DPM SALIH: TIME IS RIGHT FOR BIG MOVES ON BASRAH

C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 001070

SIPDIS

SIPDIS

E.O. 12958: DECL: 04/05/2018
TAGS: PREL PGOV ECON EAID EFIN MOPS IZ
SUBJECT: DPM SALIH: TIME IS RIGHT FOR BIG MOVES ON BASRAH
RELIEF, RECONSTRUCTION

Classified By: EMIN - Amb. Charles Ries, Reasons E.O. 12958 1.5 (b,d)



1. (C) SUMMARY: In a cordial and far ranging conversation
at the DPM residence April 6, EMIN introduced to DPM Barham
Salih incoming Anti-Corruption Coordinator Ambassador
Lawrence Benedict and discussed economic/reconstruction
measures the GOI can take in coming days to solidify gains
from the security operations in Basrah and elsewhere in
Southern Iraq over the last two weeks. EMIN urged the GOI to
implement quickly the PM's recent $100 million pledge for
humanitarian relief, reconstruction and employment activities
in the South; encouraged Salih to consider using a private
firm to run and help secure the port of Um Qasr; and pressed
him to consider a "big idea" proposal similar to the major
reconstruction plans sketched out in the Embassy's "Iraq
2020" discussion paper. Salih accepted EMIN's comments, said
the GOI has designated Acting Minister of Justice Safa
al-Safi to run Basrah relief; said he'd visit Karbala to
ensure speedy disbursal of the $100 million relief funds;
expressed concern that Um Qasr needed continued IA presence;
and revealed that he was working on a major reconstruction
proposal that is "bigger than Iraq 2020" and would focus on
building hospitals, schools, sports centers, roads, rails and
irrigation systems. Responding to EMIN's comment that
housing represents an important unfulfilled need, Salih
agreed the time is right to support renewed efforts in this
sector also. Salih was decidedly negative - due to corruption
concerns -- on payment in kind (i.e. oil liftings) for major
oil firms participating in the new TSA's proposed by MOO
Shahristani. Barham closed the meeting closed with a
cautionary note on prospects for passage of the hydrocarbons
laws -- saying the political climate is not yet propitious.
End Summary.


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TAKING THE INITIATIVE ON RELIEF
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2. (C) In a cordial meeting at DPM Barham Salih's residence
April 6, EMIN Ambassador Charles Ries, accompanied by
STRATEFF MG Mark Zamzow, visiting NSC Iraq Director Brett
McGurk, and emboffs, introduced newly arrived USM-I
Anti-Corruption Coordinator Ambassador Lawrence Benedict
(reported septel),and discussed how the GOI can use economic
levers to take advantage of its momentum from the security
operations in Basrah to cement popular support. EMIN noted
that PM Maliki's recent $100 million pledge for
Basrah-related relief and reconstruction is a good start but
it must be implemented quickly and effectively. Responding
to EMIN's query, Salih said that the GOI had designated
Acting Justice Minister Safa al-Safi to manage the effort.
Al-Safi would be remaining in Basrah to take this on. He
would chair a special committee, comprised of deputy
ministers from the service ministries, to manage disbursal of
the $100 million. This set up would be endorsed by the
Council of Ministers on Tuesday. Salih himself wants to go
down to Basrah later this week. EMIN offered USM-I support
to facilitate that trip if needed.

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UM QASR MANAGEMENT
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3. (C) Turning to Um Qasr, EMIN gave Salih the proposed
package for requesting bidders to run the port (note: this
document had previously been shared with Deputy Transport
Minister Bengin),stressing that the GOI needed to move
quickly to regularize its operations. Salih said the PM
agreed on the idea of putting out the South Port Container
facility for a concession, but was not supportive of using
private contractors to provide security; the PM believes the
Iraqi Army, having secured the port, needs to retain a
visible presence there. EMIN pointed out that the two were
not mutually exclusive and that a private firm could manage
daily security issues such as badging, record keeping, and
the like, while the IA provided physical security on the
perimeter. It would be important for the port to have
international credibility both from ISPS certification, EMIN
said, and from having a respected international firm running
the port. He said this would likely pay off in the long run
for Iraqi consumers in reduced transshipment and insurance
costs. Salih said he would be supportive but that the USG
would need to take this up with the PM.

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BIG IDEAS FOR RECONSTRUCTION
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4. (C) On broader reconstruction, EMIN urged the GOI to
propose a "Big Idea" similar to that sketched out in the

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Embassy's "Iraq 2020" discussion paper. Now was the time he
said, to take advantage of momentum from the Basrah security
operations to use the burgeoning oil export resources of the
GOI to solidify public support. Salih agreed, and said he
was working on a major reconstruction package that would be
"bigger than Iraq 2020." This $5 billion package of
infrastructure spending would focus on items that were
already in preparation, and would build scores of hospitals,
schools, and sports centers, roads and rails, and two major
irrigation projects in Mosul and in the south. The money
would be controlled and programmed either by the Higher
Reconstruction Committee, or by a central committee
comprising the PM, Salih, and line Ministers. The GOI would
seek to bypass the bureaucracy and jump-start the program by
disbursing 20 percent of awards to contractors up front.
Salih is preparing a package of briefing slides on the
proposal which he will try to get in front of the PM as soon
as possible, and will seek to have announced, even if in
outline form, by the PM at the COM session on Tuesday. He
will share the document with us as soon as it's ready.


5. (C) EMIN noted that the GOI plan didn't mention housing,
which is a very important unfulfilled need in Iraq. Salih
replied that he was to meet with the Embassy's relevant
Senior Advisor on Monday, and that current discussions
focused on private sector driven housing development. EMIN
commented that private sector housing development typically
goes hand in hand with government support for infrastructure,
which could cost hundreds of millions of dollars. A major
housing infrastructure initiative could be an additional
element in the GOI's infrastructure package, and it would
also appeal to Sadrist interests (and blunt their criticisms
of the GOI). Salih agreed and said he would pursue an
initiative that would announce that the state was taking a
responsibility, would allocate funding, and would allocate
land for housing development.

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CHARY OF TSA PAYMENT-IN-KIND
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6. (C) EMIN asked Salih's view on the proposed
payment-in-kind for major oil companies participating in the
Technical Service Agreements, which Oil Minister Shahristani
recently asked the USG to comment on. Salih was decidedly
negative on payment in kind, since it opens up opportunities
for corruption "which we are very capable of exploiting."
EMIN then asked Salih's assessment of prospects to move the
hydrocarbons legislation. Salih said KRG PM Nercivan Barzani
will be coming to Baghdad on Thursday, April 10 to discuss
this and other issues. The PM, he said, was "in a good mood
now" and so it was a good opportunity to push him on all of
these issues, but he cautioned that progress could "easily
degenerate on the smallest of things."

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OPTIMISTIC ON POLITICAL CONSOLIDATION
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7. (C) In a particularly animated aside, Salih mentioned
that the PM was feeling pretty good after the Basrah
successes. Salih noted that the Sadrists were very docile at
the last meeting of the COR, and in his view were in trouble.
The PM, he said, had insisted that the security operations
are continuing and that the cordon around Sadr city will
remain until either the JAM permits the IA to enter
peacefully, or the IA takes it by force. He insisted that
the real humanitarian problems were caused by the Sadrists.
This is a message the PM must get out.















BUTENIS