NINEWA AND THE BRINKLEY GROUP -- FUEL CRISIS

C O N F I D E N T I A L BAGHDAD 001070 SIPDIS SIPDIS E.O. 12958: DECL: 03/23/2017 TAGS: ECON EPET PGOV IZ SUBJECT: NINEWA AND THE BRINKLEY GROUP -- FUEL CRISIS BLOCKS RECOVERY REF: (A) BAGHDAD 00884 (B) BAGHDAD 00843 (C) BAGHDAD 00775 Classified By: Ninewa PRT Team Leader James Knight: 1.4 (B) and (D). This is a Ninewa Provincial Reconstruction Team (PRT) message. ¶1. (SBU) Deputy U/S of Defense Paul Brinkley visited Mosul 10-11 March 2007 in his capacity as Director of the Task Force to Improve Business and Stability Operations, Iraq. He was briefed by Ninewa PRT Economics Section staff on state- and privately-owned industries in Ninewa suitable for private U.S. and third-country commercial relations and investment (key industries noted para 4 below). Ninewa Governor Kashmoula briefed Brinkley on the economic situation in Ninewa, who welcomed Brinkley's initiative but emphatically and repeatedly underscored that Ninewa's interminable fuel crisis will block any efforts to jumpstart industrial recovery until it is resolved. ¶2. (SBU) Given the overwhelming salience of this issue for the province, Deputy U/S Brinkley focused his discussion with Governor Kashmoula on means to address this problem as readily as possible to improve employment and sustain investor and buyer interest in Ninewa's substantial industrial base. Ninewa's fuel problem at the factory level is a matter of providing sufficiently reliable electricity to operate production machinery. Brinkley accordingly suggested to Governor Kashmoula that a program of heavy fuel oil (HFO) generators for suitable plants with moderate electricity demand might be the most feasible high-impact approach. ¶3. (C) HFO generators are especially suitable for Ninewa since they would consume HFO produced at Bayji refinery. Bayji's HFO production -- 53 per cent of its refined product -- has now filled the refinery's entire HFO storage capacity, which now impedes production of other fuels. It is accordingly readily available at little cost. Transporting HFO to factory sites in Ninewa may pose problems, but such issues are likely to be more manageable since the quantities involved are relatively small. ¶4. (C) Deputy U/S Brinkley proposed an assessment team be scheduled by his Task Force to evaluate electricity needs for targeted plants in Ninewa and the suitability of small HFO generators to meet these needs. Brinkley indicated that he will seek to dispatch such a team to Ninewa before end April ¶2007. Likely recipients of such generators and their minimal power demands could include: -- Mosul Dairy Plant (Mosul) -- 5 MW -- Ninewa Drug Industries (Tal Qaif) -- 10 MW required -- Old Badush Cement Factory (Badush) -- 5 MW -- State Cotton Mill (Mosul) -- 5 MW -- Wood Furniture Factory (Mosul) -- 1 MW ¶5. (C) Comment: Ninewa's large industrial base of state-owned enterprises and its smaller but dynamic private industrial sector could be the key to significant employment creation and economic recovery in this well-endowed province, but cannot do so while the fuel crisis continues. The gravity of Ninewa's fuel crisis and its massive consequences for the province's security and economy have been frequently reported (reftels),but the crisis continues to worsen. ¶6. (C) Comment continued: At a general meeting of Iraq's Governors with Prime Minister Maliki in Baghdad 12 Mar, Governor Kashmoula's main point to the PM was that the fuel crisis has deepened to the point that not even new capital construction is now feasible. He added that the fuel crisis may entirely abort Ninewa's agricultural season this year as well, as noted reftel (C). Deputy U/S Brinkley's proposal is the only feasible suggestion yet made that would have immediate positive impact on Ninewa's economy as this grave situation persists. End Comment. ¶7. (SBU) Deputy U/S Brinkley has cleared this message. SPECKHARD