COPING WITH LIFE AND SHORTAGES IN IRAQ

UNCLAS SECTION 01 OF 03 BAGHDAD 004798

SIPDIS

SENSITIVE

E.O. 12958: N/A
TAGS: EAGR ECON ELAB ENRG EPET SMIG SOCI PGOV IZ
SUBJECT: COPING WITH LIFE AND SHORTAGES IN IRAQ

REF: A. BAGHDAD 4041

B. BAGHDAD 4484

C. BAGHDAD 4553

D. BAGHDAD 3989

E. BAGHDAD 3450

SENSITIVE BUT UNCLASSIFIED - NOT FOR INTERNET DISTRIBUTION.


1. (SBU) SUMMARY: Iraq's current economic conditions are
adverse for many. While emigration, whether permanent or
temporary, is available to a relatively small number,
ANECDOTAL EVIDENCE INDICATES those who leave are often among
Iraq's best and brightest. Average families have developed a
complex dance encompassing barter, the sale of personal
assets, black market activity, emigration, and reliance on
the intertwined tribal/religious/family connections to cope.
END SUMMARY

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FOOD
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2. (SBU) Each Iraqi family is entitled to receive food
staples from the Ministry of Trade through the Public
Distribution System (PDS) to meet their basic needs based on
family size (ref A). These food rations, however, do not
reach every family and, in most cases, do not provide
sufficient supplies for the most needy citizens. Of 3,500
households questioned by the World Food Program in a survey
released in 2004, roughly 52% of households responded that in
the course of a month, they sometimes did not have food to
eat and did not have money to buy food. Roughly 50%
explained that their income had declined, while others blamed
rising prices and shortcomings in the PDS for the food
difficulties.

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JOBS
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3. (SBU) Lack of economic opportunity, especially productive
employment, rather than a lack of available food, is the
primary reason for food insecurity. A reasonable estimate
for unemployment pegs it at approximately 30%.
Underemployment is assumed to be much higher, but no data is
available (ref E). Coping strategies range from the easy to
the extreme. Borrowing money to pay for food is a relatively
common expedient. Some 35% of families seek help through
Islamic charity. More serious is shifting money from health
care and education to purchase food. Greater still is the
selling off of assets. Criminal activity to feed one's
family is the absolute final resort, according to respondents
in the WFP survey.


4. (SBU) Most extreme is the liquidation of valuable assets,
such as draft cattle, dowries, and land rights. According to
representatives of the Food for Peace/USAID office, a village
on the Basrah-ThiQar border had very little food during the
first nine months of 2005, as village wheat stocks had
spoiled because of poor storage techniques. As a
consequence, there were few animals in the village -- they
had been sold to buy food. Pressed to the breaking point,
the villagers are reportedly selling off their water buffalo
-- the family tractor in the marsh areas -- to pay for food.

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FUELS
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5. (SBU) Supplies of fuel for cars, generators, cooking, and
heating are increasingly irregular and currently scarce in
much of Iraq (refs B and C). This has led to a large black
market in fuel. People obtain gasoline by either sitting in
long fuel lines and paying at the pump, or buying it from
someone who sits in fuel lines for a living. For example,
there are reports of old cars that have been turned into
mobile gas tanks: people add extra tanks to their cars, then
purchase fuel at low, controlled prices (between $.05 and
$.13 per gallon),then resell the fuel for a profit to their
neighbors who have a job and cannot wait a day or two in the
gas line.


6. (SBU) Coupons to distribute critical cooking and heating
fuel across the country (ref D) during the winter months are
freely transferable for the first time in 2005. This
innovation has evolved into a thriving free market, where
both the coupons and filled fuel canisters are sold to the
highest bidders. The richest families have plenty of fuel,
and the poorest sell their fuel for a profit to purchase
other items -- a thriving bit of economic trade and barter.

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ELECTRICITY
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7. (SBU) Despite improvements in generation, electricity
remains an on-again, off-again essential service in Iraq. In
most cities, electricity is on about half the time, on a
rotational cycle of several hours on, and several off.
Iraqis have developed multiple ways of coping with the
constant power interruptions. For example, local
entrepreneurs have purchased large neighborhood generators;
households can then purchase a certain amount of amps of
power from the operator when grid power goes off. A normal
bill for this service is $30-75 per month for about 7-10 amps
of alternative power, sufficient to run a household when the
national grid if off.

8. (SBU) Families that can afford a generator themselves have
small generators of about 1500 KW -- sufficient to keep the
lights on and the TV/DVD player working when the neighborhood
generators and the grid are off. Minister of Electricity
Shalash has estimated that there are 10,000 of the large
neighborhood generators in Baghdad, and Minister of Oil
al-'Ulum, whose ministry tracks gasoline and diesel
consumption, has estimated there are between 750,000 and 1
million small household generators. Acquiring fuel for the
generators, as well as for cooking and heating, has become an
art. Because of the uncertainty in supply, hoarding is
widespread. We note, for example, that a recent delivery of
kerosene to Baghdad did not appreciably raise available
stocks. We presume that increased household purchases for
the purpose of hoarding have hindered the ability of fuel
authorities to get ahead of spotty deliveries. If/when the
GOI reduces its subsidy for these fuels to something close to
regional prices running generators will be increasingly
expensive and the number of people without electricity will
increase.

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HOUSING
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9. (SBU) Due to the low individual economic viability,
particularly among young, male adults, the nuclear family
stays together in Iraq for an extended period of time.
Unemployment among younger males is very high so many young,
adult males remain in their parents' homes, unable to earn a
living or support a family. Young women remain at home, as
is usual in the Muslim world, until they are married. This
phenomenon, coupled with a high birth rate, means that there
are a greater number than normal of quite large households.
(NOTE: The size of the average Iraqi household is 6. Among
the poor, it rise to 7. END NOTE.)

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TRIBAL AND ISLAMIC NETWORKS
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10. (SBU) Tribal support networks and Islamic custom, both
quite prevalent in Iraq, require each person to share either
at least 2.5% of any wealth they have held for one Islamic
year or 3.5 oz. of gold with the needy. This tithe is given
to the tribal leadership or, in urban settings, to the imam
at the local mosque. The donation may be in cash, staples or
clothing. This local charity system, known as "Zakat", helps
to support those at the lowest end of the economic spectrum.

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EMIGRATION
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11. (SBU) Some find moving abroad until opportunities in Iraq
improve the most attractive option to adverse economic
conditions. Neighboring countries, including Jordan, Egypt
and Saudi Arabia, are hosting large numbers of Iraqi
citizens. We believe that there are thousands of Iraqis
"parked" in neighboring countries waiting for better
conditions before they return. Furthermore, many
multinational companies who maintain regional headquarters in
Dubai, Cairo or Amman have recruited a large number of young
Iraqi technocrats -- at international salaries -- and are
training abroad to be ready for future, stable conditions in
Iraq. The remittances these young Iraqis send home help to
keep their unemployed and needy family members afloat.


12. (SBU) COMMENT: The drawdown of family capital and
emigration, in particular, will make Iraq's economic recovery
more difficult. They point to the urgency of establishing
conditions to reverse emigration and capital flight as well
as secure economic growth. One can and should admire the
resilience of many Iraqi families but, for most, coping
mechanisms come with a price -- often impacting on future
economic prospects. END COMMENT.
KHALILZAD