WE WILL PAY MORE, BUT WE EXPECT MORE - BASRAH COMMENTS ON

C O N F I D E N T I A L BASRAH 000004 SIPDIS E.O. 12958: DECL: 1/20/2016 TAGS: EAID PGOV PINS ECON KDEM IZ SUBJECT: WE WILL PAY MORE, BUT WE EXPECT MORE - BASRAH COMMENTS ON FUEL PRICE INCREASE CLASSIFIED BY: Mark F. Marrano, Deputy Regional Coordinator, REO Basrah, Department of State. REASON: 1.4 (d) ¶1. (SBU) SUMMARY: The central government's mishandling of the fuel price increase has led to anger on the part of most Iraqis in Basrah. News of the price increase has spread to the local population by word-of-mouth. Once understood, it is being accepted by those REO Basrah has contacted as a necessity to improving the economic future of the country. Concerns now center on seeing immediate benefits from the price increase and the central government's management of the additional funds received. END SUMMARY. ¶2. (SBU) Until recently, fuel prices at private petrol stations in Basrah have remained the same, 50ID/liter, even after the fuel price increase dictate by the central government in mid-December. The price of premium petrol has increased from 50ID/liter to 150ID/liter, although premium petrol has not been widely available in Basrah. The price of diesel also increased per the central government's order from 60ID/liter to 88ID/liter (which is close to the government's amount of 90ID/liter). ¶3. (C) At a meeting on January 17 of the Basrah Economic Development council, a representative from the South Oil Purification Refinery (SOPR),Khasim Mohammed Ali, explained that they received a letter from the Ministry of Oil (MoO) indicating that locally produced fuel was not subject to the price increase an could be kept at 50ID/liter. The three government-owned petrol stations in Basrah have been selling fuel at the increased price of 150ID/liter since the increase took effect in December. At a meeting in Baghdad between the manager of SOPR and representatives of the MoO in early January, the Ministry objected to the fuel prices at the private stations in Basrah saying it was the only province in Iraq that had not increased prices. Following this meeting, the MoO sent a corrected letter indicating that the price of locally produced fuel must be raised to 100ID/liter. In addition, the feeling is that the price of locally produced fuel will be increased again in order to stem fuel smuggling from Basrah to other provinces. ¶4. (C) There were some protests against the price increase in Basrah at the end of December but not many in the month of January. Reaction to the price increase has been negative and fueled by the parallel rise of goods in the markets. Talking with various local contacts, the general feeling is that the central government did an extremely poor job explaining the necessity of the price increase. The Deputy Regional Coordinator had a meeting with Basrah Governor Mohammed during which he stated that people have accepted the price increase, but have done so at the expense of the central government. The sudden, unexplained increase only strengthened their opinion that the central government imposes its will on the south whenever it feels like. The Governor reiterated that the central government should have appealed to the intellect and reasoning of the people. It does appear that once many of the more educated portions of the population were informed of the reasoning behind the price increase, they accepted its necessity and grudgingly support the move to help the country's future economic development. In addition, the reasons behind the price increase are slowly beginning to filter down to the masses, generally through word of mouth. REO Basrah is not aware of any efforts by the central government to get their message out. ¶5. (SBU) In a meeting IPAO had with local Iraqi engineers, they reiterated the sentiment heard from other sources that the main reason for the anger at the price increase was a total lack of explanation from the central government. One engineer cited Minister of Oil Al Alum's resignation and said that if the Minister of Oil did not understand or condone the price increases how did the central government expect everyday Iraqis to understand. They told IPAO that understanding of the price increase is beginning to spread, and that Iraqis will want to see the immediate benefits/results of having to pay more for fuel. The need to see results for what they perceive as a burden imposed on them by the central government will need to be met quickly, otherwise levels of discontent may rise, risking more civil unrest. The engineers also explained to IPAO the distrust local Iraqis have of the central government. They are suspicious of how the price increase would be managed by the central government and where the money would be spent. ¶6. (SBU) COMMENT: Currently, the general population in Basrah seems to have accepted the new fuel prices. However, the process could have been smoother if the central government had made a prolonged concerted effort to explain the reasons for the price increase. The next hurdle for the central government will be to manage the expectations of the Basrah population that wants immediate, local benefit for having to pay more for fuel. END COMMENT. MARRANO