DEPUTY PRESIDENT MAHDI DISCUSSES SECURITY AND

C O N F I D E N T I A L SECTION 01 OF 03 BAGHDAD 004127

SIPDIS

SIPDIS

E.O. 12958: DECL: 10/29/2016
TAGS: PREL PGOV PINS ECON IZ
SUBJECT: DEPUTY PRESIDENT MAHDI DISCUSSES SECURITY AND
ECONOMIC SITUATIONS


Classified By: Deputy Political Counselor Robert Gilchrist for reasons
1.4 (b) and (d).


1. (C) SUMMARY: Deputy President Adil Abd al-Mahdi told
John Hannah, the
National Security Adviser to the Vice President, October 17
that the security situation is
bad (but statistically getting slightly better),with more
Iraqis, particularly in Baghdad,
feeling personally threatened. Mahdi stated that there needs
to be a new security
agreement or protocol between the U.S. and Iraq that delimits
responsibilities and begins
to regulate the presence of U.S. forces. Mahdi then added
that each community, whether
Sunni or Shi'a, should take responsibility into its own hands
to fight insurgents, terrorists,
and militias (as the Kurds have already done). This will
unite, not split, the country.
Mahdi said confronting militias cannot be the priority, but
there needs to be a parallel
effort against al-Qaida, Saddamists, and other terrorists.
The Deputy President praised
the recently passed Investment Law, and said there needs to
be more demonstrable results
on reconstruction and investment. Decisions must be made
that are not being made, and
money must be spent that is not being spent. Mahdi said
that, while he favors the
centralization of the oil file, there is a debate within the
Shi'a Coalition over
centralization or decentralization of responsibility. Mahdi
cast doubt on the idea that the
insurgency could be bought out by an increased share of oil
to Sunni areas. While "oil
for peace" is a good slogan, Mahdi said the insurgents and
terrorists, particularly the
Saddamists and al-Qaida, want full power, not an increased
share of oil wealth. END
SUMMARY.

--------------
Security Situation and Militias
-------------- --------------


2. (C) Deputy President Adil Abd al-Mahdi told John Hannah,
the National Security
Adviser to the Vice President, October 17 that the security
situation is very bad, but
statistically getting better. Iraqi citizens feel they are
threatened, particularly after
Samarra; in Baghdad, residents feel directly threatened, with
ethnic cleansing now
occurring. Mahdi stated that there needs to be a new
security agreement or protocol
between the U.S. and Iraq that delimits responsibilities and
regulates the presence of U.S.
forces. He said there must be a clarification of
responsibilities and authorities because it
is now too easy for each side to blame the other. Iraqi
security officials say their "hands
are tied" and that they cannot do anything without MNF-I
agreement. Mahdi urged the
U.S. to have greater trust in its Iraqi partners and remove
their excuses by clarifying that
the GOI is in control of security and is the responsible
party for improving the situation.


3. (C) Mahdi recommended a change in approach whereby each
community, whether
Sunni or Shi'a, should take responsibility into its own hands
to fight insurgents, terrorists,
and militias, as had already occurred with the Kurds. This
will unite, not split, the
country. Mahdi added that this being done now in Fallujah
and other parts of Anbar and
should be done in Basrah, Baghdad, and other mixed areas. He
described community
self-protection as an asset to the overall security effort.
U.S. forces would then be able to
reduce their footprint and exposure in major urban areas and
focus on their support
mission for the Iraqi Security Forces.


4. (C) Mahdi said the security situation would have been
worse had CPA retained the old
pre-2003 army of Saddam. Now, there is no internal threat
from the army, with little
penetration of the ranks and no attacks on administration or

BAGHDAD 00004127 002 OF 003


headquarters targets. On the
other hand, the Facility Protections Service (FPS) is a
mixture of insurgents, militia, and
government forces that are a serious problem and accountable
to no one.


5. (C) Mahdi told Hannah that Iraq will need time to deal
with the security situation, and
that there will be setbacks along the way. On confronting
militias, Mahdi said Prime
Minister Maliki is hesitating because of pressure within his
own party (Dawa) and
because of the uncertainty of support within the Shi'a
Coalition. Mahdi stated that the
Shi'a still view themselves as victims and cannot reconcile
the idea of attacking fellow
Shi'a while terrorists are getting stronger and while the
state cannot defend its citizens
(and militia groups like the Jaysh al-Mahdi are doing so).
Mahdi said confronting
militias cannot be the priority, but there needs to be a
parallel effort against al-Qaida,
Saddamists, and other terrorists.

-------------- --------------
Economic Matters: Investment Law, Hydrocarbons, and Corruption
-------------- --------------


6. (C) Deputy President Mahdi described the provisions of the
recently-passed
Investment Law as good and agreed with the assessment that
the law had been improved
in the Council of Representatives. He added that KRG Prime
Minister Nechervan
Barzani should be coming to Baghdad to discuss the
hydrocarbons issues. Mahdi said
that the UIA favors centralization of the oil file. The
Deputy President supported the idea
of a National Oil Company, which had existed previously but
was dissolved by Saddam
Hussein into the Ministry of Oil. He claimed that the
national oil company worked better
and had more professional staff. Mahdi also discussed his
idea that he had presented to
the Prime Minister of preparing the national budget based on
a fixed price of oil and
using any extra revenue to cover reconstruction costs and
investment. He highlighted the
positive role that the reconstruction board had played in the
1950's.


7. (C) While insisting on the importance of making clear that
Iraq's oil revenues must be
fairly shared among all its people, Mahdi cast doubt onthe
idea that the insurgency could
be bought out by an increased share of oil to Sunni areas.
While "oil for peace" is a good
slogan, Mahdi said the insurgents and terrorists,
particularly the Saddamists and al-Qaida,
want full power, not an increased share of oil wealth. Mahdi
said the passive majority of
Sunni Arabs could be convinced to support the state if they
see results, particularly large
scale reconstruction in the north and south of Iraq. The
Deputy President added that
money cannot just be spent on pensions and salaries, but also
on projects and investment.
When asked when this reconstruction will occur and unspent
funds utilized, Mahdi
blamed it on the lack of good management, inherited systems,
and education. He said
there are monies, "safe areas," and identified projects, but
no decisions have been taken
and no follow-up has occurred ? bemoaning that there has been
"nothing real from the
overthrow of Saddam Hussein." He blamed this situation on a
lack of capacity, not
security, and warned that over-zealous corruption campaigns
threatened to paralyze the
GOI from executing its budget on behalf of the people.


8. (C) While acknowledging corruption as a problem, Mahdi
warned that so is the
Commission on Public Integrity (CPI),which is not doing
things right. As opposed to
auditing and investigations, it is targeting officials,
thereby putting fear in the system.
Now, no one wants to take responsibility for signing
contracts for fear that they will be

BAGHDAD 00004127 003 OF 003


accused of corruption.

-------------- --
Federalism and Region Formation Law
-------------- --


9. (C) Deputy President Mahdi described the debate on the
region formation law as
political, saying the Constitution already enshrined
federalism and that the law was just
related to executive procedures to form regions. He added
that there was a common
agreement between the political parties, including the Sunni
Arab bloc, on constitutional
review and the region formation law. He said the boycott on
the final vote was related to
fears that SCIRI would benefit (Sadrists and Fadhila) and to
fears that it will split the
country (Sunni Arab parties). He stated that there is
pressure on Tawafuq leaders from
Salah al-Mutlaq, and that Iraqi Islamic Party (IIP) does not
want to look less nationalistic.
Mahdi said, "We think the region formation law is a positive
development without which
the constitution would not be respected." He added that
without federalism, they could
not proceed on the Federation Council (NOTE: The Federation
Council is discussed in
Article 65 of the Constitution. END NOTE),which could not
be elaborated on during the
Constitution drafting because the federal system was not yet
defined.


10. (U) This cable was cleared by OVPNSA John Hannah.
KHALILZAD