C O N F I D E N T I A L SECTION 01 OF 05 BAGHDAD 003111

SIPDIS

E.O. 12958: DECL: 07/25/2025
TAGS: PINS PHUM PGOV KDEM EPET EINV IZ
SUBJECT: IRAQI DPM CHALABI SUPPORTS OUTREACH TO SUNNIS,
MODERATION IN DE-BAATHIFICATION

REF: BAGHDAD 3069

Classified By: Ambassador Khalilzad for reasons 1.4 (b) and (d)


1. (C) Summary. Deputy Prime Minister Chalabi says he
supports outreach to the mass of the Sunni population, claims
to desire Sunni inclusion in the political process and feels
this will reduce tension in Iraq. There is now a plan before
the Cabinet, he said, to provide pensions to senior former
military officers and selected Baathists to reach out to the
disaffected from the previous regime in Iraq. Chalabi is
concerned about the budget deficit and the cost of subsidies
to the ITG. He has taken a personal interest in
infrastructure security and is orchestrating the ITG's
efforts at the direction of the Prime Minister. Chalabi says
that government officials do not get out to see the people of
Iraq, and are isolating themselves in the Green Zone. For
his part, he has engaged in outreach to the Sadrists to bring
them into the political process. Chalabi asserts that the TNA
needs to make a "few changes" to Iraqi Special Tribunal law
for it to "work properly and to legally accomplish its
tasks." Chalabi fur
ther said that U.S. reconstruction efforts have fallen short
of their goals, citing shortfalls in the electric power
sector. He claimed that the Contract Review Committee of the
ITG, which he chairs, had reduced corruption. He also said
the U.S. should do more with private sector investment in
Iraq, and requested U.S. support for scholarships for Iraqi
students in the United States. End summary.

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SUNNI INCLUSION IN POLITICS AND DE-BAATHIFICATION
-------------- --------------


2. (C) The Ambassador paid an initial call on Deputy Prime
Minister Ahmed Chalabi on July 25. Chalabi said the crux of
the problem with the Sunni population is that it needs to be
included in the political process. Since 2003, the result of
the Sunni population's isolation and its identification with

Baathism by both the U.S. and the Iraqi governments has been
unproductive. The CPA Order on De-Baathification was too
broad. "The issue is this," Chalabi said, "We will not
succeed if we continue to isolate the Sunni." There were 3
million people in the Baath Party, and 65 percent of them
were Shia. We need new laws on de-Baathification, and we
need to moderate the TNA proposals, as some of them are much
too radical, said Chalabi.


3. (C) Chalabi used the example of Tal Afar as a place where
the outreach to the Sunni is working. Tal Afar is a place
where it is better to "talk first, before shooting";
consequently, he invited leaders of both sides, Sunni and
Shia, to a four-hour meeting. The Sunni declared in advance
that the Shia were "agents of Iran," but came to the meeting
anyway. When the opposing sides met, they found they were
all relatives, could talk together, and then concluded: "This
shows how foolish we all are." Chalabi said he told the
group, "We need to solve these differences by talking, not by
arms and soldiers. Do you want to be a ghost town like
Fallujah?"


4. (C) Chalabi used another example of political mediation,
this time in Latifiyah. A man whose father had been killed
went to see the insurgent members of the Sawuara Tribe who
had killed his father. He asked to meet with the tribal
leaders, and a man appeared and said his brother was a tribal
leader. The man asked what it would take to end the
conflict-an amnesty? The answer was, "Yes, but he has killed
many people." Chalabi ended this example by saying he would
wait a bit before reaching a conclusion, to see if the tribes
are really serious. He did add that this is the place where
more then 250 bodies had been thrown into the river, but
mediation may work in the future.


5. (C) The final example Chalabi gave of a political
approach used to solve grievances related to Al Kut. Chalabi
explained that in Al Kut, rumors were spreading that the
police in the prison were torturing many people, and that the
lawyers were extorting money from people to supposedly defend
the prisoners in the jails. This was causing high levels of
tension in the Sunni community. Sunni sheiks were invited to
the prisons to see the prisoners themselves. They reported
that they had talked with them and saw that the prisoners had
not been tortured; they were even being held in
air-conditioned cells. This process reduced the tension in
Al Kut, Chalabi said.

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THE INSURGENCY
--------------

6. (C) "We need to figure out who is on our side in the
North and Northwest, and protect them" said Chalabi. Al
Zarqawi has freedom of movement in the West. "We caught a
suicide bomber, a Sudanese man, the MoI got him in Baghdad,
and upon his capture he wanted to make a public statement,
which was 'I would like to express my thanks to the people of
Anbar, who fed me, sheltered me, and brought me to Baghdad'".
Chalabi explained that the worst feature of the insurgency is
its infiltration of the police and military. He then told
the story of a man named Jadan who was the Police Chief in
Anbar until the U.S. Marines found he had been giving arms to
the insurgents and supporting them with information and
protection.


7. (C) "Saddam's security plan for an insurgency against the
American attackers is now being used against the Iraqi
Government," said Chalabi. The insurgents are all around
Baghdad, to the north, south, east and west. "Baghdad is
under siege by the insurgents who are cutting off the fuel
and water supply, and electric power."


8. (C) Chalabi said he has proposed a three-pronged strategy
to combat the insurgency. He recommends telling the Sunni
and Shia insurgents to 1) stop the incidents, 2) turn out the
foreigners, and 3) release the hostages. He stressed that a
political solution is required to solve the insurgency.

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PENSIONS FOR MILITARY AND BAATHISTS
--------------


9. (C) Chalabi disclosed that a proposal was put forward to
pay pensions to third and fourth tier Baathists at the last
Cabinet meeting. This proposal, which would exclude
approximately 2000 senior Baath party members, would cost
about $20 million to implement. He said there will also be a
bill for military pensions at a cost of $600 million.
Chalabi feels this may reduce tension in Iraq. When asked
how this might affect the insurgency, Chalabi said: "This is
unknown, but such a measure would be part of a process to
bridge the gap with former members of Saddam's Army. The
Army was made up primarily of conscripts, perhaps 95 per
cent, and they fled at the end of the war. It is the senior
members we are reaching out to in this process."

-------------- ---
BUDGETS, OIL INCOME, AND INFRASTRUCTURE SECURITY
-------------- ---


10. (C) Chalabi said the ITG is facing an additional $1.7
billion expenditure for fuel imports for the second half of
the year. "We have signed an agreement to reduce subsidies
for fuel, but the rise in oil prices has been a curse on
Iraq. Iraqi refineries produce 10 million liters of fuel per
day, but the demand is 24 million liters per day, which means
purchasing 14 million liters of imported fuel at $.55 per
liter per day; we then sell it at 1.4 cents per liter. Some
of this cost can be covered by the export of 250,000 barrels
of oil per day from Kirkuk to Ceyhan, Turkey, thanks to the
support of General Casey." Chalabi asserted that the
northern pipeline to Ceyhan is fully open and that oil is
flowing at 250 thousand bbl daily (a figure post is
attempting to confirm).


11. (C) Infrastructure security has been a topic much
discussed in the Cabinet, said Chalabi. He said he had held
a meeting with the Minister of Defense (MoD) on this subject
several months ago, who had told him it would cost $600
million and would take six months to secure the route and oil
pipeline to export oil out of Kirkuk to Turkey. He went on
that Iraq has a protection plan and has allocated $35 million
for infrastructure security and, since then, $200 million in
oil exports have flowed from Kirkuk.


12. (C) Chalabi told us that securing the oil infrastructure
began with an ill-fated plan by Hassan Jabouri. Eighteen Oil
Security Battalions were formed under the Ministry of Oil;
all were under strength with only about 250 soldiers in each
battalion. Unreliable, the battalions were transferred to
MoD, which rapidly became fed-up with their tribal
affiliations. A decision was made by the ITG ministers to
induct these battalions into the regular Iraqi Army. This
process is now being completed in the northern part of Iraq
in coordination with MNF-I. Chalabi has asked General Casey
to assist in protecting the essential infrastructure of Iraq,
to include oil and gas pipelines, and the electric power
lines. "Baghdad is under siege," he told the General, "and we
must deploy army forces."


13. (C) The Prime Minister authorized a memorandum on July 24
making Chalabi responsible for protection of infrastructure
in Iraq. Chalabi said he is working it through the National
Energy Committee (NEC), which consists of the Ministers of
Oil, Electricity, Water Resources, and is attended by the
Ministers of Defense, Transportation, Trade, Interior,
Industry and Minerals, and Finance as required. The Deputy
Commander of the Armed Forces represents the military and
coordinates overall planning of infrastructure protection for
MoD. Chalabi said the security forces of the ministries,
particularly the Electricity Protection Security Forces, were
not capable of protecting the linear infrastructure, and did
not even do a good job defending fixed sites. Chalabi
requested that the USG establish joint working groups with
the ITG to work these infrastructure security issues. He
said he would hold a meeting of the NEC in the afternoon,
about which we will report via septel.

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OTHER SECURITY ISSUES
--------------


14. (C) Chalabi gave the Ambassador a copy of the memorandum
from the Prime Minister referred to above, laying out the
PM's "twelve point plan" on internal security issues, which
had been discussed previously with Ambassador and General
Casey. Ambassador and DCM expressed concern-as we have made
clear with all our interlocutors-with any references
endorsing the establishment of "militias". Chalabi, noting
that the Speaker of the Assembly had agreed with him that it
is a bad idea to establish militias, suggested that Iraq
needed "night watchmen," not militias.

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SYRIA, IRAN AND IRAQ
--------------


15. (C) Syria has invited the Prime Minister, said Chalabi.
This seemed to be part of a ploy to get a three-way meeting
with the Iranians, Syrians, and Iraq, according to Chalabi.
The Prime Minister turned down the invitation. Chalabi said
the Syrians should give Iraq the funds they owe it. The
Finance Minister sent a letter to Syria June 24 requesting
release of the funds, but this has not yet happened. Chalabi
went on that "lots of other money is hidden in Syria." The
Ambassador said we would work with Iraq to help settle the
claims. Chalabi responded by saying there are many bogus
claims from Syria, Jordan, and Lebanon.

--------------
CHALABI'S VIEWS ON THE ITG
--------------


16. (C) The ITG's ministers do not understand the people and
their concerns since the Ministers do not move around to see
Iraq, said Chalabi. "They stay in the Green Zone. They
clamor to live in the Green Zone. We should not flee
Baghdad, but we need to get out and see the people, which is
why we liberated the country. It is a TV government."


17. (C) The Sadrists need to be better integrated in the
political system, said Chalabi. He was to talk to Sadr later
in the day, especially about Sadr's concerns about Baathists
in government. He said he wanted Sadr's views on jobs and
placement of people.

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IRAQI SPECIAL TRIBUNAL
--------------


18. (C) Chalabi said he supports the independence of the
Iraqi Special Tribunal. However, "there are two problems
with the process. First, the legitimacy of the Tribunal is
in doubt; we need a TNA law to fix that. Second, there needs
to be continuity of law so as not to negate past laws; there
must be amendments to the laws, not new laws." Chalabi
followed this by saying, "If I were Saddam's lawyer, and one
of the judges is a Ba'athist, I would conclude that this is
an illegal tribunal." Chalabi suggested this is the case
since some of the judges were Ba'athists. (COMMENT Chalabi
is correct that th IS Sttute states that no IST personnel
shall have been members of the Ba'ath party. However, since
membership in the Ba'ath party was a prerequisite for
admission to the judicial institute, it would have been
nearly impossible to find experienced judges who had never
been Ba'ath party members. Nearly all current IST personnel
were at one point party members; this fact was disclosed and
reviewed during
the personnel appointment process. Thus, the USG and others
have read the Statute to preclude only high level Ba'athists
from sitting on the Tribunal, and believe this is consistent
with CPA Order No. 1's focus on high level party members. No
current IST personnel were members of the top four ranks of
the party. To alter that reading now, and to remove all
Ba'athist members, even low level ones, would decimate the
progress of the Tribunal and exclude some of the most
productive, best trained judges. Additionally, we think it
is legally questionable whether the De-Ba'athification
Commission may interfere with the positions of IST personnel.
END COMMENT.)


19. (C) The Ambassador then passed a non-paper to Chalabi
recommending changes to some of the TNA-proposed amendments
to the IST Statute (see reftel). Chalabi reviewed the
non-paper and concurred in its recommendations. (COMMENT.
One USG recommendation is that the TNA limit its proposed
changes on the Ba'ath provision to state that only those IST
personnel who held the rank of any of the top four levels of
the Ba'ath party are precluded from serving on the Tribunal.
While Chalabi appeared to agree with this proposal, we
understand that the TNA has not modified its proposed
amendments to reflect the USG suggestion. Post continues to
engage on this issue and will press again with Chalabi and
other leaders, as well as with TNA, the significant problems
that would arise if the amendments were adopted unchanged.
END COMMENT.)"

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BUDGET FOR THE TNA
--------------


20. (C) The budget for the TNA, at 107 million Iraqi dinars,
is inadequate to support the members and their work, said
Chalabi. He supports raising the TNA budget to 78 billion
Iraqi dinars for the salaries of the members and their staff.
He said an additional $10 million U.S. dollars has been
allocated for consultants and studies.

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RECONSTRUCTION AND CORRUPTION
--------------


21. (C) Chalabi said he supports the USG provincial
reconstruction efforts, but is concerned that corruption is a
greater problem at local levels. His overall assessment of
the reconstruction effort is not favorable. He pointed to
the electric power sector where, he said, more than $2
billion in USG funds have been spent, and there is "not much
to show for this effort." He did concede that the Musayyib
gas turbine project is a success.


22. (C) Chalabi recommended that the Ambassador talk to the
Prime Minister about corruption. Chalabi said he had written
to the Prime Minister about contract corruption by the Iraqi
Government. He was then delegated to oversee the Contracts
Committee that reviews government contracts exceeding $5
million. (Comment. We believe the floor is $3 million. End
comment.) When the Contracts Committee approves a contract,
he said, the committee notifies the Ministry of Finance,
which authorizes payment of the contract.


23. (C) Chalabi said the Contract Review Committee had
recently approved two major contracts, each for 650,000 tons
of wheat, one from Australia and the other from the United
States. The Committee had also approved a contract for
250,000 tons of U.S. rice. It had reviewed a sugar contract
with the wrong people for four million tons of sugar at a
cost of $1.2 billion, so the committee authorized a purchase
of 168,000 tons of sugar from the London Exchange.


24. (C) Chalabi claimed that corruption has dropped 90
percent since the Contract Review Committee has been
reviewing ITG contracts. "We look for the tell-tale signs of
corruption." The Ambassador said we will work to find ways
to help the Contract Review Committee Board. Chalabi
concluded by saying that all funds from oil sales are now
deposited in the DFI.

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PRIVATE SECTOR
--------------

25. (C) Chalabi informed us that the Iraqi Private Sector
Committee had been dissolved on May 24. "You should have
protested!" he said. He went on that Iraq needs private
sector investment in Iraq, and "we need to get the Americans
on board."

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SCHOLARSHIPS
--------------


26. (U) Chalabi requested that the United States increase
the number of scholarships for Iraqi students to the United
States. He said this is very important, and we need to get
re-start a program. The Ambassador concurred and said he
would send the Public Diplomacy Officer to see Chalabi to
give him information on the opportunities to study in the
USA. Chalabi replied that his daughter had just completed
her Ph.D. at Harvard, and MacMillan publishers would publish
her dissertation, which she had researched in the Middle
East. He said she would return to Iraq shortly. The
Ambassador responded that he is looking forward to meeting
her, as we are interested in her insights on women in Iraqi
society.
Khalilzad