BILLETS, BULLETS AND BENZENE: THE BLACK MARKET IN

C O N F I D E N T I A L SECTION 01 OF 03 BAGHDAD 003626

SIPDIS

SIPDIS

E.O. 12958: DECL: 10/08/2017
TAGS: PGOV IZ
SUBJECT: BILLETS, BULLETS AND BENZENE: THE BLACK MARKET IN
MUTHANNA

REF: BASRA 0063

Classified By: Acting Muthanna Provincial Reconstruction Team Leader Ke
vin Crisp for Reasons 1.4 (b) and (d).


1. (U) This is a PRT Muthanna Reporting Cable.


2. (C) SUMMARY: Corruption has flourished in Muthanna
since 1990, leading to bustling black markets in billets with
the security services, guns and ammunition pilfered from
official sources, and fuel. The Commission on Public
Integrity (CPI) has proven ineffective in stifling the
symbiotic network of government officials, smugglers and
black market entrepreneurs in Muthanna. END SUMMARY.


Middle Class Falls, Corruption and Black Market Rise
-------------- --------------


3. (C) Since 1990 corruption has worsened in Muthanna,
leading to endemic black markets for government positions in
the security services, guns, ammunition, fuel, and drugs.
Prior to that time citizens paid small bribes to "tea guys,"
rather menial gatekeepers who scheduled meetings for senior
officials. Generally the leaders themselves were not
perceived as corrupt. Since then it has been customary in
Muthanna to pay a bribe for any major government action or
inaction. The reasons for the change are threefold: 1)
Salaries decreased in real terms due to the regime's weak
finances, 2) When some began to steal openly and were not
punished, it encouraged others, and 3) Since 2003, Internal
Affairs for the Police, and CPI oversight more generally
among the departments, has been ineffectual and politicized.
The reporting for this cable is based on local staff
accounts, Australian assessments and observations of PRT
officers.


4. (C) The cultural shift has proven difficult to reverse.
Under the former regime judges, teachers, and other civil
servants had their salaries eroded to the point where they
could not support their families, yet they were prohibited
from resigning. As a result, most began moonlighting or
sought illicit opportunities to augment their income. This
corrupted the civil service, which despite vastly increased
salaries since 2003 has not recovered a reputation for
probity. Among Muthanna's citizens the expectation is that
every government official will use his office for private
gain. Anyone with connections or savvy easily escapes the
CPI's grasp.

Bad Boys: Muthanna's Finest Serve, For A Price
-------------- -


5. (C) As in Basra (reftel) officers are not chosen for
Muthanna's police based on merit; instead they are nominated
by politically influential benefactors. Political parties or
tribes often fulfill this role of power broker. In one
notable example, a man named Falih, the current commander of
the Provincial Joint Coordination Center, was promoted from
Lieutenant to Lieutenant Colonel between 2002 and 2006 His
was not the most egregious case as he had at least attended
military college; other officers appointed by political
parties have little to no formal qualifications. Many senior
officers wear rank that they have not earned. The going rate
to secure a junior police billet is between $1100 and $1500,
a substantial increase over last year's price of $600. But
since officers earn between $600 and $800 a month, and
because Muthanna suffers from a paucity of employment
opportunities, paying the bribe remains a rational decision.
Former moneymaking schemes at checkpoints involved the threat
of jail time f
or any citizen unable to furnish his Jinsiyah identity
card--which usually resulted in a hefty bribe. Yet the
Jinsiyah requirement is no longer enforced, so corrupt
officers have directed their entrepreneurial spirit to other
profitable ventures.


6. (C) An example of such corruption is reflected in the
market price of guns. A Glock pistol, like the type provided
to the MOI by the Coalition, retails for $1400-$1600 on the
black market, with bullets averaging an additional dollar
each. By comparison, the retail price of the same weapon in
the U.S. is approximately $600. The best AK-47s are about
$250, with bullets an additional 500-750 Iraqi Dinars (ID)
each. Neither weapon is difficult to locate. During the
spasms of violence that seem to beset Muthanna quarterly, the
prices of guns rise up to 20%. Conversely, when the
Coalition or MOI donates weapons to Muthanna's finest, the
black market price tends to fall by a similar percentage.
Because no one collects records on shooting engagements,
police pad the number of rounds expended, secure in their
ability to convert excess ammunition to currency. Similarly,

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Department vehicles are often used for personal errands, so
the ministry assumes the cost of fuel. These corrupt systems
began under the for
mer regime but were held in check by its willingness to
execute the most egregious offenders. The CPI instills no
such fear, so corruption has metastasized in Muthanna since

2003. The Muthanna PRT continues to seek additional
information about the CPI's activities, but has not had much
success.

"Official" Fuel Prices and Other Theoretical Concepts
-------------- --------------


7. (C) The "official" fuel price is 450 ID per liter.
While reasonably inexpensive, it remains, alas, a theoretical
concept. Even when government stations are stocked with
"official" fuel, a tip to the attendant- who is a government
employee- for a standard 20 liter fill-up must be 5,000ID, a
considerable tax on the 9,000ID list price. One can also pay
to skip the long lines for only 2,000ID. Attendants often
intentionally dally or temporarily disable their pumps,
because if the system were to function without delay there
would not be an opportunity to extract a bribe. They also
tinker with the meters so a citizen filling a standard 20
liter jerry can be charged for as many as 32 liters.
Citizens cannot complain, as the alternative is the more
expensive black market. One gas attendant in Rumaytha earned
enough in only three months of work to purchase a new home.


8. (C) Managing a gas station is even more lucrative than
pumping the fuel. One Rumaytha station receives 36,000
liters of benzene (gasoline) per day as well as two full
trucks of diesel. By keeping two sets of books and allowing
some of the petroleum to disappear from his storage tanks,
the manager pockets 500,000-900,000ID per day for his
complicity with the oil mafia. Such work is not without its
hazards: Australian reporting indicates the Albu Jayash tribe
attacked a Rumaytha station on 29 May when rumors spread of
gas being diverted to Qadasiyah province. Pilfering
government resources for the black market, it seems, is fine
so long as it's kept within the province. As a rule of
thumb, the spread between the black market price and the
official price of gasoline increases the farther one moves
from Basra. Additionally, delays in finding fuel also mount
the further one travels from Basra. For example, Khidr in
eastern Muthanna has more reliable gasoline supplies than
Samawah in western Muthanna, and
Diwaniyah is worse still. In Najaf the price can reach
2500ID/ liter, especially during pilgrimages, a whopping 500%
price premium over the "official" price.

New Rulers, Same Black Market Oil Cartel
--------------


9. (C) Under the former regime, Hamid Madlul and the
Hajjari family had a stranglehold on fuel deliveries in
Muthanna. Little has changed. The apparatus for smuggling
that thrived during the 1990s persists, albeit with a
symbiotic relationship with political parties rather than
with one man. The Hajjari family pays a fee or tax to Da'wa,
Fadila, and even ISCI and the Sadrists to keep the oil
flowing. The family also deals in spare parts, construction
and laundering money. Madlul is the oil baron of Rumaytha,
and with the help of Hajjari trucks and connections, the
black market for fuel thrives.

Uppers and Downers: Drugs of Choice for Muthanna's Idle Youth
-------------- --------------


10. (C) Alcohol is unpopular in Muthanna. But pills, like a
sedative called Arteen and an amphetamine called Abu Hajb are
trendy among a small number of youth. Heroin and cocaine are
unknown, but there is an ongoing hashish trade from Iran to
Saudi Arabia, via Muthanna. Compared with the illicit trade
in fuel, jobs, guns and ammunition, the drug trade in
Muthanna is unsophisticated and affects relatively few
people. Nevertheless, if the plan to pave a road through the
desert to the Saudi border ever comes to fruition, the trade
could flourish.


11. (C) COMMENT: Post 1990, the former regime's financial
difficulties, combined with a strategy to punish southern
provinces like Muthanna, led to a massive erosion of the
middle class's standard of living and increased corruption
within the civil service. But the regime's brutality kept
the misuse of government resources in check. Since 2003,
that threat has ceased, and the CPI has not proven a credible
deterrent to massive corruption of government billets,
vehicles, weapons, ammunition, or fuel throughout Muthanna.
So long as fuel remains mispriced and accountability
toothless, the black market will continue to thrive in
Muthanna, complicating our efforts to establish the rule of

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law and a market-based economy. END COMMENT.

BUTENIS