SOUTH OIL COMPANY - TOO MANY RUMORS AND NOT ENOUGH

UNCLAS BASRAH 000045 SIPDIS SIPDIS E.O. 12958: N/A TAGS: PGOV ECON ETRD ENRG EINV IZ SUBJECT: SOUTH OIL COMPANY - TOO MANY RUMORS AND NOT ENOUGH TECHNOCRATS REF: A) 05 BASRAH 089 B) 05 BASRAH 142 C) BASRAH 038 ¶1. Summary: On March 29, Regional Coordinator (RC) and Poloff met with General Manager of South Oil Company (SOC) Jabbar Ali Husayn Al Lu'aybi at the Regional Embassy Office Basrah (REO). Al Lu'aybi refuted concerns of oil smuggling through the SOC terminal and questioned a report he had received that said that Ambassador Khalilzad is campaigning to have him removed from his position. He asserted that the way to eliminate rumors like these and to improve SOC performance is to revamp the Oil Ministry and provide it with a strong technocrat to lead it. End summary. ¶2. SOC General Manager Al Lu'aybi visited the REO on March 29 to meet with the RC as part of a regular series of contacts between the SOC and the REO. With no professed agenda, Al Lu'aybi began with his oft-repeated lament that the Oil Ministry ignores the SOC and is rarely in contact with him. He said he has had little, if any, contact with senior officials in the Ministry in the past month, but expressed his hope that the new Oil Minister would be a technocrat and not someone beholden to other interests. In the meantime, SOC is struggling to maintain its infrastructure with little help from Baghdad. ¶3. Al Lu'aybi said that recent reports of oil smuggling from the terminal are not true and bring an unwanted focus on the terminal. He requested that the U.S. Embassy pressure the Oil Ministry to investigate the smuggling allegations to remove this unwarranted allegation. Al Lu'aybi said that this propaganda against the SOC smears its reputation and is similar to a report he received in an email from an acquaintance that stunned him. The email contained a copy of a report dated March 24, 2006, and entitled Iraq Information Report, a report prepared by a Lebanese-based advisory group. It stated that Ambassador Khalilzad is campaigning to have Lu'aybi removed from his position because he close to Iranian parties supported by the Iranian Revolutionary Guard Command. ¶4. Al Lu'aybi made it clear - as he has in the past (see Refs) -- that he is apolitical and tries to avoid entanglement with any of the political parties. His concern about this allegation is for the damage it may cause the SOC; for himself, Al Lu'aybi asserted, he is ready to leave the SOC at any time if necessary for the benefit of the company. He expressed his fear that if something should happen to the company it would plunge the oil sector in the south into chaos. Returning to his theme of a lack of direction and assistance from Baghdad, Al Lu'aybi said that a competent Oil Ministry with strong leadership would improve the situation and remove the political jockeying that causes these unfounded allegations (see Ref C). ¶5. Comment: Al Lu'aybi obviously was concerned about the rumors and the effect they could have on the SOC. As an employee for SOC for the past 31 years, he has a genuine interest in the welfare of the company. His complaint about the lack of support and direction from the Oil Ministry is well founded. Though Al Lu'aybi brought SOC back from the dead following the end of the war, maintenance on its infrastructure is overdue and production will slip unless additional investment is made soon. And the risk to SOC from various individuals or entities anxious to obtain control over one of the potentially richest companies in the south is very real. Al Lu'aybi has managed to avoid serious entanglements with political interests, but he is clearly worried that unless a technocrat is named as oil minister the SOC could become the fiefdom of a political party. End comment. GROSS