THE NEW BATTLE FOR BASRAH: CONTROL OF THE PROVINCE'S

C O N F I D E N T I A L SECTION 01 OF 02 BASRAH 000064

SIPDIS

E.O. 12958: DECL: 7/22/2018
TAGS: EINV EPET ENRG ECON KCRM IZ
SUBJECT: THE NEW BATTLE FOR BASRAH: CONTROL OF THE PROVINCE'S
ECONOMIC FUTURE

BASRAH 00000064 001.2 OF 002


CLASSIFIED BY: Ramon Negron, Regional Coordinator, Regional
Embassy Office, Department of State.
REASON: 1.4 (d)


1. (U) SUMMARY: Nearly four months after the Charge of Knights
operation, Governor Muhammed Waeli acknowledged that the central
Qernment has improved security in the province and praised the
Iraqi Security Forces' ongoing efforts to bring steady quality
of life improvements for Basrawis. The relative calm in the
province has allowed local and central government officials to
focus more on economic development and foreign investment. That
shift in focus has given way to a new battle; one between local
officials and the central government for control of Basrah's
economic future. END SUMMARY.


2. (C) Waeli has consistently accused Prime Minister Nuri
al-Maliki of using the success of Charge of Knights to advance
his political and economic agenda. Since early April, Maliki
has removed Director Generals at almost every state-owned
enterprise operating in the province, replacing most of them
with members of the Dawa and Islamic Supreme Council in Iraq
(ISCI) parties. The most contentious personnel change was the
removal of South Oil Company (SOC) DG Jabbar al-Lua'ybi in
late-May. Despite protests over his removal, Waeli said Jabbar
has given up the fight to remain SOC DG and plans to move to
Baghdad to serve as an advisor to the Ministry of Oil. Waeli
said Minister of Oil Hussein al Shahristani has narrowed the
search for Jabbar's permanent replacement to two individuals:
Abd al Sahib Kuti (ISCI) and Diyaa Jaffer (Dawa). Other recent
DG appointments include Amir Abd al Jabar (Dawa) replacing Abd
al-Kareem Jaber al Sa'idi (Independent) as DG for Oil
Transportation, and Ali Hussien Kudayir (Dawa) replacing Abd al
Kareem as DG for South Gas.


3. (C) During a June 22 meeting with Econoff, Waeli expressed
concern that a large percentage of the USD 100 million
allocation for reconstruction and development projects following
the Charge of Knights would be lost to mismanagement and
corruption, adding that Safa al Safi, Minister of State for
Parliamentary Affairs, had already pre-approved his own
contractors. Waeli said the USD 100 million was taken from the
provinces' USD 290 million budget for 2008 with the
understanding that the funds would be replaced. (Note: Finance
Minister Bayan Jabr said in April, when Maliki announced the
special reconstruction allocation, that the USD 100 million
would be made immediately available from the Basrah provincial
budget but that Basrah would be reimbursed with USD 100 million
in supplemental appropriations later in the year. End note.)
However, Waeli is now worried that the funds will not be
replenished, which would prevent the provincial government from
executing its own efforts to address much-needed infrastructure
development and humanitarian assistance for its citizens. Waeli
suspects that the allocation was a tool to give Maliki the
ability to exercise authority over the provincial budget.
Moreover, with an eye on the upcoming provincial elections,
Waeli believes that Maliki and Safi will present successful
development and humanitarian initiatives as their own in an
effort to undermine local officials and gain greater political
control of the south.


4. (C) Following the meeting with Waeli, REO met with Abdul
al-Hafez al-Ati, head of the Basrah Business Center and one of
Safi's principal advisors on project implementation. Abdul had
trouble explaining exactly what the center does. It has no
charter and no clear funding source. When asked how his
organization raises money to operate, Abdul simply said, "we
don't need money, we work for the love of Basrah." Abdul
explained that Safi appointed a "Support and Rebuild Basrah
CommiQe," which is located inside the Basrah Business Center.
According to Abdul, the committee was tasked with making initial
decisions regarding the overall vision for how the USD 100M
would be spent.


5. (C) Abdul said that after the broad vision for the grant was
developed, the committee began working on details for specific
projects. In early-June, 150 projects were approved. However,
according to Abdul, the committee somehow had already identified
prospective contractors (3 for each of the 150 projects) with
full proposals, including costs, before the projects were
approved and announced. When questioned further about the
sequence of events, Abdul admitted the contractors were
pre-selected. Now that Safi has approved the projects, Abdul
said the committee will direct the procurement and
implementation phases.


6. (C) Since mid-June, some Provincial Council members have
claimed that they have been working with Safi and his committee
toward executing the USD 100M grant. However, Abdul said that
while Safi and his committee have consulted the council on a
number of issues, Safi has not included the council in the
decision-making and implementation process. Akil Talib,

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Provincial Council member and close advisor to Waeli, confirmed
that the council has been left out of the process. In a meeting
with the PRT, he said he believes Safi will use the grant to
support his political agenda and provide employment
opportunities for contractors and workers loyal to ISCI.


7. (C) Since nearly one third of Basrah's budget is being
directed by Safa al Safi, and with no assurance that the money
will be replenished as initially announced, the Provincial
Council is struggling to respond to critical water and power
shortages with the money that currently remains. The lack of
clean water, months after Charge of Knights, serves as an
illustrative example of the limited progress made - at least
partly - as a result of this awkward budget situation.


8. (C) The shortage of clean water began in mid-May 2008 when
production at Basrah Petrochemicals, the sole producer of
chlorine gas for Iraq, began to slow due to equipment
deficiencies and the lack of funding. In early June, the
central government reported that it only had three days of
chlorine reserves. As a result, the Central Ministry of
Municipalities in Baghdad began supplying Basrah with chlorine.
However, Basrah Petrochemical's decreased chlorine output,
combined with the central government's modest supplement of
chlorine tablets, fails to meet the 100 tons of chlorine per
month currently needed to chlorinate water for Basrah City and
Al Zubyar. In recent weeks, drought conditions and the lack of
adequaQwaste removal services have further complicated efforts
to provide clean water to the citizens of Basrah. In addition
to health concerns, low water levels in the Tigris and Euphrates
rivers have damaged the region's agricultural production and
have slowed gas liquification operations.


9. (C) During the first quarter of 2008, Basrah enjoyed nearly
twenty-four hours per day of electricity. Since early-May,
Basrawis have reported receiving as little as six hours per day
of electricity. According to an Associated Press article, Iraqi
electricity officials blame Iran in large part for the
electricity shortages, saying Tehran has cut supplies by more
than half since the Charge of Knights operation was launched on
March 25. Waeli did not attribute the electricity problems to a
single source, but he warned that the security situation is
fragile and maintaining calm in the city will depend on the
local government's ability to provide basic services for its
citizens.


10. (C) Fearing the permanent absence of the USD 100 million
from its budget, the Provincial Council is attempting to gain
greater authority over the humanitarian and development
initiatives that exist outside Maliki's grasp. Mohamed Sa'adoun
Al Obadi, Chairman of the Provincial Council, recently sent a
letter to the British-led PRT demanding that the council be
included in the approval process for all coalition-funded
projects in Basrah. Waeli said council members are simply
focusing on their self-interests and do not have the authority
to make such demands. Curious about why the PRT did not raise
the issue directly with him, Waeli said the PRT "chooses to
climb through windows when it can simply walk through the door,"
explaining that he alone has the authority to allow the PRT to
continue implementing projects without confronting potential
obstacles from the Provincial Council. He said the Provincial
Council should play a role in monitoring coalition-funded
initiatives, but should not be involved in approving projects or
selecting contractors. Waeli stressed that the PRT and REO
should bring any future grievances directly to him. (NOTE: The
PRT governance team is aware that having the Provincial Council
involved in the implementation of reconstruction projects is an
anomaly, and they plan to move toward normalizing institutional
roles after provincial council elections later this year. END
NOTE.)


11. (C) COMMENT: We believe it is not only plausible but likely
that the contractors who will ultimately be awarded the projects
have already been pre-determined. It is clear project selection
lacked transparency and was never meant to be inclusive. Safi
has complete control over decision-making and, as a result,
Waeli and other local officials have legitimate concerns that
Maliki and Safi will use the USD 100Qrant to advance their
political agenda. While the grant approval and implementation
process lends itself to corruption, there may be a silver
lining. The Governor and the Provincial Council have
consistently failed in executing the city's budget. As a
result, Maliki and Safi have a real political incentive: if
they deliver they get the credit - at the same time they make
Waeli and the Provincial Council look bad. While many believe
contracts and employment opportunities may be skewed toward
Basrawis loyal to ISCI and Dawa, the end result of the projects
will probably benefit the larger populace. END COMMENT.
HOWARD