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