MINISTRY OF OIL REMOVES SOUTH OIL COMPANY DIRECTOR GENERAL

C O N F I D E N T I A L SECTION 01 OF 02 BASRAH 000055

SIPDIS

E.O. 12958: DECL: 6/4/2018
TAGS: EPET ENRG ECON KCRM IZ
SUBJECT: MINISTRY OF OIL REMOVES SOUTH OIL COMPANY DIRECTOR GENERAL

BASRAH 00000055 001.2 OF 002


CLASSIFIED BY: Howell Howard, Regional Coordinator, Regional
Embassy Office - Basrah, Department of State.
REASON: 1.4 (d)


1. (C) Summary: On May 23, the Ministry of Oil (MoO) announced
it had removed South Oil Company (SOC) Director General Jabbar
Al-Lu'aybi. Kefah Kaml, Jabbar's Deputy, has been appointed to
serve as SOC's interim DG. Although Minister of Oil Husayn
Al-Shahristani issued the order in mid-May, Jabbar was still
working at SOC headquarters as of May 29. Industry contacts
defined the personnel shuffle at SOC as "fluid" and believe that
there is a possibility that Jabbar will be reinstated, adding
that he is widely supported by SOC employees, tribal leaders,
and foreign oil companies. The MoO cited several reasons for
Jabbar's dismissal. In addition to allegations of corruption
and suspicion that Jabbar has been complicit with rampant oil
smuggling operations, Shahristani believes that Jabbar has
undermined MoO authority in his internal management decisions
and his negotiations with foreign oil companies. Many believe,
however, that Jabbar's dismissal is politically motivated. PM
Maliki has used the success of the Charge of Knights (COK)
operation to make sweeping personnel changes in the south.
While many of the changes were necessary, some Baswaris believe
that the GOI is being opportunistic. If there was ever a time
for Maliki to clean house to improve central government control
over state-owned enterprises and advance his political agenda
ahead of provincial elections, now would be that time. END
SUMMARY.


2. (SBU) On May 23, the Ministry of Oil (MoO) announced it had
removed South Oil Company (SOC) Direct General Jabbar
Al-Lu'aybi. A temporary council of the Basrah governate
originally appointed Jabbar as DG in April 2003. Although there
was no legal nomination process and the posting was meant to be
temporary, Jabbar has been the principal driving force behind
SOC efforts to improve infrastructure and develop relationships
with foreign investors. Jabbar is widely known as a very adept
negotiator who has successfully managed relationships that cross
political affiliations. He is revered for being able to get
things done, particularly as it relates to the oil and gas
industry. According to SOC contacts, he has undoubtedly
provided a great deal of stability within South Oil Company.


3. (C) The stability Jabbar has provided has come at a price.
According to SOC sources, Jabbar is known throughout the
province as the "godfather" and he has allegedly made a number
of concessions that, if true, would support the MoO's claims
that he is corrupt. A senior-level manager at South Refinery
told the REO that the MoO believes Jabbar has been complicit
with oil smuggling operations involving fellow Fadhila members,
which include the misuse of USG-funded meters. According to the
contact, Jabbar has also been accused of employing hundreds of
unqualified workers to alleviate tensions between rival
political parties and assisting in the appropriation of funds
for fraudulent or nonexistent SOC projects.


4. (C) Although Minister of Oil Husayn Al-Shahristani issued the
dismissal order in mid-May, Jabbar was still working at SOC
headquarters as of June 1. The MoO clearly wants to portray
Jabbar's removal from his post as a reassignment. In fact, it
is being advertised publicly as a promotion. It is clear,
however, that even if the GOI appoints Jabbar as Iraq's
advisor/representative to OPEC (pursuant to industry rumors),
neither Jabbar nor his allies will view his removal from SOC as
a promotion. Despite public reports of a strained relationship
between Jabbar and Shahristani, SOC and other industry sources
contend that the two had a very productive and cooperative
private relationship. However, that relationship has soured
over the past few months. According to a source working for a
major oil company in the region, Shahristani believes Jabbar
consistently undermined MoO authority in his internal management
decisions and, more importantly, his negotiations with foreign
oil companies. While Jabbar has been accused of overstepping
his authority, both PM Maliki and Shahristani understand
Jabbar's value to the development of Iraq's oil infrastructure
and the importance of keeping him engaged in negotiations with
foreign oil companies (thus the "promotion").


5. (C) Jabbar has expressed some reservations regarding the
hydrocarbon law. In fact, officials within the MoO believe
Jabbar has been an obstacle to getting hydrocarbon legislation
moved forward. However, oil industry sources contend that
Jabbar is not opposed to production sharing agreements with
foreign oil companies, but rather he wants SOC to be run as a
regional enterprise without central government control.
Throughout his tenure, Jabbar has expressed interest in bringing
foreign companies into Iraq to help SOC develop its
infrastructure and promote a more efficient production stream.
Despite some of the issues regarding corruption, illegal
payments to rival political parties, and employment
opportunities for unqualified workers, Jabbar is seen by the
major international oil companies to be pragmatic and

BASRAH 00000055 002.2 OF 002


predictable, which are two extremely important qualities in an
otherwise uncertain operating environment.


6. (C) Many believe Jabbar's reassignment was politically
motivated. Both he and Governor Mohammed Waeli are Fadhila
members, and both have been accused of oil smuggling. They are
not the only officials who have been marginalized since PM
Maliki began his Charge of Knights Operation (COK) in
late-March. Maliki has removed top officials within the
military, managers at the Port of Umm Qasr, and other
high-profile leaders in the province. Since Maliki began making
these sweeping changes in personnel, security in Basrah has
improved and revenues at Umm Qasr have increased by more than
100 percent. The success of COK has provided the central
government with a considerable amount of leverage and, until
now, Maliki has been given carte blanche in decisions to replace
key officials. Although most of the changes have appeared to be
in the best interest of the province, there is no doubt that the
GOI is also being opportunistic. If there was ever a time for
Maliki to make changes to advance his political agenda ahead of
provincial elections, now would be that time. However, while
most of those removed from their positions over the past month
have gone unchallenged, Jabbar's reassignment is being disputed
by some Provincial Council members, tribal leaders, and SOC
employees who have threatened to strike.


7. (C) An Olive Group contact who speaks to Jabbar on a daily
basis believes that there are two probable outcomes. He said
that Jabbar will either be an advisor for the MoO and serve as
the focal point for the projects and contracts for the major oil
companies; or he will be reinstated as the DG for a short time
period during which he would prepare his supporters to accept
the idea of him stepping aside from SOC. In the meantime,
Jabbar's deputy, Kefah Kaml, has moved into the DG slot. Kefah
is regarded as an experienced and well-respected technical
manager who has served as Jabbar's trusted right hand. Kefah
does not have the same level of "loyalties" and relationships
outside SOC. He is viewed by the central government to be a
safe choice to serve as interim DG. However, it is unlikely that
the MoO will choose him as its permanent SOC DG because of his
strong ties to Jabbar.
HOWARD