IRAQI FUEL PRICES RISE BEFORE IMF DEADLINE

UNCLAS BAGHDAD 005039

SIPDIS

E.O. 12958: N/A
TAGS: EPET ENRG ECON PGOV IZ
SUBJECT: IRAQI FUEL PRICES RISE BEFORE IMF DEADLINE

REF: BAGHDAD 4998


1. (SBU) SUMMARY: The Government of Iraq (GOI) formally
initiated fuel price increases across Iraq on December 18.
These fuel price increases meet an essential IMF prior action
for a Stand by Arrangement with Iraq. Demonstrations were
reported in multiple locations in response to the price
increases. The GOI informed us the price rises would stand
in spite of the negative response of the demonstrators. The
Deputy Prime Minister and the Ministers of Finance and Oil
held an unscheduled press conference to calm the populace and
explain the reason for the increases in the price of fuel.
END SUMMARY



2. (SBU) The GOI officially initiated fuel price increases
across Iraq on December 18. The price increase policy was
implemented nationally to meet the IMF requirements according
to Musab Al Khateeb, Chief of Staff of the Ministry of
Finance. New prices in Iraqi Dinar (ID) per liter are as
follows: LPG (Standard Cylinder)--600 ID ($.40),regular
gasoline--150 ID ($.10),premium gasoline--250 ID ($.16),
kerosene--25 ID ($.016),diesel--90 ID ($.06).


3. (SBU) Demonstrations against the new fuel prices were
reported in the press at Al Kut and An Najaf. Concern about
demonstrations and further unrest caused Deputy Prime
Ministers Chalabi and Shawys, the Minister of Finance Allawi,
and two other ministers to hold an unplanned joint press
conference at 4:30 PM December 18 to calm the populace and
explain the price rises. In a vivid demonstration used to
show how cheap fuel is in Iraq, a bottle of water was used as
a prop, with the accompanying comment that a bottle of fuel
was cheaper. The point was also made that this price reform
is a necessary part of fixing the economy of Iraq.


4. (SBU) Price reports from gas stations and provincial
officials in Hillah/Najaf and Tikrit provide additional
confirmation of the initiation of the new prices for fuel
across Iraq. No variations from the official government
prices were reported. The Ministry of Oil reportedly is
sending 200 technicians out across Iraq to adjust the prices
on the pumps at the gasoline stations. That process is
expected to take a week.

KHALILZAD