IRAQI DEPUTY PRIME MINISTER AL-ISSAWI ON ESSENTIAL

C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 002927

SIPDIS

DEPT FOR NEA/I

E.O. 12958: DECL: 09/09/2018
TAGS: ECON EPET ENRG EAID PGOV PREL EAGR TU IZ
SUBJECT: IRAQI DEPUTY PRIME MINISTER AL-ISSAWI ON ESSENTIAL
SERVICES, ASSET TRANSFER

REF: A. A. BAGHDAD 2891

B. B. BAGHDAD 2638

Classified By: Baghdad EMIN Marc M. Wall, Reasons 1.4 b,d.


1. (C) Summary: Iraqi Deputy Prime Minister Rafi Al-Issawi
met with EMIN Ambassador Wall on September 8. A confident
Al-Issawi assured EMIN of his continued focus on the need to
improve the Goverment of Iraq,s (GOI) delivery of essential
services, including energy and water, as well as improving
national and provincial budget execution. He said he is
committed to development of a National Energy Strategy, but
admitted the Oil Minister is not fully behind the effort. He
lamented Iraqi politicians, suspicion of robust interagency
coordination and their desire to avoid taking decisions.
Nonetheless, he was pleased with the recent decision to
finalize a major deal with Shell to capture gas from the
southern oil fields, and progress towards concluding a deal
with GE for turbines. He pledged to continue moving towards
conclusion of an agreement to accept ownership of
USG-constructed assets, noting that the Iraqi leadership
appreciates the need to provide necessary effort to maintain
them. End summary.

Essential Services, Budgets Challenging
--------------


2. (C) EMIN and Econ Counselor met with Iraqi Deputy Prime
Minister Rafi Al-Issawi on September 8. Al-Issawi confirmed
his desire to work closely with the Embassy on essential
services, asset transfer, and energy sector issues.
Al-Issawi noted he has led a series of government meetings
with provincial officials to determine where bottlenecks
exist on the delivery of essential services and whether they
are substantive or bureaucratic. "We have to look at all
layers, from the project-level on up," he noted. "Reliable
electricity and water supply are needed to improve every
sector, from health care to reviving business." EMIN
expressed his strong interest and support for improvements in
these sectors, noting his recent trip to a waste-water
facility under construction in Fallujah. Budget execution
remains a challenge at every level, Al-Issawi noted, and
described a recent meeting with the Deputy Governor of Ninewa
province to explore steps to improve the low level of budget
execution there. Al-Issawi welcomed ongoing U.S. government
assistance in training and capacity building for GOI
officials at all levels. "This is still one of our greatest
needs," he stated.

Coordination Viewed as Interference
--------------


3. (C) Ambassador Wall emphasized that one area where
coordination is needed is the energy sector. Al-Issawi
concurred but said he was dealing with an "Iraqi mentality"
that often perceives coordination as interference or an
attempt to undermine the authority of the relevant Minister
or Director General. He expressed his personal support for
the development of a National Energy Strategy, but admitted
he has had better success working with Minister of
Electricity Karim on this than with Minister of Oil
Shahristani. But the other problem is the deflection of
responsibility. Too often government decision-makers will
postpone a decision rather than say yes or no.

Shell and General Electric
--------------


4. (C) Market Sensitive: According to Al-Issawi, he
encouraged the relevant GOI players to approve the deal with
Shell (ref A),in which it would develop natural gas in a
joint venture with state-owned South Oil Company. (Note:
Under the multi-billion, 25-year agreement, Shell would
develop a comprehensive natural gas production system that
could end wasteful and polluting flare-offs and make Iraq a
self-sufficient exporter of natural gas.) Al-Issawi told us
that Minister Shahristani was at the cabinet meeting on
September 7 that took up the proposed deal (and which
Al-Issawi himself was chairing at the time the Shell deal
came up for debate); Al-Issawi had to force ministers to
overcome the consensus to delay a decision and was able to
force a vote in favor of the deal. Al-Issawi also said he
was a strong supporter of General Electric,s proposal for
turbines in addition to Siemens. (Note: It seems each
company will get a part of the package. GE representatives
told us that, during a September 7 meeting in Amman,
Electricity Minister Karim committed to purchase 6,875 MW
worth of GE turbines to be installed at 10 power generation
sites. GE's proposal, however, had been for 12,500 MW.)
Al-Issawi also noted that the government had approved the oil

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project with the Chinese in Wasit province.

U.S.-Iraq-Turkey Gas and Bilateral Talks
--------------


5. (C) EMIN explained the importance of exploring a gas
export route to Turkey and eventually to supply Europe and
encouraged Al-Issawi to make sure that the GOI sends
senior-level representation to planned U.S.-Iraq-Turkey talks
on this subject planned for next month in Turkey. Al-Issawi
did not directly address the planned trilateral, but did note
that the cabinet had recently authorized the Trade Minister
to negotiate and sign several cross-border agreements with
Turkey on areas such as trade and water, and that Trade
Minister Al-Sudani would soon travel to Ankara to begin talks.

Asset Transfer
--------------


6. (C) On the transfer of USG-constructed physical and
infrastructure assets to the GOI, Al-Issawi said that he had
been designated by the Prime Minister to handle this issue
and was currently drafting a letter to the Prime Minister
(note: in coordination with ITAO). He offered assurances
that the senior Iraqi leadership understood that these assets
would be a "gift" from the U.S. government, and that the GOI
would take full ownership of these assets after the transfer.
"It is clear that the GOI, as owner, will have full
responsibility for maintenance of these assets. We want to
maintain full coordination between the Embassy and relevant
GOI ministries for follow-up after assets are transferred."

Agriculture Sector Needs
--------------


7. (C) In addition to essential services such as water and
electricity, Al-Issawi noted that the agriculture sector
needs urgent attention. In some districts, agriculture is
70-80 percent of economic activity. The GOI is undertaking
studies on revival of the agriculture sector but at present,
as with many other sectors, there is no national GOI strategy
or policy for prioritizing activities or projects. Al-Issawi
said he would discuss the sector further with the Deputy
(Acting) Minister of Agriculture on September 9.

CROCKER