OIL WORKERS UNDER THREAT; MORE "UNOFFICIAL" FUEL

S E C R E T BAGHDAD 004040 SIPDIS E.O. 12958: DECL: 09/29/2015 TAGS: ECON ENRG EPET KCOR KCRM PGOV IZ SUBJECT: OIL WORKERS UNDER THREAT; MORE "UNOFFICIAL" FUEL PRICE RISES IN THE WORKS REF: BAGHDAD 3939 Classified By: Economic Minister Counselor Tom Delare for reasons 1.4 ( b) and (d). ¶1. (S) Summary: Director General of the Oil Products Distribution Company at the Ministry of Oil Zuhayr Shakir (strictly protect) told us September 27 that he intends to institute further modest increases in fuel prices for both consumers and state-owned enterprises (SOEs). He believes that he has tacit permission to do this. Zuhayr said that oil company workers are increasingly under threat, reported the murder of one of his men in Baghdad that morning, and expressed concern regarding his own safety. Zuhayr has also refused to provide carte blanche fuel deliveries authorized by senior GOI officials. End Summary. ¶2. (S) In a September 27 meeting with Director General for the Oil Products Distribution Company at the Ministry of Oil Zuhayr Shakir (strictly protect),he told us he is continuing his efforts to rationalize fuel prices in Iraq. Zuhayr said he presented further proposals for price rises to state owned enterprises (SOEs) September 22 to Minister of Oil al-'Ulum. Following recent practice, he does not expect the Minister to respond either positively or negatively. When, "after a month or so," he hears nothing back, Zuhayr says he will put fuel price hikes for SOEs into effect. ¶3. (S) Zuhayr said he has further price rises in mind for consumers as well. His idea is to first increase the number of mobile gas stations (where fuel currently sells for roughly $.26/gallon),co-locating them at existing gas stations. This effectively lets people choose between the longer line at $.13/gallon, and the shorter line at $.26/gallon. The mobile stations will then raise their price to, for example, $.39/gallon, while the gas stations move to $.26/gallon. Zuhayr sees this as a gradual process. ¶4. (S) Zuhayr said he receives daily special requests to provide fuel for neighborhood or personal generators. Generally endorsed by Minister al-'Ulum or other high-ranking government officials, Zuhayr maintained that many of these requests are clearly for personal gain. Zuhayr said he authorizes no shipments until one of his staff has personally verified the existence and capacity of the generator. The amount of fuel delivered is only sufficient for storage facilities on hand, to prevent re-sale of the fuel on the black market. Insisting that he will not break regulations, Zuhayr complained that no one above him says no - they simply pass the problem down to him, with a request that the fuel be issued. If he denies a request from a powerful individual, he "has problems;" if he grants it without verifying, he breaks the law. Compounding the problem, fuel deliveries are currently so low that he does not have sufficient fuel supplies on hand to meet demand in any case. ¶5. (S) Zuhayr was agitated as he reported the murder of one member of his verification team that morning in Baghdad and described the pressures and threats his people are under. He said he requested that Minister al-'Ulum stop forwarding requests for fuel deliveries, and to have been told more or less that he (Zuhayr) is out of touch with political reality. Zuhayr insisted that he no longer wants his position at the distribution company, but "can't find anyone he hates enough" to whom he could pass it. His request for extra security was denied. ¶6. (S) Comment: We tend to take Zuhayr's word on the price hike process. Our previous conversation with Oil Minister al-'Ulum showed the Minister to be intent on keeping aloof from the matter (reftel). Yet tacit approval is a fragile basis for policy, and, without Zuhayr's initiative, it is unlikely that the GOI would be making any fuel price reforms this year. If he is killed, it is difficult to see how anyone willing to engage on reforms would be willing to take his place. Khalilzad