PRT TIKRIT: MINISTERS OF OIL, ELECTRICITY, AND 4TH

C O N F I D E N T I A L SECTION 01 OF 04 BAGHDAD 000681

SIPDIS

SIPDIS

E.O. 12958: DECL: 02/22/2017
TAGS: ENRG EPET KCOR EIND IZ IR
SUBJECT: PRT TIKRIT: MINISTERS OF OIL, ELECTRICITY, AND 4TH
IA DESCRIBE PLAN TO RESTORE BAYJI OIL REFINERY

REF: BAGHDAD 539

Classified By: Classified by Leonard Hatton, PRT Deputy Team Leader, fo
r reasons 1.5 (b) and (d).


1. (U) This is a PRT Tikrit, Salah ad Din cable.


2. (C) SUMMARY. During a February 19 meeting at the
refinery, Minister of Oil Al Shahristani, Minister of
Electricity Al Hasan, and the deputy commander of the 4th IA,
BG Nabeel, revealed their plan to improve oil infrastructure
security and increase public fuel distribution. Attending
the meeting were refinery officials, the Governors of Salah
ad Din (SaD),Nineveh, and Kirkuk, and embassy officials.
The presentations made by Al Shahristani, Al Hasan, and
Nabeel emphasized separate points, but communicated one
central message: effective control of the distribution of
refined fuel from Bayji - and the security necessary - will
pass from the Ministry of Oil (MoO) in Baghdad to the
governors of the north-central provinces, in conjunction with
the IA. Given a fixed allotment of fuel per week, governors
will now be tasked with organizing and ensuring the
distribution of fuel to their constituents during a four week
trial period, after which the plan,s success/failure will be
reviewed. While offering an opportunity for decentralized
decision making and encouraging greater local accountability,
the new plan also tasks provincial governments with new
responsibilities without definite support from the GOI. When
questioned about this by the Governor of Nineveh, Al
Shahristani did not offer specific resources to help the
governors of the largely Sunni provinces, simply stating
&the MoO will help.8 END SUMMARY.

--------------
4th IA in Charge
--------------


3. (C) The Deputy Commander of the 4th IA Brigade, BG Nabeel,
laid out a detailed security and distribution plan at the
refinery which - if fully carried out - will transform
operations at Bayji. Nabeel described the mission of the IA
and SIB in simple terms: secure fuel for the Iraqi people and
protect the residents of Bayji and the refinery. Nabeel
claimed that significant success has already been achieved;
stating that the black market price of benzene fell from
35,000 ID to 20,000 ID per 20 liter can since the IA assumed
responsibility for security at the refinery. (NOTE:
Nabeel,s claim that black market prices have dropped appears
to be on target. According to atmospheric data released on
February 20, prices of benzene have fallen to around .40 USD
per liter, compared to .76 USD on February 11. END NOTE.)
However, stating that there was much yet to accomplish,
Nabeel detailed the following objectives for the 4th IA:

--Control over entrances and exits of the refinery.
--Control over distribution procedures within the refinery.
.
--Separation of tankers by product type.
--Armed escort of fuel tankers to provide security on
highways.
--Encouraging a stronger, incorruptible Oil Protection Force
(OPF).
--Success in fighting the terrorists and AIF.
--Successful exploitation of the media to keep public
informed of successes.


Nabeel also listed longer term projects. These included
reorganizing the parking lot, installing cameras and other
monitoring devices throughout the refinery and outside, and
upgrading communications capabilities within the facility.
Nabeel also stated that after the operations completely
secured the refinery, Strategic Infrastructure Battalions
(SIBs) would also assume responsibility for the propane
distribution facility in Siniyah.

--------------
Fewer Tankers, But Better Organized
--------------


4. (C) Fuel distribution at Bayji is often a scene of bedlam,
with hundreds of tankers waiting outside the gate. Nabeel
described a completely overhauled process which limits the
number of tankers receiving fuel to 100 per day in order to
provide for greater accountability and order at the gates.
(NOTE: Currently distribution hours run from 7am ) 1am,
although in practice, due to confusion at the gates, fuel is
often dispensed for a far less number of hours. END NOTE.)
According to Nabeel, this would provide six hours of more
efficient and transparent distribution each day, allowing for
three or four hours of clean-up, equipment maintenance, and

BAGHDAD 00000681 002 OF 004


security operations


5. (C) Previously, the ability to organize daily shipping
manifests for fuel tankers was limited to Baghdad; the
distribution office in the refinery would receive faxed
documents ostensibly detailing the tankers which would
receive fuel that day. In practice, chaos was often the
rule. For example, on a February 6 visit to the refinery
there were approximately 25 tankers waiting near the HFO
distribution gate that weren,t on the manifest for the day,
while the trucks that were did not show. Nabeel announced a
new distribution plan provides for a predetermined amount of
fuel to be allocated for each province, appropriately divided
by fuel type, i.e. benzene, kerosene, etc. Provincial
governors of each would assume responsibility for the entire
distribution process inside of the province; including the
election, destination, and security of tankers. Nabeel also
emphasized that this was an interim strategy ) it would be
reassessed in four weeks. (Note: MinOil has never run
point-to-point distribution. Local distribution has always
been handled within a province. Nevertheless, Nabeel's plan
still gives the provinces a greater role, in both allocation
decisions and security.)

--------------
OPF Taken Under Wing?
--------------


6. (C) One of the central issues regarding the &military
invasion8 (as described by PM Al Maliki during the December
29 meeting) of the Bayji refinery is the ongoing relationship
between the OPF and the IA. So far, according to CF elements
on the ground, the two sides appear to be &keeping tabs8 on
each other and encouraging accountability. In the meeting,
Nabeel spoke positively of OPF cooperation, referring to the
OPF as colleagues whom the SIBs considered as &one of their
units.8 The feeling however, may not be mutual. Nebhan
Mehjoob, the refinery OPF Chief, told IPAO before the meeting
began that the SIBs were not adequately communicating with
the OPF. (NOTE: OPF officials ) Sami, Nebhan, Sabah, etc. -
previously expressed concern to IPAO about the IA assumption
of responsibility for security duties at the refinery. It is
unclear if their skepticism reflects an ongoing internal
power struggle within the refinery or mere professional
rivalries (septel). END NOTE.) Breaking ranks with his
refinery colleagues, Regional Chief of Distribution Samir
Abbas requested that the Ministry of Oil &strengthen8 the
OPF.

--------------
Media Savvy
--------------


7. (C) Pointing out that improved communication with the
media was necessary, Nabeel emphasized that another primary
objective of the IA would be to utilize the media to provide
the population with regular updates from the refinery. The
updates, which would detail precise numbers of tankers
arriving and being fueled each day, would encourage overall
accountability and convince the public that the GOI was
responding to the fuel shortage crisis.

--------------
Al Shahristani Tasks ) and Governors Respond
--------------


8. (C) Al Shahristani echoed many of the same points as
Nabeel, naming security as the greatest challenge facing the
MinOil. Describing pipeline security ) refinery inputs as
well as export pipelines ) as inadequate, the Minister
emphasized that most of Iraq,s hard currency is derived from
petroleum exports delivered by pipelines. Al Shahristani
also described the highway security situation as appalling
and a major impediment to the efficient distribution of
refined fuel to the general population. In order to remedy
the situation, Al Shahristani assigned the governors of the
Iraq,s north-central provinces and the 4th IA the
responsibility for increased security, saying that they knew
their respective areas better than anyone. The Minister also
said he was requesting that the Ministry of Defense give the
4th IA additional control of the SIBs protecting the vital
Kirkuk ) Bayji crude oil pipeline.


9. (C) The Governor of the province of Nineveh, Ghanim Al
Basso, raised serious concerns with the Minister,s strategy,
stating that the MinOil contracts with tribal leaders ) at
the price of $750,000 per kilometer ) who, according to Al
Basso, often take the money and later steal fuel anyway. Al
Basso also argued that the funds given to the tribes often
are funneled to insurgent groups. Both Al Basso and the
Governor of Salah ad Din, Hamed Al Quissi, also strongly

BAGHDAD 00000681 003 OF 004


objected to Al Shahristani,s highway and pipeline security
tasking in principle as well, claiming that ) in reality -
neither the provinces nor the IA or SIBs had the resources to
expand their security operations. This support, according to
the governors, would have to come from Baghdad. Al
Shahristani,s response to the governors was simple: &Give
me your (the governors) plan, and the Ministry of Oil will
help.8 Specifics, however, were conspicuously lacking.

--------------
Syria and Iran to the Rescue
--------------


10. (C) Admitting that the shortage of refined fuel would
remain an enormous problem in the near future, Al Shahistrani
explained that the MinOil was in the process of negotiating
new contracts with Syria and Iran for the importation of
fuel. (Note: the inarguable shortage is of subsidized fuel.
Fuel is more widely available from unofficial sources, but at
2-4 times the official price of 350 dinars.) The imports, Al
Shahristrani explained, would be province specific: gasoline
from Iran would be delivered to Diyala, while imports from
Syria were earmarked for Nineveh. While, according to the
Minister, Kurdistan would be allowed to negotiate its own
contracts, Salah ad Din and Anbar presently did not have any
foreign import contracts.


11. (C) Al Shahistrani also recognized that the glut of HFO
was forcing the closure of the refinery on a regular basis )
7,000 cubic meters per day need to be distributed in order to
ensure continued production at the refinery ) and that
coupled with the frequent power failures, it was the greatest
barrier to higher production levels (reftel). Acknowledging
that the HFO build-up was due to a break-down in contracting
with Turkey as well as the lack of highway security (and
possible AIF targeting of tanker drivers),Al Shahristani
promised refinery officials and the governors that the MinOil
had finalized HFO export contracts with Syria and Turkey
(which he said provided for 7000 tons of HFO to be exported
to each at the international market price). He also
suggested that railroads could be potentially be used to
transport much of the HFO in lieu of the highway security
situation (Al Shahristrani claimed that 1500 to 2000 tons of
HFO per day could be moved by rail); however, he admitted
that that railway security had to be addressed before this
would be a viable option. Al Basso suggested that the
Ministry provide 50 tanker trucks to carry away some of the
excess fuel; Al Shahristani again was non-committal.

--------------
Obeydi,s Reach Back
--------------


12. (C) Al Shahristani strongly backed new director Dr. Ali
Obeydi, declaring that he had the authority and license to
obtain necessary equipment for the refinery. This could be a
major step forward; the Bayji refinery currently lacks a
significant amount of vital spare parts. During a February 6
visit, former Abdel Khader told IPAO that the refinery
requested for years in vain over 3 million dollars worth of
equipment from the MinOil. The Minister also reiterated a
commitment to providing back-up electrical generators in the
future; again, however, refusing to provide details or a time
frame of when the generators could be delivered.

--------------
Ministry of Electricity to Help
--------------


13. (C) Minister of Electricity Kareem Al Hasan Al Hasan
detailed a plan to increase the amount of HFO which could be
used as fuel by the nearby power plant. Al Hasan explained
that the power plant operates three thermal units and is
repairing a fourth; when all four are operational, the plant
will consume approximately 6500 tons of HFO per day. He also
described the Ministry,s strategy to convert two of the main
turbines to run on HFO instead of diesel. This project,
which Al Hasan said should be completed by the summer of
2008, would increase HFO consumption by the power plant to
9000 tons daily ) greatly assisting the refinery in the
disposal of HFO.


14. (C) Pointing out that the power plant also depends on
pipeline supply of fuels, the Minister echoed the request
raised by Al Shahristrani to increase security on the
pipelines. --------------
Comment
--------------


15. (C) Al Maliki,s plan to provide security and overhaul
fuel distribution at the Bayji refinery appears to be paying

BAGHDAD 00000681 004 OF 004


positive dividends. Oversight has noticeably increased at
the gates and the pumps; there are more boots and eyes on the
ground ) watching each other as well as the tankers. The
4th IA seems to have a workable, practical strategy to take
control of the situation, at least in the refinery. In
addition, the plan is showing positive results in the streets
of Salah ad Din; black market prices for benzene have dropped
drastically over several weeks.


16. (C) In theory, Al Shahristrani,s decision to assign
increased responsibility for fuel distribution to the
governors increases accountability and simplifies the
process; indeed, one of the central flaws in the old system
was the complete centralization of distribution planning and
contracting in Baghdad. However, the provincial governments
and governors are probably not ready to completely assume the
responsibility to provide security necessary to ensure
adequate fuel distribution. Local pressures would probably
ensure that much of the fuel reaches its destination;
however, a strategy which transfers complete responsibility
to provincial authorities who may be implicated in fuel
smuggling themselves - as in the case of Salah ad Din
province - may not prove the most successful course of
action. Al Shahistrani offered MinOil assistance for
security and distribution. If this assistance is not
ultimately forthcoming, central government in Baghdad may run
the risk of appearing in the eyes of many Sunnis here to be
handing them the problem and walking away. END COMMENT.


17. (U) For additional reporting from PRT Tikrit, Salah ad
Din, please see our SIPRNET reporting blog:
http://www.intelink.sgov.gov/wiki/Tikrit.

KHALILZAD