Identifier
Created
Classification
Origin
08BAGHDAD3564
2008-11-11 14:45:00
CONFIDENTIAL
Embassy Baghdad
Cable title:  

IRAQ-KOREA ECONOMIC RELATIONS -- SECURITY STILL A

Tags:  PREL ETRD EINV ENRG EPET EAID KS IZ 
pdf how-to read a cable
VZCZCXRO8483
RR RUEHBC RUEHDE RUEHIHL RUEHKUK
DE RUEHGB #3564/01 3161445
ZNY CCCCC ZZH
R 111445Z NOV 08
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 0316
INFO RUCNRAQ/IRAQ COLLECTIVE
RHEBAAA/USDOE WASHDC
C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 003564 

SIPDIS

DOE FOR PERSON

E.O. 12958: DECL: 11/11/2018
TAGS: PREL ETRD EINV ENRG EPET EAID KS IZ
SUBJECT: IRAQ-KOREA ECONOMIC RELATIONS -- SECURITY STILL A
CONCERN

BAGHDAD 00003564 001.2 OF 002


Classified By: Economic Counselor Michael Dodman, reasons 1.4(b,d)

C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 003564

SIPDIS

DOE FOR PERSON

E.O. 12958: DECL: 11/11/2018
TAGS: PREL ETRD EINV ENRG EPET EAID KS IZ
SUBJECT: IRAQ-KOREA ECONOMIC RELATIONS -- SECURITY STILL A
CONCERN

BAGHDAD 00003564 001.2 OF 002


Classified By: Economic Counselor Michael Dodman, reasons 1.4(b,d)


1. (SBU) SUMMARY: Korean Embassy Counselor Kwang Yong Chung
said, during an October meeting with EconOffs, that virtually
the only Korean business activity in Iraq is in the KRG, with
the Korean National Oil Company holding interests in eight
exploration and production blocks. One problem hampering
investment in other areas of Iraq is the stringent security
and documentation requirement imposed on Koreans wishing to
travel to the country. Surprisingly, Korea's largest export
to Iraq is cigarettes, followed by used cars. Korean
development assistance focuses on public health. The Korean
Embassy is struggling to cope with the loss of its Korean
Marine security contingent, which will depart with other
Korean military deployed in Iraq as part of Coalition forces.
END SUMMARY

The Hyundai Deal
--------------


2. (SBU) We made an appointment at the Korean Embassy after
news accounts reporting that Electricity Minister Karim had
announced that the Ministry of Electricity (ME) had signed
deals with GE, Siemens, and a third company worth $7-$8
billion. According to the reports, Karim said, "These deals
will help us to end the electricity supply problem by 2012."
We later learned the third company was Hyundai, which had
contracted to provided twelve 30-megawatt turbines burning
heavy fuel oil, which, according to the letter of credit,
would have a total value of $385 million. In the event,
Chung had no further background on the particular deal, only
that Hyundai was simply providing equipment, and not building
turn-key power stations.

KRG Activity
--------------


3. (U) Chung said the Korean National Oil Company (KNOC) had
opened an office in Erbil on September 1 and a second office
in Sulaymaniya on September 27. He provided details of
KNOC's agreements with the KRG, which have also appeared in

media reporting. According to Chung and the media, KNOC will
form a consortium of South Korean companies to conduct
exploration and production of eight blocks -- five located
near Erbil and three others near Sulaymaniya. The blocks
have total estimated oil reserves of 7.2 billion barrels, of
which the Korean firms will have rights to 1.9 billion
barrels. Under its contract, KNOC will acquire an 80% stake
in Qush Tappa, a 60% stake in Sangaw South, a 20% stake in
Bazian, 20% in Sangaw North and 15% stakes each in K15, K16,
K17, and K21 blocks in Hawler.


4. (U) Chung confirmed that KNOC, to land the deal, had
entered into an unusual arrangement, the "Oil for
Development" project, to provide $2.1 billion of
infrastructure construction in KRG -- roads, bridges, sewage,
water supply, etc. The project manager would be the SK
Construction Company subsidiary of leading Korean
conglomerate (chaebol),SK Group. Construction would begin
in a few months (i.e., probably at the beginning of 2009).
Chung added that SK Energy had not qualified for the Ministry
of Oil licensing round, but was hopeful that it would be
included in an additional group of companies qualified to bid
in a future licensing round. Since the first qualification,
SK Energy had pulled out of an earlier petroleum deal with
KRG and was a major sponsor of an MoO-backed "Oil and Gas
Expo" to be held in Baghdad December 5-7. (Note: SK Energy
began in 1962 as South Korea's first oil refiner. The
company is now a leading energy and petrochemical company and
Korea's largest and Asia's fourth largest refiner.)

Surprising Trade Patterns
--------------


5. (U) Chung sheepishly said South Korea's largest category
of export to Iraq was tobacco, supplanting the usual U.S.
tobacco dominance in other markets. He said Korean
cigarettes were quite inexpensive, so that Korean diplomats,
who had access to American cigarettes at the military Post
Exchange, preferred to buy Korean cigarettes locally. Chung
speculated that Iraqis were reluctant to be seen smoking
American cigarettes. Korean used cars were in second place,
although a new regulation banning importation of cars older
than two years (which took effect two years ago) had reduced
used car imports. Chung said Korean car companies had no
plans to manufacture automobiles in Iraq or to open new car
dealerships.

Low Levels of Business Interest

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--------------


6. (U) Chung said a strict Korean "passport law" restricted
Korean business activity, particularly in the areas of Iraq
outside KRG (which he referred to as "central and southern
Iraq"). The ROKG (South Korean government) had passed the
law after a South Korean contractor working in Iraq had been
killed. The law, which set prison sentences for violators,
imposed onerous documentary requirements on travelers. In
order to receive permission to travel to Iraq, Koreans had to
provide a business plan, proof of life insurance to a value
of at least $200,000, and a security plan. The documentation
was required for each trip. As a result, only large Korean
businesses had the resources to hire security services and
meet the other requirements, although Chung noted that small
and medium-sized Korean construction contractors were very
interested in business possibilities in Iraq. The only
applications under the law thus far had been for travel to
KRG.


7. (SBU) The single exception, Chung noted, was the June
30-July 2 travel of a delegation of mix of Korean government
and business officials to Baghdad that included Hyundai
Construction and a Korean electric company. Chung said a
Director General from the (Note: as Chung related the name)
Ministry of Knowledge Economy had been part of the delegation
and was interested in making a return visit. The original
intent had been to visit in the fall, but Ramadan timing had
complicated scheduling. Chung also referred to the
postponement of the Ministry of Oil-sponsored Oil and Gas
Expo, from October to the first week of December, suggesting
that the visit would be timed to coincide with the Expo.
South Korea had also invited members of Iraq's Investment
Board to visit Seoul, but, although the Investment Board had
expressed interest, no concrete follow-through had occurred.
Other than the security issues, Chung commented, Iraqis held
Hyundai in particularly high regard, remembering Hyundai's
work in the '70s and '80s to build Iraq roads, bridges, and
other infrastructure.

Korean Assistance Programs
--------------


8. (SBU) Chung said South Korean official development
assistance (ODA) had a major element in the public health
area. The ROKG had provided mobile medical units to Najaf
and hoped also to ship them to Karbala. It was also planning
to assist in the modernization of hospitals in Erbil and
Baghdad. The Koreans had found that construction projects
were difficult to execute, so had focused on providing
equipment and training programs. The Korean International
Cooperation Agency (KOICA) had two employees at the Korean
Embassy to administer Korean ODA programs, while another
office at the Embassy, the Korean Investment and Trade Agency
or KOTRA, which promoted trade and commercial ties, had one
employee.

Bio Notes and Atmospherics
--------------


9. (C) Chung speaks excellent English and is a graduate of
the London School of Economics. He mentioned that he also
has management responsibilities and that his time has been
occupied in a search for new embassy premises. The Korean
Embassy's protective contingent of 18 Korean marines would
depart along with South Korea's contingent in northern Iraq,
so Chung was looking for a new office in the International
Zone. An Iraqi Police 55-man contingent of the Diplomatic
Protective Service augments security, but Chung was skeptical
regarding its effectiveness. Other than the marines, the
Korean Embassy has 19 Koreans on its staff. The Korean
Embassy is currently located across the Tigris from the U.S.
Embassy New Embassy Compound, behind the Babylon Hotel in
Jadriya.

CROCKER