A NEW GOI BIG PLAYER IN OIL?

C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 002588

SIPDIS

E.O. 12958: DECL: 08/17/2018
TAGS: ENRG EMIN EIND EINV IZ
SUBJECT: A NEW GOI BIG PLAYER IN OIL?

Classified By: Economic Minister Counselor Charles Ries. Reasons 1.4 (b
,d).


SUMMARY
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1. (C) The Ministry of Industry and Minerals is reportedly
seeking to expand into both upstream and downstream oil and
gas projects, including technical service joint ventures with
the oil majors. In addition, MIM wants to increase its role
in mineral exploitation and transportation infrastructure, as
well as form a billion dollar development bank for small to
medium-sized enterprises. End Summary.

MIM SEEKING TO EXPAND ROLE IN OIL
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2. (C) According to Sami Araji, the Deputy Minister of
Industry and Minerals (MIM),his ministry is seeking to
expand into both upstream and downstream oil and gas
projects. "We are looking to be active in oil, from
exploration to the gas pump," he stated. He and Industry
Minister Fawzi Hariri met with BP and Shell executives in the
United Kingdom in July and Exxon Mobile and Chevron
executives in the United States earlier this year to discuss
forming joint ventures (JV) in oil services companies as a
first step. Araji said MIM specifically is seeking "firm
offers" from the oil majors on JVs for large refinery
construction projects in order to gain the support of
Minister of Oil Shahristani, who has so far shown some
"reluctance" towards MIM's efforts of expanding its role.
Araji said the GOI recently established a committee, chaired
by Shahristani, to focus on the private sector's role in
refinery construction. Industry Minister Hariri will propose
refinery construction projects through that forum, Araji
said. (Note: MIM is currently completing construction on
four small-scale refineries, two in Erbil and two in
Sulaimaniya, to process 10,000 bpd. JVs with the majors on
construction would envisage 50,000 bpd refineries. End Note.)

PUTTING THE "MINERALS" BACK INTO MIM
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3. (C) According to Araji, MIM plans to increase its role in
mineral exploitation. While MIM administers the State
Company for Geological Survey and Mining, it lacks capacity
for mineral extraction, he said. His meetings in the UK
therefore also focused on joint ventures with
minerals-related companies, including steel giant
Arcelormittal, which not only is bidding on a joint venture,
production-sharing agreement on MIM steel companies, but also
in talks with MIM on iron ore exploration rights. Araji said
companies are also interested in copper and gold. In
addition, in July MIM reportedly signed an MOU with the
University of Leeds for a joint project on improving mineral
exploration and the granting of rights. He added that once
IOCs begin major oil production-sharing investment projects,
they would have to go through MIM to purchase all
sub-terrestrial maps.

TARGETTING INFRASTRUCTURE, PRIVATE SECTOR DEVELOPMENT
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4. (C) Declaring that MIM should be called the "Ministry for
Building Iraq," Araji said he envisioned MIM taking a greater
role in transportation and infrastructure projects, such as
ports, highways, and airports, as well as telecommunications.
He said MIM presented a proposal to the Council of Ministers
to establish a development bank for small to medium-sized
enterprises. The Bank would initially be capitalized as a
1.5 billion USD revolving fund. Araji said MIM is
responsible for registering all industrial projects in Iraq,
and that 37,000 industrial-related projects are registered
through his ministry. He explained MIM is seeking to gain
stewardship of all patents, trademark rights, and IPR
concerns in Iraq from the Ministry of Planning and
Development.

MIM UPBEAT ON BIDS FOR JVS WITH SOES
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5. (C) Araji was enthusiastic about the bids for joint
venture, production-sharing deals for the 36 state-owned
factories MIM tendered from May to July (septel). (Note: MIM
reportedly received 56 bids, mainly for its cement, steel,
sulfur and fertilizer factories. End Note). Araji
reiterated MIM's strategy of eventually selling equity shares
in these and other state-owned enterprises, to begin
"hopefully" within five years.

BAGHDAD 00002588 002 OF 002



COMMENT
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6. (C) This is not the first time we have heard of MIM
expanding into oil/gas projects or international oil
companies partnering with the GOI on oil service companies.
In April, Araji said MIM wanted to set up new engineering
company to specialize in oil and gas infrastructure projects.
In May, a consultant to MIM told us he had learned a
"British oil company" was exploring a possible 49 percent
equity joint venture in an oil services company with the
Ministry of Oil.


7. (C) Araji has in the past stated MIM neither desired to
create an "oligarch class through shock treatment
privatization" nor exceed a "stewardship" role of industry
and commerce. At the same time, given MIM's large payroll
(200,000) and central role it played in the Iraqi economy for
decades, Araji is extremely vocal in heralding the ministry's
capabilities to rebuild Iraq. Expanding into other sectors,
but only through strategic partnerships with private
enterprise, and stimulating SME growth, but with capital
administered by MIM, reflects this philosophy of marrying the
public and private sectors. While this could signal how Iraq
may further embark on economic development, it is unlikely
that other GOI actors - mainly the Ministries of Oil,
Electricity, Housing and Construction, Transportation,
Communication, and the state banks - will welcome MIM onto
their turfs. End Comment.
CROCKER