Identifier
Created
Classification
Origin
06BAGHDAD101
2006-01-11 15:09:00
SECRET
Embassy Baghdad
Cable title:  

DPM CHALABI UPDATES ON ENERGY AND INFRASTRUCTURE

Tags:  ECON ENRG EPET EFIN MOPS MARR PGOV PREL KCOR IZ 
pdf how-to read a cable
This record is a partial extract of the original cable. The full text of the original cable is not available.
S E C R E T SECTION 01 OF 04 BAGHDAD 000101 

SIPDIS

E.O. 12958: DECL: 01/09/2015
TAGS: ECON ENRG EPET EFIN MOPS MARR PGOV PREL KCOR IZ
SUBJECT: DPM CHALABI UPDATES ON ENERGY AND INFRASTRUCTURE

REF: BAGHDAD 0048

Classified By: Classified by Charge D'Affaires David Satterfield for re
asons 1.4 (b) and (d).

S E C R E T SECTION 01 OF 04 BAGHDAD 000101

SIPDIS

E.O. 12958: DECL: 01/09/2015
TAGS: ECON ENRG EPET EFIN MOPS MARR PGOV PREL KCOR IZ
SUBJECT: DPM CHALABI UPDATES ON ENERGY AND INFRASTRUCTURE

REF: BAGHDAD 0048

Classified By: Classified by Charge D'Affaires David Satterfield for re
asons 1.4 (b) and (d).


1. (C/REL MNF-I) SUMMARY: Deputy Prime Minister (DPM) Ahmad
Chalabi, serving at that time as acting Minister of Oil
(MoO),hosted a status review on January 8 for the Steering
Group for Infrastructure Integrity. According to data he
presented, Chalabi claimed that Baghdad has 1.1 days of
gasoline supplies on hand, with a tenuous but improved
re-supply chain. The 22-inch product line from Bayji to
Baghdad remains interdicted. MoO intends to pump gasoline by
pipeline from Bayji to Kirkuk and truck it to Baghdad to
avoid the more dangerous Bayji-Baghdad route. Chalabi
acknowledged the effectiveness of the recent IMF-mandated
fuel price hikes as a corruption-fighting tool. He stressed
the existence of a connection among corrupt officials, black
marketeers, and insurgents, who he said are engaged in an
"effort to make the government fail." He announced he would
restrict the export of fuel products from Iraq over the
Syrian border. Finally, Chalabi once again challenged the
effectiveness and utility of the Strategic Infrastructure
Battalions (SIBs). END SUMMARY.


2. (SBU) On January 8, DPM Chalabi met the Steering Group
for Energy Infrastructure Integrity to discuss the fuel
crisis situation in Iraq. The meeting was attended by
Infrastructure Coordination Center Chief BG Kamal, DCM
Satterfield, Deputy Commander of MNF-I LTG Houghton,
POL/MILMINCOUNS, ECONMINCOUNS, MNF-I STRATOPS, IRMO Director
of Operations, and ECONOFF.

--------------
PRODUCTION AND DELIVERY OF FUEL
--------------


3. (C/REL MNF-I) Director General of the Ministry of Oil's
(MoO) Technical Directorate, Samir Michael Assad, summarized

current gasoline production in Iraq. Samir Michael said that
Bayji was providing 1.4 million gallons, Basra 450,000
gallons, and Daura 130,000 gallons of gasoline. He added
that 1.5 million gallons of gasoline had been delivered to
service stations in Baghdad January 8. (NOTE: This compares
to average daily consumption from official sources in Baghdad
of 2.1 million gallons. END NOTE). The total amount of
gasoline available in Baghdad on January 8, according to
Samir Michael, was 2.4 million gallons or 1.1 days of supply.
Samir Michael explained that normally about 1 million
gallons of gasoline comes from the sea-borne imports at Umm
Qasr, while a half-million gallons usually are produced at
the Daura refinery, near Baghdad. (NOTE: Total Iraqi
production does not even meet Baghdad consumption needs. END
NOTE.)

--------------
PIPELINES AND CONVOYS
--------------


4. (C/REL MNF-I) DPM Chalabi said that the 22" Bayji-Baghdad
product line remains down, six days after it was interdicted.
The initial oil pipeline repair crew had been attacked, with
three men wounded and their vehicle destroyed. The
interdiction is at a remote location, he said, and the
repairs remain incomplete. (NOTE: The Director General for
Oil Pipelines agreed to Coalition requests that they will no
longer send out repair crews without adequate coordination
through the Provincial Joint Coordination Center (PJCC) or
without security. END NOTE). The inability to ship oil by
pipeline to Baghdad from Bayji has necessitated an
alternative course of action, for which convoys were
selected. Chalabi said that two convoys have been attacked
on January 4 and 5 while carrying fuel to Baghdad on Highway
1, and he concluded that that route to Baghdad is too
dangerous. The truckers are intimidated and, even with
bonuses, will not drive that route. As a result, Chalabi
told us he directed that product be pumped from Bayji to a
new depot in Kirkuk and then trucked from Kirkuk along
Highway 2 to Baghdad. Chalabi estimated that 500,000 gallons
per day would be necessary from Bayji to complement gasoline
supplies from other sources for the Baghdad area.


5. (C/REL MNF-I) The 18" crude oil pipeline to Daura
refinery has been repaired, and the second unit at Daura is
starting up again. The 26" pipeline from Kirkuk to Bayji has
not been interdicted since its last repair on January 5, and
oil is now in the pipeline flowing to depot IT1A from Kirkuk.
The 40" and the 30/32" pipelines both are under repair.
(NOTE: Workers from the Northern Oil Company on site at
Zagatoon reportedly sabotaged both lines using a backhoe.
END NOTE.)
--------------
PIPELINE REPAIR CREWS -- MOO AND MNF-I PLANS
--------------


6. (C/REL MNF-I) The Ministry of Oil (MoO) has developed a
plan for emergency pipeline repairs. The Ministry will
provide five emergency repair crews who will be deployed to
Iraqi Army camps. The 20-man crews will have their own
vehicles, equipment, and security. MNC-I will coordinate
with MoO for the deployment, hosting, and security of these
crews at four Iraqi Army forward operating bases (FOBs) in
Kirkuk, Bayji (2 teams),Baghdad, and Mussayib. These
pipeline repair units should then be available to rapidly
repair pipelines and would only be dispatched with integrated
Iraqi Army security protection units. The date of the first
team's deployment is not set, but MNF-I will work with DG
Samir Michael to define requirements and discuss next steps.

--------------
COMMAND CONTROL AND COORDINATION
OF INFRASTRUCTURE SECURITY
--------------


7. (C/REL MNF-I) The PJCCs, as agreed between MNF-I and MoO,
will be the focal point for all coordination of
infrastructure security, repairs and convoy movements.
Chalabi said there currently is "deplorable coordination" on
the security operations to secure the oil pipelines and the
fuel truck convoys, although he acknowledged that the MoO and
the repairs crews, failure to inform the Coalition of their
activities resulted in the security problems that has
occurred. He said there was confusion within MoO on PJCCs,
and many key MoO officials have "never heard of" these
coordination centers, which are not staffed with MoO
personnel despite the fact that MoO is a key element of the
energy security program. Chalabi asked MNF-I to coordinate
directly with MoO DG Samir Michael to staff these centers
with appropriate MoO officials. (NOTE: Northern Oil Company
personnel needed to coordinate already are in place in all
three PJCCs; however, OPF and OPC personnel are not.
Although coordination has been effective in the past,
information sharing between the national level and the PJCCs
now need to be improved. END NOTE.)

--------------
EXPORTS OF REFINED FUEL PRODUCTS
TO SYRIA WILL BE FORBIDDEN
--------------


8. (C/REL MNF-I) Chalabi acknowledged that the recent fuel
price rise had made smuggling in Iraq a less viable option
for terrorist financing and corruption, a point we had made
to him some time ago. The profits from fuel sales on the
black market are lower and the incentives to smuggle fuel
reduced, but not eliminated, he said. Syria remains a
favored destination, and Chalabi announced that he would
strictly enforce existing regulations on the export of fuel
products from Iraq, especially to Syria. Chalabi predicted
that this reduction in smuggling would increase the
availability of fuel in Iraq. Chalabi also discussed the
option of shutting down deliveries of subsidized fuel to
government factories, like the brick factories, so that
resold fuel from other government entities would not end up
on the black market or exported, as is often the case at
present. Chalabi also questioned the lack of control of all
tanker trucks across Iraq, suggesting that only about 10% of
the tanker trucks were involved in legal distribution for
MoO, with the rest involved in illicit activities, like
smuggling fuel and black market operations.

-------------- ---
INTELLIGENCE SUPPORT AND ANTI-CORRUPTION EFFORTS
-------------- ---


9. (S/REL MNF-I) Chalabi expressed his continued concern
about the lack of viable intelligence on saboteurs,
terrorists, and smugglers. He cited the need to identify
people involved in intimidation, smuggling, and interdiction,
and to arrest them and bring them to justice. Chalabi
requested MNF-I support on intelligence. MNF-I provided
Chalabi with information on multiple suspects involved in
corrupt practices in the Bayji refinery smuggling operations.
We noted the importance of using this intelligence to
acquire evidence through appropriate investigations to
support charges that would be admissible in court so the
government could prosecute corrupt MoO or provincial
personnel. In addition to the former DG for Distribution
(see para 10),another example of an official allegedly
involved in oil corruption was the Salah ad Din Chief of
Police. Chalabi asked how a police chief can be removed for
corruption, since the provincial council alone has
jurisdiction over firing police chiefs. He asked whether
MNF-I could remove this official, as they had removed other
officials in al-Anbar Province. We suggested considering
reference to the Central Criminal Court of Iraq (CCCI),whose
mandate might include similar crimes.


10. (C/REL MNF-I) Chalabi informed us he had taken several
actions to reduce corruption within the MoO. He said he had
fired the DG for Distribution at Bayji for complicity in the
intimidation incident that shut down Bayji for two weeks.
Chalabi was replacing him with former Bayji Distribution
Director General Hameed. He said he had formed a committee,
comprised of Hameed, former Distribution DG Zuhayr Shakir,
and one other official, whom he had asked to resolve the fuel
distribution issue, including organizing the fuel truck
drivers and motivating them to drive fuel convoys to Baghdad.

--------------
STRATEGIC INFRASTRUCTURE BATTALIONS
--------------


11. (C/REL MNF-I) Chalabi said he thought several of the
Strategic Infrastructure Battalion (SIB) commanders should be
fired, specifically the commanders of the 2nd, 9th, 11th, and
16th SIBs. Chalabi also opined that the SIBs must be more
closely integrated into the Iraqi Army. Chalabi questioned
the SIBs, loyalty and competence. Chalabi asked MNF-I to
present a different solution to the SIB problems and
recommended to the steering group that the SIB concept be
reviewed in three weeks. LTG Houghton responded that loyalty
and competence are issues that could and should be dealt
with. Making the SIBs a mobile or maneuver force, however,
would be a major undertaking, involving revamping their
training and equipment since the SIBs had been designed by
the Iraqis as a static force.


12. (C/REL MNF-I) BG Kamal, the Infrastructure Coordination
Center Chief, agreed that many of the SIB commanders needed
to be replaced. Kamal confirmed that some of the SIBs are
involved in destroying the pipelines, although MNF-I said
that the number of interdictions has been reduced. Chalabi
responded that the pipelines are still interdicted and oil is
not flowing -- thus the SIBs are not working.

--------------
SECURITY RESPONSIBILITIES
--------------


13. (C/REL MNF-I) Chalabi and MNF-I agreed that MNF-I was
responsible for linear infrastructure security and that the
Iraqi ministries were responsible for the fixed
installations. The security of fuel convoys would be
coordinated through the PJCCs. MNF-I reported that the 101st
is providing aerial reconnaissance and surveillance of both
the 22" pipeline and the route between Bayji and Baghdad.
When Chalabi asked about route security to Baghdad for tanker
trucks, MNF-I stated that Coalition Forces clear the route
twice a day from Bayji to Baghdad. MNF-I also said the 101st
is prepared to ensure protection of the fuel convoys once
coordination is effected through the PJCCs but reiterated the
importance of respecting the command and control chain in
selecting and deploying forces. (NOTE: In spite of the lack
of effective coordination from MoO on the status of convoys,
all convoys from Bayji have been protected by security
forces. END NOTE). When we questioned whether the security
was in place for the lengthier route from Kirkuk to Baghdad
(Route 2),Chalabi noted that the road was considered much
safer.

--------------
OIL PRODUCTION AND EXPORTS
--------------


14. (C/REL MNF-I) Chalabi reported that oil production in
the south should increase when 60 wells currently undergoing
well workovers are completed. Chalabi added that the $40
million initial effort, as well as a planned follow-on
project for 77 additional wells, would increase Iraqi oil
production by 650,000 barrels per day. Moreover, berthing
confusion of tankers will be alleviated with the planned
purchase of additional tug boats from Holland (delivery date
unspecified). Chalabi also announced that there had been
1.71 million barrels of oil exported from the south January

7. (NOTE: This is a large increase from the recent exports
of late December 2005 and early January 2006, when little to
no oil was exported. END NOTE.)


15. (C/REL MNF-I) Chalabi prioritized his security issues as
protection of the oil infrastructure first and electricity
second. He called the current security crisis "an organized
effort to make the government fail by using infrastructure
interdiction to isolate Baghdad." Nonetheless, he concluded
on a more optimistic note, claiming that "We are gradually
winning the battle of gasoline in Baghdad."


16. (C/REL MNF-I) COMMENT: We agree that there has been
progress, most notably in attacking incentives for smuggling
and blackmarketeering via IMF-mandated price hikes.
Nevertheless, the overall supply situation remains tenuous,
with little redundancy if further attacks are mounted. END
COMMENT.
SATTERFIELD