DEPUTY OIL MINISTER HAS SECTARIAN WORRIES

S E C R E T SECTION 01 OF 02 BAGHDAD 003095

SIPDIS

SIPDIS

E.O. 12958: DECL: 09/13/2017
TAGS: EPET ENRG PREL PGOV IZ
SUBJECT: DEPUTY OIL MINISTER HAS SECTARIAN WORRIES

Classified By: CETI/EMIN Ambassador Charles Ries, reasons 1.4 b and d


1. (S) SUMMARY: A senior GOI official warned EMIN about
Iranian influence within the Oil Ministry, and conveyed his
fear that the Ministry is falling apart due to sectarian
tension. If left unchecked, he warned that USG officials in
4-5 months would no longer find it safe to visit or even be
welcome in the Oil Ministry. END SUMMARY.

Iranian Plot
--------------

2. (S/NF) Motasim Akram Hassan (protect),one of three GOI
Deputy Oil Ministers, told EMIN on September 12 that he sees
signs of a sectarian plot to take over key GOI ministries.
He had wanted to meet the Ambassador before, but he recounted
how earlier that same day, he had been called into a meeting
with two generals, the Minister of Interior, Minister of
Defense, and the Minister of State for National Security, to
discuss the situation in southern Iraq, but without the
involvement of other Ministers. Essentially, the Mahdi army
and Fahdila are battling for control, with the Mahdi army
aligning itself with the Gulf States and Fahdila with Iran
(NOTE: we have heard no other information corroborating these
claims regarding alignments END NOTE),and the Shia national
leaders are facilitating the split from the central
government.


3. (S) The DepMin said that Oil Minister Shahristani is
under great pressure to follow instructions, which he
believes come from Iran. He gave an example of a contract
for 100 trucks, which the Minister directed be purchased from
Iran. When the DepMin protested that the contract needed an
open tender, the Minister directed that the bid documents be
tailored to an Iranian company so that it would be sure to
win the tender. When Oil DepMin al-Wagga was released from
captivity after his kidnapping, the Minister had said that he
had gathered a ransom, but actually had gotten al-Wagga
released after making a phone call to "a country." The
Minister had not said which country, but it was obviously
Iran, he thought.


4. (S) The only time Shahristani has not bowed to Iran was
on construction details for the proposed Iraq/Iran crude
pipeline. Iran had wanted to build the entire line, even
within Iraqi territory, but the Minister had successfully
countered that there was no way even Shia Iraqis would
swallow Iranian workers on the Iraq oil network. The
Minister had suggested the Iran/Iraq pipeline is needed
because it would increase export capacity, but the DepMin
thinks that is not true. Iran needs Iraqi oil because the
API of projected Iranian crude will change over the next 5-7
years, and the relatively lighter Iraqi crude would be used
for blending to keep the Abadan refinery online. The current
1.7 mbp Iraqi export capacity can only be increased by well
work-overs, since the old wells need rehabilitation, he
added.


5. (S) The Depmin suggested that the Minister had visited
Russia to conclude a three-way deal: dangling the prospect of
Iraqi oil contracts on behalf of Iran so that Russia would
oppose more sanctions against the Iranian nuclear program.
He does not think the Minister has the authority to enter
into contracts with international oil companies absent the
framework hydrocarbon law, despite the Minister's recent
assertions to the contrary.

Meanwhile, back at the Ministry...
--------------

6. (S/REL MNF-I) Due to sectarian division and lack of
security, the Oil Ministry is paralyzed, according to the
DepMin. Many people have taken vacation or extended leave.
If one walks through the halls, one sees only half as many
people present as normal. As for the operating companies,
things are getting worse, for example, the refineries'
production yields are decreasing. The lack of kerosene
supply promises to be a very dangerous issue this winter.
Lack of kerosene will hurt the Kurds most, and the Shia
attitude is to forget about the Sunnis entirely. Imports
will ensure that Najaf and Karbala will be OK, but there will
be no distribution to the north. The recently enacted fuel
import liberalization law will be of no help. The DepMin
said he had recently promoted the idea to local businessmen,
but they said if they imported fuel, the next thing they
would see would be the militias lining up to claim their
blackmail payments.


7. (S/REL MNF-I) As for the immediate future of the MoO
leadership, change is imminent. DepMin al-Wagga has said he
will not return to Iraq (although he reportedly did attend
the Dubai oil conference). DepMin al-Shamma has his
retirement in mind, but has not yet approached the Minister.
DepMin Akram Hassan has a target retirement date in November,

BAGHDAD 00003095 002 OF 002


but is waiting for the Council of Representatives to confirm
him as DepMin for pension reasons. All of the DepMins are
acting; none have been confirmed. After their departure, the
DepMin said USG officials are unlikely to find anyone in the
Ministry willing to talk with them, and safety of USG
officials visiting Ministry facilities may be at risk. He
said all the security guards are Shia, and they have been
infiltrated by militias.


8. (C) Dathar Khashab, the Director General of the Midlands
Refinery Company, told us separately on September 12 that the
Minister had not approached him about an extension to
postpone his mandatory retirement from the end of 2007, an
extension which would also require the concurrence of the
Council of Representatives. Sameer Asad, the Director
General of the Ministry's technical department, also has told
us that he intends to depart by the end of this year.

Biographical note
--------------

9. (S/NF) A Kurd, the DepMin said he has been working at the
Ministry for three years. He said he had been in charge of
the Kurdish Regional Government oil ministry, and before
that, worked as a drilling manager. He has ties to Chalabi
and Talabani. He lives in the international zone, and when
he goes to the office in the Oil Ministry, brings his own
Kurdish Peshmerga security detail. In his view, the United
States represents the greatest ally to the Kurds. He speaks
passable English, but his train of thought at times is
difficult to follow.

COMMENT
--------------

10. (S) One the one hand, the DepMin's observations are
alarmist and may be colored by his own sectarian tendencies,
but on the other hand, the length of his experience and the
level of his position lend credence to his views. In any
event, perception is reality, and claims that the GOI is
buffeted by competing interests are commonplace. Our plan,
nevertheless, is to continue to engage the Ministry as
possible, and to emphasize the advantages of Western oil
companies and markets. As for the Ministry, the kidnapping
of DepMin al-Wagga has had a demoralizing effect, and it
appears likely that it will soon face an even greater
leadership vacuum. Although that hardly distinguishes it
from other Iraqi Ministries these days, it is a serious
matter given the centrality of oil to the Iraqi economy.

BUTENIS