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 BAGHDAD 00002927 002 OF 002 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