DPM CHALABI ON OIL MINISTRY CORRUPTION AND KURDISH

C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 000495

SIPDIS

SIPDIS

E.O. 12958: DECL: 02/14/2016
TAGS: ECON ENRG EPET KCOR MARR MOPS PGOV PREL IZ
SUBJECT: DPM CHALABI ON OIL MINISTRY CORRUPTION AND KURDISH
"SAFE HAVEN" COMMENTS

REF: A. BAGHDAD 0405

B. 2005 BAGHDAD 4309

C. BAGHDAD 0212

Classified By: Economic Minister Counselor Tom Delare for reasons 1.4 (
b) and (d).


1. (C/REL GBR AUS) Summary: Deputy Prime Minister Ahmed
Chalabi, newly provided with expanded authority over the
energy sector, is wrestling for results with the military and
civilian bureaucracies. On other subjects, Chalabi cited a
recent comment by Kurdish Regional President Mas'ud Barzani
offering the KRG as a "safe haven" to indicted former
Minister of Defense Hazem Sha'lan, told Economic Minister
Counselor February 12 said that Committee for Public
Integrity (CPI) chief Judge Hamza al-Radhi is coming under
increasing political pressure. Chalabi said that he thought
politically-motivated manipulation of contracts at the
Ministry of Oil (MoO) might be a short-lived problem, since
widespread dissatisfaction with Fadhila's performance thus
far at MoO made it unlikely they would maintain control in
the new government. End Summary.

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Party-based Corruption at MoO
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2. (C/REL GBR AUS) In a meeting with Economic Minister
Counselor February 12, Deputy Prime Minister Chalabi was
already well-versed with the accusations of Fadhila
Party-initiated corrupt activity at the Ministry of Oil
(reftel). Calling the attempts to manipulate contracts for
the financial benefit of the Fadhila Party "outrageous,"
Chalabi said he had asked Prime Minister Ja'fari to rein in
his coalition allies. EconMinCouns recommended that PM
Ja'fari send written instructions to Acting Minister of Oil
Hashem al-Hashemi ordering him to refrain from undertaking
any additional financial obligations at MoO during the
current "caretaker" government. Chalabi accepted a joint
U.S.-UK paper with points the PM might include in his
instructions, but said he thought the problem was one that
might eventually solve itself: widespread GOI dissatisfaction
with Fadhila's performance to date at MoO made it unlikely
the party would retain control of that ministry in the next
government. If the problem persists, however, Chalabi
recommended that the Ambassador follow-up directly with PM
Ja'fari, Abd al-Aziz al-Hakim, and 'Adil abd al-Mahdi.

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CPI Under Pressure
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3. (C/REL GBR AUS) What Chalabi described as an even more
urgent issue was the increasing pressure being exerted on
Commission on Public Integrity (CPI) head Judge Hamza
al-Radhi. In response, we informed him that three of the
five investigative judges at CPI recently submitted their
resignations due to threats and intimidation directed at them
and their families. Furthermore, Kurdistan Regional
President Mas'ud Barzani had announced in an interview aired
February 10 on al-Iraqiya television that "Kurdistan is open
for anyone who is pursued for political reasons and who seeks
protection," referring to former Minister of Defense Hazem
Sha'lan who Barzani said is "under Kurdish protection." In
the interview, Barzani says that the corruption case against
Sha'lan is "part of a settling of political accounts," and
that "the measures taken are unjust and not legal." Chalabi
urged the U.S. to speak out against Barzani's claims that the
Kurdish region is a safe haven and that the corruption case
against Sha'lan (involving more than $1 billion in contracts
that cannot be properly accounted for - see ref B) is
politically motivated.

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Working on Fuel Situation
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4. (SBU) On Iraq's increasingly difficult fuel situation,
Chalabi said that an Iraqi delegation charged with striking a
deal with the Turks to pay arrears over time and limit
monthly imports to a set amount paid only by letters of
credit was on the ground in Ankara. Chalabi said that Iraq's
first tender to purchase 1.5 million tons of gasoline had
driven up the offering price from $193 million to $204
million from Iraq's normal suppliers. "We will buy
(elsewhere) at a lower price," Chalabi said.

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"Warlord" Chalabi
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5. (C/REL GBR AUS) Invited to join Chalabi's ongoing meeting
with Ministry of Defense (MoD) and MNF-I officials, we
observed Chalabi flexing his muscles under the recently
issued letter empowering him to take all measures necessary
to assure that oil and fuel products are available (ref C).
Chalabi, despite having no direct sway over Iraqi Security
Forces (ISF),has clear views on what he would like to see
the Iraqi forces do -- and, equally clearly, remains
frustrated in what he views as his efforts to get results.
For example, Chalabi pointed out that the battle space of no
less than four Iraqi Army divisions all converged in an area
north of Baghdad where many attacks on infrastructure occur.
The perpetrators, Chalabi said, are using the lack of
coordination across divisional boundaries to evade capture.
When Iraqi Army Chief of Staff LTG Abadi asserted that this
was not the case and that the units were operationally
integrated, Chalabi was dismissive: "We can't continue to
call the operation successful when the patient is dead."


6. (C/REL GBR AUS) In another pointed observation, Chalabi
accused MoD of looking at infrastructure security as an
"auxiliary mission," rather than "the thing we must win."
Chalabi said that Salahadeen, a province "manufactured" by
Saddam, is home to much of the country's natural wealth
(including 60% of Iraq's refining capacity at Bayji) and also
its insurgent activity. This concentration of wealth and
forces uniquely positions the province to starve or otherwise
threaten Baghdad, Chalabi said, adding that the disposition
of Iraqi forces, spread as they are across the country - even
in areas where there is little or no insurgent activity - is
too diffuse to be effective in the areas where they are most
needed.

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Pot Calling the Kettle Black
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7. (C/REL GBR AUS) Comment: Chalabi himself has often been
accused of graft and corruption, including doing from October
2003 through May 2004 exactly what he said Fadhila is doing.
Many in the political leadership have reservations about
making him a minister because of it -- even while some
acknowledge that he is a very competent manager. While we do
not argue against Chalabi's stance on Sha'lan, it should be
noted that Chalabi is hardly an impartial bystander in this
issue. His rocky relationship with his cousin and political
rival, former Prime Minister Ayad Allawi, colors his reaction
to anything connected with Allawi and his administration.
Finally, we note Chalabi's observations on "deficiencies" in
the posture of the security forces -- an area in which he can
request and advise, but has no operational control -- seem to
come at the expense of focusing his attention on areas where
he is authorized to act: within the Ministries of Oil and
Electricity where he could be pushing, for example,
Inspectors General to act more aggressively to root out
corrupt officials responsible for both corruption and
sabotage.
KHALILZAD