Identifier
Created
Classification
Origin
06BAGHDAD405
2006-02-10 14:13:00
CONFIDENTIAL
Embassy Baghdad
Cable title:  

POLITICAL POWER - AND REVENUE - GRAB AT OIL

Tags:  ECON EFIN ENRG EPET KCOR PGOV PREL IZ 
pdf how-to read a cable
VZCZCXRO2825
OO RUEHBC RUEHDE RUEHIHL RUEHKUK RUEHMOS
DE RUEHGB #0405/01 0411413
ZNY CCCCC ZZH
O 101413Z FEB 06
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC IMMEDIATE 2616
INFO RUCNRAQ/IRAQ COLLECTIVE PRIORITY
RHEBAAA/USDOE WASHDC PRIORITY
RHMFISS/CDR USCENTCOM MACDILL AFB FL PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 000405 

SIPDIS

SIPDIS

E.O. 12958: DECL: 02/09/2016
TAGS: ECON EFIN ENRG EPET KCOR PGOV PREL IZ
SUBJECT: POLITICAL POWER - AND REVENUE - GRAB AT OIL
MINISTRY; SOMO ASKS FOR HELP

REF: BAGHDAD 390

Classified By: Ambassador Zalmay Khalilzad for reasons 1.4 (b) and (d)

C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 000405

SIPDIS

SIPDIS

E.O. 12958: DECL: 02/09/2016
TAGS: ECON EFIN ENRG EPET KCOR PGOV PREL IZ
SUBJECT: POLITICAL POWER - AND REVENUE - GRAB AT OIL
MINISTRY; SOMO ASKS FOR HELP

REF: BAGHDAD 390

Classified By: Ambassador Zalmay Khalilzad for reasons 1.4 (b) and (d)


1. (C/REL GBR AUS) SUMMARY: Dr. Musab al-Dujayli (strictly
protect),Director General (DG) of the State Oil Marketing
Organization (SOMO),asked the U.S. and UK embassies February
8 to intervene with the Prime Minister to prevent new
Minister of Oil Hashem al-Hashimi from abrogating SOMO's
current crude oil export and oil product import contracts in
favor of contracts with Fadhila party-supported partners.
Al-Dujayli claims that the Fadhila party, which has control
over the Ministry of Oil in the current GOI political
alignment, seeks revenue for the party through kickbacks it
will receive on each contract. According to Al-Dujayli,
Fadhila is willing to commit Iraq to purchase more than
double the amount of imports currently budgeted in the
party's search for cash; DGs who balk are being threatened
with removal. Post Econ Section is working with the UK
Embassy on language for a letter from the Prime Minister to
the Minister of Oil ordering him to cease all activities that
violate the PM's earlier directive to ministries to refrain
from undertaking substantive obligations during this
caretaker phase of the ITG. Econ Counselor will recommend
that DPM Chalabi use these points with PM Ja'afari and, if
necessary, the Ambassador will directly urge the PM to issue
a new directive that will put an end to Fadhila's illegal
activities at MoO. END SUMMARY.

--------------
Ministry of Oil Coup
--------------


2. (C/REL GBR AUS) Speaking to representatives of the UK and
U.S. embassies February 8, Dr. Musab al-Dujayli (strictly
protect),Director General (DG) of the State Oil Marketing
Organization (SOMO),said that Hashem al-Hashimi, widely
acknowledged as having been brought into the Ministry of Oil

(MoO) at the behest of the Fadhila party to replace Ibrahim
Bahr al-'Ulum several weeks ago, brought with him as advisor,
Kedem al-Yacoubi, nephew of Fadhila spiritual leader
Ayatollah al-Yacoubi. Kedem, a low-level engineer at SOMO
and former shoe-shop owner in Damascus, recently had been
rejected as the Fadhila candidate to replace al-'Ulum.
Al-Hashimi, according to al-Dujayli, issued a memo February 2
fully empowering Kedem with all the authority enjoyed by the
minister - in effect a Fadhila coup d'etat (NOTE: this is
confirmed by several other directors general at MoO. END
NOTE.)

--------------
Fattening Fadhila
--------------


3. (C/REL GBR AUS) Kedem, according to al-Dujayli, has
wasted no time in making his agenda at MoO crystal clear:
providing revenue for the Fadhila party. Al-Dujayli said
that a committee of some 12-15 Fadhila members, none of whom
have any experience in MoO, have "spread throughout the oil
sector," pressuring DGs to "do something financially for
Fadhila." DGs that resist are being threatened with being
fired. Al-Dujayli said that Fadhila apparently has decided
that being awarded "control" over a ministry as political
spoils of government formation entitles them to the
ministry's wealth, and they are acting accordingly, taking
advantage of the interim period to make their move.
Al-Dujayli said that Iraq had only/only $213 million to spend
per month on fuel imports. Fadhila is pressuring him to
spend twice that, either canceling existing fuel contracts
and re-awarding them to Fadhila favorites or, at the very
least, signing additional contracts. Contracts signed now,
al-Dujayli confirmed, would be binding for months to come.

--------------
Milking Time at MoO
--------------


4. (C/REL GBR AUS) Al-Dujayli recounted a February 5 event
during which he claimed that some 15 "youngsters" from the
Fadhila party demanded entry to his office. The two
al-Dujayli agreed to see reiterated earlier demands for
financial "help" for Fadhila: "You know how to do it." They
insisted that al-Dujayli, as head of SOMO, immediately sign
several contracts favored by the party to import gasoline in
the south. According to al-Dujayli, Fadhila's kickback from
the favored supplier would be, for example, $50,000 on a
contract to import 200,000 tons of fuel. When al-Dujayli
objected on the grounds that it would be against the public

BAGHDAD 00000405 002 OF 002


interest to commit public money, since Iraq could not afford
to pay, the party members replied, "We are the public." The
demand vis-a-vis exports is that SOMO immediately cancel all
existing crude oil export contracts so that they can be
bestowed instead on purchasers to be determined by Fadhila -
presumably with suitable remuneration for the party for the
favor.


5. (C/REL GBR AUS) When first approached by party members,
al-Dujayli said he recommended they finance themselves the
way most other Iraqi organizations and parties do: "form a
company and get contracts." He reported that he was told,
"You are not stronger than al-'Ulum, and we sent him home."
Al-Dujayli called Ayatollah al-Yacoubi an "agent of
pressure," adding that Prime Minister Ja'afari is reluctant
to stand against Fadhila so long as he seeks their support to
retain the prime ministership in the next government.
Fadhila, al-Dujayli opined, wants his signature as legal
cover for their looting of what he called the ministry's
assets.

--------------
U.S. a Shrinking Violet?
--------------


6. (C/REL GBR AUS) Al-Dujayli claims to have received a
lukewarm reception when he briefed Deputy Prime Minister
Ahmed Chalabi on the situation February 6. Chalabi called
Kedem's appointment to MoO illegal but did not say he would
take any specific action; hence al-Dujayli's decision to ask
for U.S. and UK assistance. "You have been too shy of
putting (U.S. and UK) ideas (on the new government) to the
Iraqis," al-Dujayli said. He recommended that the US
intervene directly in the choice of a new minister of oil,
claiming that MoO employees - himself included - are
"petrified" that MoO will remain in Fadhila hands.


7. (C/REL GBR AUS) COMMENT: As long as Fadhila does not
retain control of the ministry in the next government,
al-Dujayli admitted that this could be a short-term problem.
Many of our Shia Alliance contacts have told us that the
Fadhila Party will not retain control of MoO because of how
poorly it managed the ministry. If Nadim al-Jabiri is
successful at his bid for the premiership, Fadhila will not
have control of any ministry (reftel). Iraq, however, cannot
afford the consequences of even a short-lived interregnum of
financial mayhem at MoO. With the conviction of the
newly-converted, al-Dujayli spoke vehemently of his budget
limitations, and, although he may have other (possibly
political) agendas of which we are unaware, he appeared
sincere in his request for our help. Post Econ Section is
working with the UK Embassy on language for a letter from the
Prime Minister to the Minister of Oil ordering him to cease
all activities that violate the PM's earlier directive to
ministries to refrain from undertaking substantive
obligations during this caretaker phase of the ITG. Econ
Counselor will recommend that PM Chalabi use these points
with PM Ja'afari and, if necessary, the Ambassador will
directly urQ the PM to issue a new directive that will put
an end to Fadhila's illegal activities at MoO.
KHALILZAD