WORLD BANK OFFICIALS ON ENERGY STRATEGY, WORLD

C O N F I D E N T I A L SECTION 01 OF 03 BAGHDAD 002768

SIPDIS

E.O. 12958: DECL: 08/28/2018
TAGS: EPET EINV ENRG SENV EFIN IZ
SUBJECT: WORLD BANK OFFICIALS ON ENERGY STRATEGY, WORLD
BANK PRIORITIES

REF: A. EMBASSY 8/15 UNCLASSIFIED OI

B. EMBASSY 8/19 CLASSIFIED OI

Classified By: CETI Ambassador Marc Wall, reasons 1.4(b,d)


1. (C) SUMMARY: While the World Bank has the expertise to
assist the Iraqi Government develop a national energy
strategy and believes a strategy is important, working level
staff in the World Bank's headquarters will not expend
resources on this effort until the GOI demonstrates a genuine
commitment. World Bank willingness to provide advisory
assistance would be heightened if the GOI were to develop a
financial relationship with the World Bank as well. For
example, the World Bank could facilitate Independent Power
Project investment by providing political risk insurance
through the Multilateral Investment Guarantee Agency (MIGA)
or co-financing projects to reassure potential investors. In
conjunction with developing an interim country strategy for
Iraq, the World Bank plans to expand its resident staff; in
addition to the country director, World Bank staff would
include two program managers and two regional or local staff
augmented by visits of sector experts. A visiting World Bank
official also appealed for U.S. efforts to encourage the GOI
to take the steps necessary for Iraq to achieve candidate
country status with the Extractive Industries Transparency
Initiative by a February 2009 conference in Doha. END SUMMARY

Candid Comments
--------------


2. (C) A visiting World Bank (WB) official met with us and
Energy Fusion Cell (EFC) representatives on August 24 to
provide an update on World Bank developments and future plans
for its Iraq program. He spoke candidly and noted that he
would not report back some of his comments due to
headquarters views that differed from others in the field
regarding Iraq priorities. Please protect accordingly.

Energy Strategy
--------------


3. (U) The meeting was a follow-up to an August 14 meeting of
Embassy and EFC representatives with Abdulilah al-Amir,
deputy to PM adviser Thamur Ghadban (ref A). During the
meeting, al-Amir explained that PM al-Maliki had directed the
PM Advisory Commission to form a "High Committee," chaired by
the PM or DPM to prepare a National Energy Strategy. The
High Committee membership would include the relevant line
ministries -- Oil, Electricity, Water, Planning, Finance --
and the Ministers of Oil and Electricity had already agreed
to the approach. Al-Amir turned to EFC to obtain a list of
world-class consultancies to prepare a draft energy strategy.
He said a consultant should prepare a plan within a year or
less and opined that it should cover a 10-year period. We
followed up with a visiting World Bank official, who had
previously been assigned in Iraq, to report the outcome of
the meeting and to learn how the World Bank might support
this process.


4. (C) The WB official said that World Bank colleagues who
work in the energy sphere could also provide the names of
specific individuals, in addition to well-known firms and the
World Bank's own in-house capability, who had the exact
background best suited for the project. At the working
level, however, the World Bank insisted that Iraq must
demonstrate a genuine commitment to developing an energy
strategy before the World Bank would provide assistance.
Referring to an earlier e-mail, the WB official reiterated
that the Iraqis needed to more narrowly and precisely define
their requirements for a national energy strategy; al-Amir
had been too vague in describing what a national energy
strategy should contain. Our contact agreed that the World
Bank could usefully enter into a dialogue to educate the GOI
regarding the purpose and scope of an energy strategy and to
tease out GOI energy priorities, but the relevant World Bank
officials would not travel from Washington absent a sign of
GOI commitment.


5. (C) In a perhaps related development, the WB official said
Minister of Energy Karim Wahid al-Hasan had written a letter
requesting World Bank assistance in three areas -- a national
energy strategy, a renewable energy program (specifically
wind and solar),and attracting Individual Power Project
(IPP) investment. (Note: While the WB official was probably
relaying the language used in the letter, it is unclear
whether Karim was actually referring to a national energy
strategy or a development program specific to the Ministry of
Electricity.) The Ministry of Electricity had already hired
a consultant to develop an IPP contractual structure, which
the WB official thought might be IPA. (IPA is a consulting
company with offices in Edinburgh, London, Abu Dhabi,

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Melbourne, and Shanghai that specializes in energy, water,
and infrastructure management areas.)

World Bank Country Program
--------------


6. (C) The WB official welcomed the most recent signs that
the GOI was becoming committed to developing a national
energy strategy and commented that, if the GOI were serious,
the timing would be fortuitous. The World Bank was in the
process of developing its interim strategy for Iraq. The
strategy would focus on public finance management and broader
governance issues, plus one or two key sectors. The possible
sectors included energy, water, education, and health. The
WB official noted that, from September until the end of the
year, he would assist incoming World Bank country director
Jean-Michel Happi to settle in and would himself be based in
Beirut. As the WB official transitioned from this role, he
hoped to devote himself increasingly to Iraq and to regional
energy sector development (in Syria and Iran, as well as
Iraq). He promised to seek an early meeting, probably in the
first week of September, between Happi and Ghadban to stress
the importance of genuine Iraqi commitment to a national
energy strategy that would be evidenced at a minimum with a
letter requesting World Bank assistance, which should then be
followed up with face-to-face meetings between the
appropriate GOI and World Bank officials.


7. (U) Note: In February 2008, WB Director for the Middle
East Department Hedi Larbi discussed the Iraq Interim
Strategy Note with Minister of Construction and Housing
Bayan. Larbi stated that the new note would be formulated in
September 2008 and completed before the end of the year. He
added that it would be created with consultation and
direction of the GOI. Larbi assured Bayan that the WB would
not include anything the GOI did not specifically request.
End note.


8. (C) In addition to our read-out, the WB official noted
that another sign that the GOI might want World Bank
involvement in the energy sector had been Deputy Prime
Minister Barham Salih's recent letter to World Bank Group
President Robert Zoellick requesting World Bank involvement
in construction of the Iraq-Jordan gas pipeline. While the
letter was vague regarding the nature of World Bank
involvement, the offer pointed to another issue about which
Iraqi Government officials needed to be aware, i.e., an
advisory relationship would be facilitated if the World Bank
had a financial relationship with the GOI in its energy
sector. Although direct loan activity would not be
appropriate with Iraq's abundant oil revenues, the World
Bank's financial instruments could leverage the GOI's own
capital development or facilitate private sector engagement.
World Bank financial engagement could take the form, inter
alia, of co-financing to reassure service providers of
payment or political risk insurance provided through World
Bank affiliate, MIGA.

Extractive Industries Transparency Initiative
--------------


9. (C) The WB official also asked the U.S. to encourage the
GoI to take the next steps to join the Extractive Industries
Transparency Initiative (EITI). (Note: Per its website, EITI
is a coalition of government, companies, civil society
groups, investors, and international organizations. It
supports improved governance in resource-rich countries
through the verification and full publication of company
payments and government revenues from oil, gas and mining.)
The WB official said Iraq had formally committed to EITI and
the World Bank hoped the GOI would take the steps necessary
to become an EITI "candidate country" by the February 2009
international EITI conference in Doha. The GoI would need to
appoint a senior GOI interlocutor and develop a work plan.
The WB official would request that the GOI convene a meeting
of the Deputy Prime Minister and Ministers of Oil and Finance
to appoint the interlocutor.

Other World Bank Activity
--------------


10. (C) In an August 18 meeting, Happi told us (ref B) the WB
is planning to add four staff -- two project managers (one of
whom will be a public finance management expert) in the
offices in the IZ and two local or regional hires to work
with a low profile in the red zone (please strictly protect).
Happi said the plan for the latter two is not 100 percent
final, but it is his operating assumption. In addition the
Bank will be bringing in experts both from the Amman WB
office and private consultants from time to time. He
mentioned that standard practice is for two assessment

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missions to be carried out per year for each program. In
response to a question, Happi said the WB's new Iraq strategy
will be shared with the Embassy in draft before being
finalized. He also said he plans to convene a donor meeting
in September of all Baghdad-resident donors, and intends for
this to launch a series of coordination meetings through the
end of the year. Happi concluded that the Bank is trying to
figure out how best to engage in Iraq as a) IRFFI Funds
dwindle; b) Iraq no longer qualifies for IDA funding; and c)
the GOI does not want lending on normal IBRD terms. The new
strategy will explore this issue.
BUTENIS