CENTRAL BANK MANAGER ON BASRAH PROBLEMS: SECURITY AND

C O N F I D E N T I A L SECTION 01 OF 02 BASRAH 000070

SIPDIS

SIPDIS

E.O. 12958: DECL: 8/18/2017
TAGS: EFIN ENRG ECON EAGR PGOV PTER IZ
SUBJECT: CENTRAL BANK MANAGER ON BASRAH PROBLEMS: SECURITY AND
ELECTRICITY

REF: BASRAH 49

BASRAH 00000070 001.2 OF 002


CLASSIFIED BY: Louis L. Bono, Director, Basrah Regional Embassy
Office, Department of State.
REASON: 1.4 (b),(d)




1. (C) SUMMARY: Zuhair Ali Akbair, General Manager for the
Central Bank of Iraq (CBI),Basrah Branch met with Basrah
Regional Embassy Office (REO) officials on August 11. Zuhair
listed lack of electricity and security as the two main
impediments to Basrah's development, but Zuhair showed no
concern about security for the bank or his person. Another
problem cited was delays in transmission of funds from Baghdad
to the Basrah Provincial Council. Economic indicators in Basrah
were slowly improving but unemployment and inflation remained
high. Bank accounts are increasing, but Basrawis are still
distrustful of the government and ignorant about the advantages
of bank cards. End summary.


2. (SBU) Zuhair noted the great economic potential of Basrah
with its combination of ports, agriculture and oil, and some
positive signs such as the increased strength of the dinar.
Nevertheless he said that economic development had not
progressed as it should have in Basrah. Zuhair described
sub-optimal performance in oil production as one of the main
obstacles to economic development in Iraq. While hydrocarbon
production was up, he sees serious limitations in oil exports
from the two marine terminals south of Basrah, where loading was
hamstrung by rough seas at some times of the year. In Basrah,
the agricultural sector is still suffering; Zuhair recalled
earlier times when Basrah was the breadbasket of Iraq and noted
that much arable land was going untilled. The two major blocks
to economic growth in Basrah province were insufficient
electricity and security; almost all economic activity in
Basrah, even agriculture and construction, depended on these two
pillars.


3. (C) Electricity in Basrah city was currently running in
homes for two hours after blackouts of four to six hours. With
only about six hours of intermittent electricity per workday,
businesses could not prosper. There are no law enforcement
efforts to prevent the rampant theft of electricity from lines,
and no legal or other consequences for electricity thieves that
are caught. Zuhair recalled somewhat wistfully the days of
Saddam Hussein's regime, when electricity theft in Basrah was
non-existent; anyone caught stealing was executed.


4. (C) Lack of security was also stifling Basrah's commerce.
Zuhair related trying to get the Standard Charter Bank in Dubai
to open a Basrah branch, but Standard declined due to the lack
of security. The number of private banks in Basrah - 15 - had
not changed over the past year despite increased commerce in
Basrah. Lack of security hampers movement of agricultural
products to market as common criminals robbed the trucks, Zuhair
said, and it slows down most other commercial activities.


5. (C) Ironically Zuhair did not seem concerned about security
either for the CBI Basrah Branch or himself. He said that the
Facility Protection Service was doing an adequate job (despite
being queried about reports of less than ideal FPS security for
the CBI in Baghdad and reminded of the notorious break-in of the
Basrah Branch in 2003). As for him, Zuhair said he did not fear
kidnapping, as the militias all understood that he did important
work that benefited all. (Note: Zuhair drove to the REO with
only a driver whom he said was not even doubling as a bodyguard.
End note.)


6. (C) Unemployment contributes to Basrah's security problem as
youths are drawn to militias. Although he admitted that
unemployment had decreased somewhat in recent months, it remains
very high, especially for young adult males. Militia attacks
would decrease if employment could rise, he maintained. (Note:
During our meeting, a rocket attack was launched against our
compound, and Zuhair commented, "We need to put those people to
work." End note. ) Most laborers have food on hand for only
two days. Inflation in Basrah was very high. An example is the
bottles of propane that are used universally; what cost 250
dinar under Saddam, cost 10,000 dinar six months ago and now
sells for 20,000 dinar. Zuhair discounted any significant
Iranian investment as affecting employment.


7. (C) Zuhair opined that some sort of interest rate incentive
would help the Basrah economy. Savings accounts paid 10%
interest, with 12% for a one-year deposit. CBI Basrah Branch
was lending funds to private banks at 20%. Zuhair noted that the
number of private bank accounts is slowly increasing, but that
his touted cash machine card (reftel) that he introduced has

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been slow to catch on. This despite a new feature that card
holders could get instant loans with the cards. He faults lack
of education in the bank and government-wary Basrawis and thinks
that a television advertising campaign would be needed to get
people to accept the card. The majority of Basrawi workers are
paid in dinars, he said; manufacturing imports from Kuwait and
agricultural imports from Iran are paid for in dollars.


8. (C) Zuhair did not bring any statistics to back up his
generalizations about the Basrah economy, but he said that he is
preparing a report that would lay out in detail the economic
issues facing Basrah and his recipe for progress with Basrah as
part of a federal system. The cornerstone, he said is an
employment plan with capital funding along the lines of Nobel
Laureate Muhammad Yunus' famous plan for reaching almost full
employment in that country. Giving the provincial governments
timely resources for development was another key point: although
there was a working connection from CBI Basrah Branch to CBI
Baghdad, delivery of funds from the federal government to the
Provincial Council is too slow.


9. (C) COMMENT: Zuhair is an articulate and educated man whose
description of Basrah's issues rang true. We found it odd that
despite lamenting poor security, he is not worried about
kidnapping or bank robbery; we wonder if he may have reached an
accommodation with the militias. Zuhair was careful not to
criticize any particular militia or political party as
contributing to security problems, and his statements that there
is little Iranian investment are inconsistent with other
indicators. Despite his nostalgia for Saddam's firm hand in
dealing with crime issues, Zuhair was proud of his refusal to
join the Baath party even though it cost him travel
authorization to study for a PhD in San Francisco in the late
70's.
BONO