term Project: Border Pipeline:
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8. (SBU) The TPIC official also briefed Econ Specialist on
its plans to establish a 15- 16 km long pipeline through the
Habur border gate, in order to partially resolve the backlog
of trucks at the border and to expedite humanitarian (SOMO)
fuel transport to Iraq. They have a warehouse in a secure
area in Habur, and will be able to pump 1,000- 1,500 tons
fuel through the pipeline daily. This amount is small
compared to their total daily fuel export to Iraq, which is
currently at 5,000 tons. They had to contact several
agencies in Turkey and Iraq for approval--all of which were
very receptive. TPIC got official approval from GOT and
even sent the pipes to the area, but is waiting for SOMO's
official response to start construction. SOMO will need to
construct the Iraqi side of the pipeline, so they need to
take quick action. The official pointed out the slow
decision- making process in Iraq, and said USG support on
expediting a decision on this issue would be appreciated

Sustainment Remaining the USG Priority:
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9. (SBU) Action Request: Post will seek the MFA's take on
these issues, and a readout of the second round of bilateral
border gate discussions with the ITG scheduled for this week
in Ankara. Unless instructed otherwise by the Department,
post will reiterate past USG requests that sustainment fuels
be given priority treatment.

Need for Revived Tracking of SOMO Trucks by U.S. Military
Border Tracking Unit:
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10. (SBU) Action Request, cont.: Until early July, the U.S.
military's Movement Control Team at the Habur Gate counted
SOMO trucks as they crossed the border into Iraq; this
report also noted the number of trucks as a percentage of
the daily SOMO requirement for different fuels (benzene,
diesel, etc.). We have learned, however, that 917 CSG and
484 MCB Commander have ordered that the MCT cease counting
SOMO trucks. This reporting provided us with an excellent
early warning system when SOMO shipments slowed down for any
number of reasons. These have included trucker strikes,
Turkish oil companies being compelled to stop shipping for
SOMO due to large arrears, and Turkish government decisions
to change the traffic flow at Habur. Since the MCT no
longer reports on SOMO trucking, we were unaware of the
current growing backup of fuel trucks on the Turkish side of
the border until AmConsul Adana PO actually saw it on an
official trip to the border area. Given the importance of
providing humanitarian fuels to the Iraqi people (two-thirds
of which flow over the Habur Gate),we request that this
decision be reversed.


11. (U) Iraq REOs minimize considered.

McEldowney