IRAQ/IRAN: KARBALA EAGER FOR PILGRIMS WITH DEEP POCKETS

C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 002426

SIPDIS

DEPARTMENT FOR NEA/IR AND NEA/I.

E.O. 12958: DECL: 09/02/2019
TAGS: PGOV PREL PECON IR IZ
SUBJECT: IRAQ/IRAN: KARBALA EAGER FOR PILGRIMS WITH DEEP
POCKETS

REF: A. BAGHDAD 2287

B. BAGHDAD 1876

C. BAGHDAD 1100

Classified By: Political Counselor Yuri Kim for Reasons 1.4 (b) and (d)


1. (C) SUMMARY AND COMMENT: According to the governor of
Karbala and the brother of the imam of the al-Abbas shrine,
Iran continues to exert a dominating influence, notably in
business dealings in Karbala province. Both interlocutors
lamented Iraq's inability to negotiate with the Iranians for
more favorable terms for Iraqi businesses in the lucrative
religious tourism sector, water rights, and other key areas.
With security improving over the past year, Karbala is
experiencing a resurgence of economic activity, including
visible construction in the city. However, the city's
potential for luring and benefiting from religious tourism
and increased foreign investment remains to be realized given
a slow government bureaucracy, inadequate incentives for
investors, and lingering concerns about long-term security.
Determined to project its "soft power" in Iraq, Iran is
likely to continue to play a dominant role in Karbala and
other predominantly Shia cities, especially those with
religious cachet. END SUMMARY AND COMMENT.

Show Me the Money
--------------


2. (C) During an August 31 meeting with PRT and visiting
Emboffs (Iran Watcher and Econoff),Karbala's Dawa party
governor, Amal al-Din al-Hir, discussed Iran's role in the
province's lucrative religious tourism industry. Governor
Amal al-Din, himself a long-time former resident of Iran,
complained about Iran's abusive and heavy-handed approach to
securing unrealistically low prices for visiting Iranian
pilgrims at the expense of local Iraqi businessmen.


3. (C) With four hundred hotels (two/three-star equivalent),
each Iranian pilgrim pays 20 USD daily for meals and lodging,
an exorbitantly low fee that leaves Iraqi hoteliers with just
5 USD in profit per pilgrim, Amal al-Din noted. Such
heavy-handed tactics have prompted provincial officials in
Karbala to consider a boycott of Iranian pilgrims, Amal
al-Din said. The boycott proposal is pending the approval of
the city's hotel owners' association. The governor pointed
out that Iranian officials complain about the lack of
adequate services and amenities, but are unwilling to pay the
price for improved services, leaving Iraqi businesses in a
quandary. (NOTE: A boycott of Iranian pilgrims is unrealistic
and unlikely given the political and economic ramifications.
Ironically, Iranian officials are threatening to reduce the
number of Iranian pilgrims, citing the lack of adequate
services and amenities in Iraq. See ref A for more details.
END NOTE.)


4. (C) While Karbala receives an average of 15,000 Iranian
pilgrims monthly, the governor complained that with few
tourism sites other than the city's two holy shrines, most
pilgrims stay only 3-4 days. Efforts by a UAE-owned company
to construct a multi-billion dollar "New Karbala" development
project on the outskirts of the city have stalled, pending
GOI approval of the project. "The Iranians (government)
spend most of their money on maintaining the shrines and very
little on other things," Amal al-Din lamented.


5. (C) With control of all Iranian pilgrim travel in the
hands (and pockets) of one Iranian-based company (see ref B),
local Iraqi businesses have yet to reap the benefits of the
lucrative religious tourism industry. That said, the
governor was lukewarm on the idea of breaking the monopoly by
allowing competition among various local travel agencies, as
Qallowing competition among various local travel agencies, as
is done in Turkey and other countries in the region.

Picking the Right People
--------------


6. (C) PRT and Emboffs met separately with Kadhum Nour
Al-Safi, a soft-spoken local engineer and brother of Shaykh
Ahmad Nour Al-Safi (see ref C),imam of the al-Abbas shrine
and one of Grand Ayatollah Sistani's two representatives in
Karbala (the second is Shaykh Karbala'i, imam of the
al-Husayn shrine). Unlike his more prominent sibling, Kadhum
is a mechanical engineer specializing in water issues who
periodically agrees to meet with USG officials. (NOTE:
Sistani and his representatives refuse to meet with USG
officials for religious and political reasons. END NOTE.)


7. (C) Kadhum echoed the governor's concerns about a
domineering Iran, stating that the GOI has been ineffective

BAGHDAD 00002426 002 OF 002


in protecting its own interests against Iran, citing water
rights and usage as one main example. "We never appoint the
right person with the right qualifications for negotiations
with Iran," he asserted. This shortcoming is a glaring
weakness that is easily exploited by Iran and Iraq's other
aggressive neighbors, Kadhum said. He encouraged greater GOI
effort to address Iraq's water problems with neighboring
states who refuse to compromise. "It's time for less talk
and more action," Kadhum asserted.


Lucrative Market for Iranian Companies
--------------


8. (C) Karbala is seen by Iranian companies as a
potentially lucrative market for products and services
outside of the tourism sector. Representatives of the Iran
and Iraq Chamber of Commerce, Industries and Mines
(www.ir-iqcc.com) recently paid a call on the Karbala Chamber
of Commerce (CoC) to discuss trade and investment
opportunities. The President of the CoC Nabeel Salman
Al-Anbaree (please protect) told Karbala PRT Business Advisor
that nine Iranian businessmen paid a call on him to discuss
areas of potential cooperation between the Karbala CoC and
the Iran-Iraq CoC. They proposed leasing a building down the
street from the Karbala CoC building for ten years to house
about 50 Iranian companies interested in doing business in
Karbala. The group said a number of Iranian businesses are
looking for Iraqi dealers for their products and raised the
possibility of holding a trade show in the near future.
Finally, the group expressed an interest in working with the
Provincial Investment Commission (PIC) to invest in a five
star hotel and a housing complex.


9. (SBU) The group provided copies of &Trade Book of
Karbala,8 published in Iran by Trade Karbala
(www.tradekarbala.com),in conjunction with the Iran-Iraq
CoC. The book, in English and Arabic, includes a listing of
287 Iranian companies offering a variety of products and
services across all sectors. The book provides a list of
large projects recently executed by Iranian companies
throughout the Middle East as well as a few pages of trade
statistics, which while slightly dated, generally track with
what we have seen in other open-source reporting.


10. (SBU) The representatives of the Iran-Iraq CoC that paid
a call on the Karbala CoC included the following persons:
--Dr. Hassan Tizmaghz, Head of Iraq-Iraq CoC
--Sayed Ahmad Khadem Al-Sharieh, Executive Member and
Secretary General, Chairman of Trade and Tourism Commission,
Iran-Iraq CoC
--Najem Beit Chanaan, Chief of the Khorramshahr Chamber of
Commerce, Vice-President of Iran-Iraq CoC
--Ali Asghar Farschi, Director General for Europe, America,
Africa and Arabian Countries, Iran-Iraq CoC
--Abdolreza Mizban, Board Member, Member of Trade and Tourism
Commission, Iraq-Iraq CoC
--Seyed Morttada Shahrestani, Board Member, Member of
Insurance and Investment Commission, Iran-Iraq CoC





FORD