NINEWA'S FUEL CRISIS

S E C R E T SECTION 01 OF 02 BAGHDAD 003358

SIPDIS

SIPDIS

E.O. 12958: DECL: 08/31/2011
TAGS: PGOV PREL ECON EPET MARR IZ
SUBJECT: NINEWA'S FUEL CRISIS


Classified By: NINEWA PRT Leader James Knight: Reasons 1.4 (b) and (d).
This is a Ninewa Provincial Team (PRT) message.

--------------
SUMMARY
--------------


1. (C) Unending fuel shortages in Ninewa are the
preoccupation of all/all PRT interlocutors, second
only to ongoing violence in Mosul. These shortages
are the single most critical issue impeding improved
security and economic rehabilitation throughout
Ninewa. They restrict mobility of Iraqi security
forces, and feed discontent by preventing use of
private generators to deal with long daily power
outages, limiting household food preparation, and
throttling commerce.


2. (C) These shortages will become volatile as
winter approaches, especially since kerosene for
household heating is in extremely short supply with
no relief in sight. At this point 3,500 fuel trucks
remain stalled at Harbur Gate -- an average of only
50 per day crossed into Iraq in August. End
summary.

--------------
Bad now . . .
--------------


3. (C) Extraordinarily limited deliveries of fuel
-- benzene (gasoline),diesel, LPG, and kerosene --
are now entering Ninewa through both formal and
black markets channels. The fuel shortage has
forced 'normal' waits of 12-14 hours and miles-long
queues at official stations for a weekly ration of
20 liters of diesel or benzene. Demand has pushed
black-market prices to four times the official price
for benzene, ten times the official price for diesel
and kerosene, and twenty times the official price
for LPG (ID = Iraqi Dinar, currently about 1500
ID/USD):

FUEL OFFICIAL BLACK MARKET (Mosul)
PRICE PRICE

Benzene 350 ID/liter 1250 ID/liter

Diesel 75 ID/l 750 ID/l

Kerosene 25 ID/l 750 ID/l

LPG 1000 ID/canister 20,000 ID/canister


4. (C) The most worrisome immediate impact of the
shortage of motor fuel has been movement limits
imposed on Iraqi security forces. Iraqi police in
Mosul are now restricted to 50 km per vehicle per
day. Similar problems limit Iraqi ARMY operations
throughout the province.

--------------
. . . but going to be worse
--------------


5. (C) Our interlocutors' focus on the fuel
shortage's impact has shifted since summer heat has
begun to moderate, reminding everyone that winter is
coming. Complaints now point to household heating
needs in winter. Current imports of kerosene used
for heating have not allowed households to
accumulate stocks (last winter's solution) and the
ongoing severity of the shortage has ignited fears
that the winter will be deadly without indoor heat.

--------------
A clogged border crossing . . .
--------------


6. (C) As of the end of August 2006, 3,500 fuel
trucks were backed up at Harbur Gate awaiting
passage across the Turkish/Iraqi border. PRT
records for August 2006 (based on figures provided
by Coalition personnel at Harbur Gate) indicated
that the largest number of fuel trucks crossing the
border on any day in August was 121 (all fuel
products) on 30 August; the daily average for the
month was 50.


7. (C) Of the 1549 fuel trucks which entered Iraq
from Harbur Gate in August, 766 carried benzene, 292

BAGHDAD 00003358 002 OF 002


diesel, and 558 LPG (in canisters). None/none
carried kerosene -- the last reported crossing of
trucks carrying kerosene was 22 July, when three
such trucks entered Iraq. Before 22 July the last
prior entry of kerosene was 18 June, when four
trucks crossed into Iraq. At the current rate of
entry, the backlog of fuel trucks already/already
waiting at Harbur Gate will not be cleared until
early November 2006.


8. (C) A small percentage of Ninewa's fuel needs
are provided by imports from Syria through Rabe'a.
That flow (214 trucks in July, 318 in August, all
benzene) appears unlikely to increase to levels high
enough to moderate Ninewa's fuel crisis, at least
over the short or medium term.

--------------
. . . and massive shrinkage once across
--------------


9. (C) Apart from the slow passage of fuel trucks
at Harbur Gate, only a small percentage of fuel
imports are delivered to official distribution
points once in Iraq. Iraqi and KRG officials and
Coalition personnel indicate that as much as 70 per
cent of fuel brought across the border is diverted
to the black market before reaching official
distribution points. If true, this suggests that
only about 8 mn liters of benzene imported through
Harbur Gate in August was actually pumped at
official distribution points, while nearly 20 mn
liters went missing -- to eventually appear on the
black market, in Ninewa or elsewhere.

--------------
no alternatives
--------------


10. (C) In Ninewa these shortages are felt most
sharply in Mosul and Tal'Afar. Mosul city is built
to run on electricity and petroleum fuels. It has
no significant capacity to utilize energy
alternatives -- fuel and electricity are essential
for the city to work. Even so, Provincial officials
report that Ninewa Woods -- the largest tract of
trees close to the city -- is already subject to
illegal woodcutting as residents seek wood for
cooking.

--------------
Iran another option?
--------------


11. (C) All of northern Iraq is struggling with
this problem. KRG President Barzani recently
indicated that a number of solutions are being
considered by the KRG if fuel imports from Turkey
remain blocked, including rehabilitation and
enhancement of refineries. However, such efforts
are unlikely to solve the problem in the short term;
when pressed, Barzani indicated that fuel procured
through commercial channels from Iran may soon
become necessary.

--------------
Comment
--------------


12. (S) The fuel shortage in Ninewa is apparently
an instance of Turkish pressure on the KRG,
exacerbated by black marketeering within Iraq.
However, this tactic seems to be only strengthening
Kurdish solidarity, and may open KRG dependence on
Iranian fuel suppliers. In addition, these
shortages prevent Ninewa from becoming an effective
counterweight to further expansion of Kurdish
influence.


13. (S) Comment continued. The very great
differences between official and black-market fuel
prices give enormous incentives to black marketeers.
Those incentives can only be effectively countered
by moving beyond Iraq's Public Distribution System,
which holds official fuel prices to such
artificially low levels. Liberalizing the fuel
market will not solve Ninewa's shortages, but would
allow fairer distribution of fuel which does manage
to transit Harbur Gate. End comment.
SPECKHARD