SOMO ARREARS TO TURKEY AND FUEL SHORTFALL TO IRAQ

UNCLAS ANKARA 006231

SIPDIS

SENSITIVE

E.O. 12958: N/A
TAGS: ETRD EPET PREL TU IZ
SUBJECT: SOMO ARREARS TO TURKEY AND FUEL SHORTFALL TO IRAQ

REF: A. ANKARA 6095

B. ANKARA 3842

C. BAGHDAD 2845

SENSITIVE BUT UNCLASSIFIED


1. (SBU) MFA informed EconOff on October 13 that SOMO
arrears (45 days past product delivery) to Turkish fuel
suppliers had grown to $750 million and urged the USG to make
demarches in Iraq to alleviate this growing problem (Ref A).
According to the MFA, SOMO recently annulled 22 of 36
contracts with Turkish suppliers (for insufficient or late
delivery of product),thus explaining the current shortfall
in SOMO trucks. (SOMO truck shipments are very volatile,
depending on conditions, but in normal times average 600-800
trucks moving south per day. Over the last week, since a one
day closure for construction, trucks have totalled 200-300,
with a particularly dramatic fall-off in "benzene"-
gasoline.) MFA emphasized that the Foreign Economic
Relations Board (DEIK in Turkish),representing the bulk of
Turkish suppliers, was getting increasingly restive about the
(repeated) arrears problem. She promised to forward a list
of the cancelled contracts when available.


2. (SBU) MFA noted that the GOT Foreign Trade
UnderSecretariat had met with SOMO in late August to resolve
problems and SOMO had made a significant payment at that
time. On September 22 Foreign Trade sent a letter to SOMO
explaining why there had been delays in shipments over the
preceding month, primarily due to new export license
procedures to attempt to control fuel trade. Despite this,
MFA stated that SOMO had cancelled a large number of
contracts, many of which were providers of benzene. This
further exacerbated the problem and put many of these
companies in greater difficulty (having acquired fuel and now
finding their contracts annulled.) MFA asserted that Foreign
Trade was not currently holding up authorization of fuel
export.


3. (SBU) Post has long noted that fuel exports will remain
challenged as long as there is just the single Habur Gate,
but the border gate does not appear to be the source of the
current problem. Customs officials have implemented
reasonable measures to facilitate passage of fuel, but not
enough fuel is now arriving at the gate. Current
construction to renovate and expand the gate explains some
portion of the delay, but delays and/or shortfalls will
likely be exacerbated unless and until SOMO makes significant
payments to reduce arrears.
MCELDOWNEY