6 August 2005 Meeting with Dr. Mohsin Shalash,

UNCLAS SECTION 01 OF 02 BAGHDAD 003400

SIPDIS

SENSITIVE

E.O. 12958: N/A
TAGS: ENRG IZ
SUBJECT: 6 August 2005 Meeting with Dr. Mohsin Shalash,
Minister of Electricity and IRMO Director, Daniel
Speckhard

SENSITIVE BUT UNCLASSIFIED


1. (U) SUMMARY. On 6 August 2005, Dr. Mohsin Shalash,
Minister of Electricity, IRMO Director Speckhard and
Senior Advisors met to discuss how IRMO can assist the
Ministry of Electricity (ME) to alleviate its immediate
energy and security issues. Shalash discussed a number of
issues, which lead to a severe and somewhat sustained
decline in hours of power in Baghdad. Recent
interdictions have created extensive damage to the
transmission lines, leading to a loss of about 600 MW of
power (~5-6 hours of power) particularly to the Baghdad
area. He believes the infrastructure security needs to
be strengthened. Complicating this issue is Shalash's
desire to replace the head of ME's Electrical Power
Security Services (EPSS),a force of 7,000. In addition,
Shalash discussed the failure of the Basra and Nasiriyah
governorates to honor power transfer agreements and
provide 200 MW of power (~1-2 hours of power) to the
Baghdad area. Shalash believes the impact of these two
issues that occurred at the same time could have been
mitigated by sufficient fuel supply for Baghdad area
power plants. Shalash stressed the need for an
alternative solution to their existing dependency on the
Ministry of Oil (MoO). Finally, the need for funds
through other donors and revenue generation through
tariffs were discussed as USG donor funds are being
depleted rapidly. END SUMMARY.


2. (SBU) Infrastructure Security and Interdictions. The
security situation was a subject at the forefront in the
meeting. The need to develop the electricity
infrastructure security is crucial at this stage, as the
recent escalation in the magnitude of interdictions has
critically damaged transmission lines to a precarious
level. The drastic drop in hours of power in Baghdad from
12 hours to 4 hours is the result of repeated
interdictions on the Bayji to Baghdad West #1 & #2 lines,
which provides as much as 600 MW of power. Minister
Shalash stressed the need for coordination between Iraqi
and Coalition forces in order to increase security on key
transmission line corridors and not to exclude the use of
aerial surveillance. Complicating and exacerbating this
is Shalash's intention to terminate Director General
Faris, the head of EPSS, along with ten to fifteen
members of Faris's staff within the next two weeks.
Faris's replacement, selected by the Minister to be
General Sa'ad Hashim, has extensive prior experience in
protecting the electricity infrastructure. However, this
information has leaked and Sa'ad has been threatened on a
number of occasions by EPSS. Both the Minister and US
personnel fear retaliation from Faris and his extensive
supporters within EPSS. As a temporary solution, the
Minister requested military support to identify and
position rapid response coalition forces to be deployed
at ME headquarters or other key ME static sites around
Baghdad. For the short term, IRMO Electricity requests
that coalition forces remain on site at ME facilities
while they are present. The Minister is currently
working with the Prime Minister's office to develop a
strategy that will allow General Sa'ad to replace DG
Faris. The Minister has also requested support in
securing weapons and equipment recently provided to EPSS
under an IRRF-funded training and equipment contract.


3. (SBU) Power Sharing. Further impacting hours of power
has been the failure of the South to honor its obligation
to transfer power to Baghdad. Minister Shalash recently
visited the National Dispatch Center (NDC) to address
this issue and assess the NDC operation. At the NDC, the
Minister personally contacted and convinced the Governor
of Al Anbar Province to increase power transfer to
Baghdad by 50 MW. He also contacted the Governor of
Basra to increase the power transfer to 100 MW. The
Governor of Basra failed to comply with the Minister's
request, which, when combined with the interdicted
transmission lines, led to Baghdad hours of power
decreasing to 4 hours per day between July 29 and August
6, while Basra enjoyed 18 hours. The Minister was unable
to successfully contact the Governors of Hillah and
Nasiriyah to ask for similar power transfer support.
Following his assessment of the NDC, the Minister has
decided to replace some personnel at the NDC, citing
incompetence. To further tackle the power sharing issue,
a meeting is planned to take place in the near future
with the Prime Minister (PM) who will lead a discussion
between governors, ministers, local and regional leaders.
The Minister will ask the PM to clarify whether ultimate
authority lies with the governorates or centrally with
the ME. Shalash also intends to ask the PM to order the
governors and local councils to cooperate and comply with
the power-sharing plan as developed by the ME. The ME
hopes to advance a power-sharing plan designed to provide
equitable power with a goal of at least 12 hours of power
per day across all of the governorates for the summer.
Meeting this goal was progressing successfully until the
recent interdictions to transmission line and the
obstruction to power transfer from the South to Baghdad.


4. (SBU) Fuel Supply. Shalash also stated a need to
mitigate the dependency of the ME on MoO for fuel as well
as the need to explore options for more efficient sources
of fuel supply. Shalash recently met with the Minister
of Oil to assess the availability of natural gas for the
next two to three years in order to evaluate the
potential for the development of new gas combustion power
stations at strategic locations. At that meeting, the
Minister of Oil admitted that no additional gas would be
available in the next two to three years unless oil
production increased to allow for the collection and
distribution of associated natural gas. Shalash would
therefore like to explore, with donors, opportunities to
develop gas fields and to site natural gas power stations
on these fields. Shalash is of the opinion that the
Ministry of Oil is paralyzed and is incapable of
partnership in the execution of such key projects. The
emergence of the Electricity Sector Working Group,
announced during last week's Baghdad Coordination Group
meeting and expected to meet next week, couples
interested donors and Iraqi leaders and can serve as an
important forum for the Minister to raise this problem.



5. (SBU) Funding and Tariffs. Finally, Shalash expressed
the need for further funding, as USG donor funds are
depleting rapidly. He explored the possibility of the
USG providing additional funds for the Electrical
infrastructure through soft loans, similar to the way
other countries are providing this support. As an
example, the Minister discussed soft loans available to
Iraq from Iran, Germany and Japan summarized below:

-Iran has promised $1 Billion USD in soft loans
-Germany has promised 1 Billion Euros in soft loans
-Japan has promised $3.5 Billion USD in soft loans


6. (SBU) In addition to funding projects and its
operation through donor funds, the need for the ME to
generate revenue through the increase of tariffs was also
discussed. In order to successfully implement an
increase of tariffs, Shalash strongly believes that all
subsidies for food, refined products and electricity
should begin to be phased out later in 2005, a direction
for which he will continue to advocate with the PM. He
also believes that a public relations campaign must be
be
developed to explain to the population the reason for and
the manner in which the subsidies will be phased out.
Shalash also stated he did not believe the Coalition
effort had resulted in any real megawatt contribution.
IRMO Director Speckhard and IRMO Electricity Senior
Advisors objected to this comment and perception. The
Senior Advisors agreed to provide Shalash with factual
information to clearly show the contributions made by the
Coalition.

KHALILZAD