C O N F I D E N T I A L SECTION 01 OF 05 BAGHDAD 003103

SIPDIS

E.O. 12958: DECL: 07/31/2015
TAGS: ENRG EPET MASS MOPS EFIN EAGR PREL PGOV IZ
SUBJECT: IRAQ INFRASTRUCTURE SECURITY: FIRST REAL PROGRESS
REPORTED TO NATIONAL ENERGY COUNCIL ON OIL PIPELINE SECURITY

REF: BAGHDAD 2790 AND PREVIOUS

Classified By: ECONOMIC MINISTER COUNSELOR ANNE DERSE FOR REASONS 1.4 B

AND D.


1. SUMMARY: (C) On July 4, the Deputy Commander of the
Iraqi Armed forces briefed the NEC on a new plan for the
defense of the oil infrastructure in the vicinity of
Kirkuk-Bayji, including the Al-Fathah Crossing. The key
elements were the planned commitment of two battalions of the
Iraqi Army to control the area while the current Strategic
Infrastructure Battalions (SIBs) were assimilated into the
Iraqi Army. The command of the entire area will be under the
Commander of the Iraqi 4th Infantry Division, headquartered
in Kirkuk. The Iraqi forces will conduct security operations
until the SIBs are assimilated into the regular army
(including necessary vetting) and then trained to appropriate
standards to guard the pipelines and key oil infrastructure
nodes. MNF-I will provide resources to support the initial
defense, including intelligence support and a quick reaction
force to support the Iraqi forces. Iraqi forces will begin
to use aerial reconnaissance, using small airplanes to patrol
the routes over the pipelines. It was reported that MNSTC-I
would assist in training the forces.


2. (C) The Ministry of Oil will provide specialized training
on oil protection. Priority of defense of linear oil
infrastructure was designated at the meeting, with Kirkuk to
Bayji being highest, then Bayji to Mosul, followed by Bayji
to Baghdad, and finally Baghdad to Basrah. Hardening of
infrastructure will be concurrent, with key nodes being
hardened and guard forces established over the next few
months. The MOD will become responsible for the security of
the oil infrastructure as of August 1, 2005. The DPM thanked

the Armed Forces and General Casey for their work in bringing
forward this plan of protection; however, the Minister of
Industry reminded all that success would not be declared
until oil flowed to Turkey. END SUMMARY.


3. (C) DPM Ahmed Chalabi convened the eleventh meeting of
the ITG National Energy Council (NEC) on July 4. The purpose
of the meeting was to receive a new briefing on an
MNF-I/Ministry of Defense plan to defend the northern Iraqi
oil pipelines. Those attending included the Ministers of Oil
(MOO), Electricity (ME), Water Resources (MWR), Planning and
Development (MOPD), Industry and Minerals (MIM), Agriculture
(MOA), Deputy Minister of Finance (MOF), Deputy Minister of
Interior (MOI), Deputy National Security Advisor, MOD
Director General of Programs and Budget, Deputy Commander of
the Iraqi Armed Forces, Commander of the 4th Iraqi Division,
EMINCOUNS, IRMO Director and emboffs. The DPM opened the
meeting with his assessment of the current strategy of the
insurgents, and said that in his opinion, their strategy was
to attempt to strangle the economy of Iraq by cutting off
essential services to Baghdad, citing the interruptions of
water, electricity and fuels. He then stated there was a
major disinformation campaign and infighting against the ITG
by political parties campaigning against the current
government. He warned each of the ministers that they had no
right to interfere in any judicial decisions. He complimented
the ministers by saying they were all doing good work, and
was pleased to tell them there had been no explosions or
major attacks against the infrastructure for the past six
days. The Minister of Oil responded to this compliment by
saying, "Inshallah".

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REVISED PLAN FROM MOD/MNF-I TO GUARD OIL PIPELINES
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4. (C) The Deputy Commander of the Iraqi Armed Forces, LTG
Abadi, briefed the new infrastructure security plan to the
NEC. LTG Abadi began by effusively thanking DPM Chalabi for
his efforts in talking to General Casey of MNF-I to open the
door for Iraqi Forces to be employed to defend the oil
infrastructure. He said General Casey had agreed to support
the Iraqi efforts to protect the infrastructure, to include
providing back-up quick reaction forces.


5. (C) LTG Abadi provided an assessment of the security
situation at Al Fathah Crossing, saying there were many
problems, especially with checkpoints along access roads into
the area. To rectify this situation, LTG Abadi said the
Iraqi Army would move a brigade to the vicinity of the
northern oil infrastructure to enhance security and provide
quick reaction forces. The initial forces are in place and
only small adjustments are required. He also said Iraq was
going to receive $16 million to support this effort.
Initially, MNF-I will provide support by placing two officers
in the intelligence cell to improve intelligence support to
the infrastructure protection forces. A road will be built
parallel to the pipeline to provide quick reaction access to
the pipeline corridor. Better intelligence links will be
needed between the security forces and the intelligence cell;
these are dependent on improved communications. Two radios
have been requested for each battalion. The planners for
this operation are currently on a three-day visit to the
North; the results of their reconnaissance visit will be
reported at the next NEC meeting.


6. (C) LTG Abadi described the new plan as a joint effort by
Iraqi armed forces, including ground troops and aerial
reconnaissance along the pipeline corridors. He said that
Iraq would use six small planes for this purpose, adding that
Iraq already has the trained pilots and planes, but
insufficient spare parts. The ground forces will include two
trained Iraqi Army battalions from the 4th Iraqi Infantry
Division (ID). The command and control for the operation
will remain with the Commander of the 4th ID. The four
current Strategic Infrastructure Battalions (SIBS), made up
of tribal forces, will be integrated as quickly as feasible
into the Iraqi Army. That process of integration is
currently occurring, with about 450 soldiers assimilated per
day. The key aspect of screening of the soldiers is the
intelligence interview to screen out insurgents from these
units. LTG Abadi said, "We are doing a good job of
recruiting and assessing these soldiers." The Deputy
Minister of Interior (DMOI) offered support to screen these
recruits and assist in background investigations. The MNSTCI
training requirement restriction, is that they will only
train members of the Iraqi Army, so that is why all the
security forces must be part of the Iraqi Army. MOO will
provide training for the soldiers to prepare them for the
unique aspects of guarding oil infrastructure.


7. (C) Priority of defense of oil infrastructure was
designated at the meeting by consensus of the NEC ministers,
with Kirkuk to Bayji being highest, then Bayji to Mosul,
followed by Bayji to Baghdad, and finally Baghdad to Basrah.
Hardening of infrastructure will be concurrent, with key
nodes being hardened and guard forces established over the
next few months. Close coordination will be required between
the ministries of Oil, Defense and Interior. The MOD will
become responsible for the security of the oil infrastructure
as of August 1, 2005.


8. (C) LTG Abadi explained the units would not have
sufficient four-wheel-drive vehicles, so these units would be
issued two-wheel-drive pickup trucks until other military
vehicles could be found. He said 120 officers would be used
to train the new battalions. He emphasized that this had
been a rapidly evolving plan, and the budgeting had not
caught up with the force planning and proposed moves. He did
say the units had about 60 percent of the required equipment
for operational capability. He said MNF-I would be providing
$60 million for the battalions for equipment. (NOTE: MNSTC-I
has promised to match MOD expenditures of up to $35M. END
NOTE.) He requested the MOO provide the armed forces with
technical oil maintenance and repair teams. The Army could
transport them to attack sites and protect them while they
conduct repairs. He said, "We want specialists in oil repair
and protection." He specifically stated key nodes, like the
pumping stations and important valves, would be hardened and
guarded with concrete barriers and guard towers.


9. (C) The Commander of the 4th ID said each battalion
should be increased in strength by 250 soldiers for these
missions. The Deputy National Security Advisor then stated
that the NEC should determine how the brigades should be
constructed and deployed to meet the larger mission in the
north. He continued by explaining that the defensive area to
be covered for the pipelines is quite extensive, extending
all the way to the Turkish border. The Commander of the 4th
Infantry Division responded that there would be a second
phase of this operation to secure the area along the pipeline
north from Bayji to Mosul and then to the border. The CG of
the 4th ID requested that the NEC ministers not disrupt the
Chain of Command and let him figure out the deployments and
stationing of the brigades and battalions. He concluded by
saying, "Let's keep it simple!"


10. (C) LTG Abadi said he needed to do more planning for
future deployments and troop stationing, as he also needed to
begin assessing how to protect the electrical towers and
other infrastructure across the country. The MOF stated the
budget allocated $800 million for oil production. DPM Chalabi
stated, "We have managed to increase the importance of
producing oil. I do not believe we can go forward unless
making this the first priority for reconstruction." DPM
thanked the Armed Forces, General Casey and the US Ambassador
for their work in bringing forward this plan of protection.
The Minister of Industry commented, "Success should not be
declared until oil flows to Turkey."

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ELECTRICITY UPDATE TO NEC
--------------


11. (SBU) The Minister of Electricity (ME) announced to the
NEC that electricity production had exceeded pre-war levels,
as 5300 MW of peak power and 124000 MWH had been reached,
with an average generation capacity reaching 4800 MW this
week. This still only resulted in 3 hours on and 3 hours off
for electricity across much of Iraq. The DPM asked if the
deal for the power from Iran had been fixed, and the ME
responded that Iran was in the midst of the high summer
demand period and had no excess power available. The ME
continued that he had met with the Iranians that morning and
he will sign the final agreement with Iran shortly. The ME
followed this with a report that he was still trying to get
400 MW of electricity from Turkey, but there continues to be
an EU constraint against Turkey selling power to Iraq. The
DPM said, "It is all in the hands of Iran; you need to
negotiate with them." ME said he would need about $300
million to pay for electricity imports. The DPM then asked
for an update on the Youssifiya Project. The ME said, "I
talked to the people in the North, and there could be a new
electric power station for 1400 MW." The MOWR said, "The
Bakhman Dam could provide 1400 MW, but the current design
provides for only 400 MW." ME said the V94 alone would add
260 MW. The ME told the DPM, "We have been told we need to
provide 20K MW, but we can provide only 8K MW. It will take
25,000 metric tons of oil per day to generate 20K MW of
Power."

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NATURAL GAS
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12. (SBU) The ME said, "We should focus on free resources,
not oil. We should use dry gas. Sixty-five percent of the
gas is flared." The DPM concurred, saying, "We need a plan
for gas." The MOO said, "We have gas from the oil fields at
Khurmala and Quds and large gas fields at Missan and
Az-Zubayr." The DPM said, "We need to focus on refineries
and gas." The MOO said, "ME and MIM should quit using gasoil
(diesel) for factories and electricity. We need to quit
using gasoil, and we need to build a gas infrastructure
network to capture, process, and use the dry gas." The DPM
said, "A gas plan is desired."

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REFINERIES
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13. (SBU) The DPM asked, "What is the processing capacity of
our refineries?" The MOO responded, "If all refineries were
working at full capacity, we would refine 650,000 bpd of
crude oil. The only cracking plant is at Bayji. We have a
plan to develop the refineries. We have a plan for a 70,000
bpd expansion at Doura Refinery, and additional planned
expansions at Basra. We produce 50 percent of our refined
products at Basra." The DPM said, "We need more expansion
than those plans." MOO responded, "We have long-term plans
for a 300,000 bpd refinery at Basra and a 70,000 bpd refinery
at Sulimaniya." DPM said, "We cannot afford those, but we
could with private investment. We need a Petroleum Law."
MOO said, "We have a plan for a Petroleum Law to present to
the TNA to permit the import and refining of fuels and
authorization for private sales of fuels. I have talked to
several refining companies about private sector investment in
Iraq." DPM replied, "Good idea. We need to be able to export
from our refineries." The DPM continued, "There has been a
decline in the production from the southern fields. Last
year we were producing 2.4 million bpd, and it is now
declining. We have no vision for our national budget, and we
do not have the right management skills to run our oil
fields. We had a $3 billion budget for oil, and we did not
use this money for investment, but rather we used it for fuel
imports." MOO added, "MOO has problems in technology,
drilling fields, and entering the modern petroleum world. We
need to bring back INOC (Iraqi National Oil Company). It
needs to be independent. We need to send the INOC Plan to
the Assembly." The DPM said, "Send the INOC Plan to me, and
I will review it and sign it."

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COMMENTS
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14. (C) COMMENT: The NEC made a great leap forward at the
July 4 meeting. There is now the basis of a viable plan for
the protection of the critical infrastructure across Iraq.
The NEC has set the priorities for protection, and the MOD is
supporting with the planned commitment of trained Iraqi Armed
Forces. This illustrates a positive commitment and
coordination between the MOD and the MNF-I in future planning
and force deployments, a positive development for the
maturation of the Iraqi government. This is also an
important Iraqi military response to continued attacks on
strategic infrastructure. The NEC can be expected to expand
this planning to the other key aspects of national essential
infrastructure over the next few months, helping to ensure
the provision of basic essential services for the people of
Iraq. The ministers of the NEC are cooperating and there
appears to be the beginnings of coherence in national level
planning and execution. While the words sound positive, they
must be followed with funding decisions that provide the MOD
with the financial resources to accomplish this mission.


12. (C) The NEC discussion on private sector investment and
best use of petroleum/natural gas resources is another giant
leap forward. Any discussions or plans to obtain electricity
and/or fuel from Iran and Turkey need to be watched
carefully. The Iraqis are presenting their views of the
economic benefits to Iraq of an integrated and synchronized
electrical grid constructed between Turkey, Iran and Iraq,
permitting power sharing and maximizing the regional benefits
of both hydropower and natural gas resources. The NEC
discussion on expanding refineries hints at the long-term
goals of the Iraqi petroleum sector to follow the model of
Saudi Arabia, and enhance the income stream from oil
production and refining prior to export. The
reestablishment of INOC would be a major step in the
direction of providing management and coherence to the
petroleum sector of the Iraqi economy. END COMMENT.


Khalilzad