IRAQ'S ILLICIT FUEL TRADE

S E C R E T ABU DHABI 002927 SIPDIS NOFORN SIPDIS E.O. 12958: DECL: 06/11/2031 TAGS: EPET EFIN KCOR IZ AE SUBJECT: IRAQ'S ILLICIT FUEL TRADE REF: A. SECSTATE 105085 ¶B. DET 600 IIR 7 611 0504 06 ¶C. DET 600 IIR 7 611 0502 06 ¶D. 01 ABU DHABI 7043 Classified by Ambassador Michele J. Sison for reasons 1.4 (b and d). Derived from Det 600 IIR 7 611 0504 06. ¶1. (S/NF) Embassy and Congen's best estimate is that the illicit fuel trade with Iraq (both black market and gray market) continues primarily in the northern emirates. The U.S. Navy continues to collect reports that the trade continues with boats reportedly selling gas oil off the coast of the UAE near the port of Fujairah (the second largest bunkering port in the world) (Ref B.). There are also reports that several shipping companies that were involved in shipping oil to the UAE stopped their operations due to diminishing profitability. (Ref C). ¶2. (C) Embassy contacts, however, suggest that the trade is relatively small and "under the radar screen." According to one local observer of the oil trade, the problem was greater shortly after the "end of the war with Iraq" when local traders complained about being undercut by cheap Iraqi oil and products. One BP contact of Econchief said that he occasionally still received calls inquiring as to his interest in receiving Iraqi oil. He stressed, however, that BP was not interested in black or gray market oil as it could purchase oil directly from Iraqi oil companies and didn't need to take chances on possible oil scams. ¶3. (C) Post does not have any information on companies involved in smuggling Iraqi oil. We note, however, that FAL Oil Company, headquartered in Sharjah, attempted to sue both the UAEG and the USG in 2001 for seizing its ships for smuggling Iraqi oil, is still in operation. It advertises itself as the largest independent bunker operation in the Middle East. SISON