IRAQ'S PARTICIPATION IN THE EXTRACTIVE INDUSTRIES

C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 003135 SIPDIS E.O. 12958: DECL: 12/03/2019 TAGS: EFIN EPET EINV KCOR IZ NO SUBJECT: IRAQ'S PARTICIPATION IN THE EXTRACTIVE INDUSTRIES TRANSPARENCY INITIATIVE REF: A. BAGHDAD 2214 ¶B. BAGHDAD 1134 Classified By: ACCO Anne Bodine, reason 1.4 (b and d) Summary -------------- ¶1. (C) Iraq has constituted its stakeholder group as the third prerequisite for candidacy in the Extractive Industries Transparency Initiative (EITI) and intends to convene these stakeholders to formally adopt a workplan for EITI implementation that has been produced by the GOI under the leadership of the Ministry of Oil (MOO). Assuming that conference produces consensus, that would pave the way for a formal review by EITI to agree on Iraq's candidacy and new monitoring systems that would enhance the transparency of Iraq's oil management. The stakeholder group includes key Ministries, the Central Bank, and representatives of civil society, oil purchasers, Iraqi state oil companies, and multinationals who have recently entered into service contracts with the GOI. End Summary. Iraq Projects Becoming EITI Candidate by May 2010 -------------- -------------- ¶2. (SBU) Anti-Corruption Coordinator and staff met November 25 with Ala' Mohie Din, Inspector General of Iraq's Ministry of Oil, to discuss Iraq's efforts to seek country candidate status for the international Extractive Industries Transparency Initiative (EITI). (NOTE: The framework requires that a government seeking admission as an EITI candidate meet four qualifying conditions: declaring the intent to manage assets transparently; appointing an official to run the EITI process; setting up a stakeholder group of companies, civil society and government representatives to monitor payments from extractive industry companies; and getting stakeholder buy-in for the workplan. End Note.) ¶3. (SBU) Iraq declared its interest in EITI in April 2008, with Minister of Oil Shahristani noting that EITI membership would "promote trust in foreign investment for petroleum projects in Iraq . . . and (would be) an effective step towards eradicating corruption." (NOTE: Once these steps are completed, the country gains "candidacy" status. A further review process follows; countries typically need two years to gain full compliance. So far, Azerbaijan is the only country to have done so. 33 countries are pursuing EITI candidacy; many receive technical assistance from a Multi-Donor Trust Fund (MDTF) funded by twelve donor countries and the European Commission. The U.S. joined the MDTF in 2009. END NOTE.) ¶4. (SBU) Mohie al-Din told us he had been discussing next steps with EITI chairman Peter Eigen and the World Bank, both of whom, he claimed, praised Iraq's efforts to finalize its workplan at meetings earlier this year in Oslo and Beirut. Mohie al-Din said that his ministry had planned a mid-December conference to get stakeholder buy-in. The GOI had hoped that this final step would pave the way for them to gain candidacy status by the end of 2009. Mohie al-Din noted, however, that the GOI was postponing the conference until mid-January to give Ministry of Oil officials time to conduct their second round of bidding. Assuming stakeholders agree to the workplan at the later January conference, EITI candidacy status could be granted in May or June. Until that time, however, Iraq would not be eligible to receive technical assistance from the MDTF for civil society engagements that had been recommended by the IBRD. Mohie al-Din requested ACCO assistance to identify funds for 1-2 Qal-Din requested ACCO assistance to identify funds for 1-2 conferences that could help them engage international NGO's such as Revenue Watch and Publish What You Pay (PWYP) who have been key to EITI processes elsewhere. He was seeking approximately USD 100,000 to engage in outreach and training for civil society to cover the period before MDTF funds could be sought. He projected the cost over the next year for other stakeholder and oversight mechanisms at about USD 3.6 million. ACCO told Mohie al-Din that we would explore possible assistance, but could make no commitments. Civil Society Obstacles -------------- ¶5. (SBU) Mohie al-Din confirmed reports conveyed in October by IBRD country representative that Iraq was having problems identifying appropriate civil society groups to serve as the required stakeholders; the IBRD rep added that oil union employees in Basra in particular were proving difficult. BAGHDAD 00003135 002 OF 002 Mohie al-Din said that the unions are not registered as NGO's but that they would be invited; he stated that they likely will not sit on the board of the stakeholders group. ¶6. (SBU) He said, in fact, that civil society was proving the biggest obstacle to Iraq's accession, as few groups today had grassroots support or technical capability to engage on such a complex issue. The Ministry had convened one workshop with some Iraqi civil society organizations, and another was planned for mid-December, but much more was needed. (See reftel B for a review of NGO shortcomings and their limited role to date in combating corruption in Iraq.) Iraq's Next Exclusive Club - the EITI Stakeholder Body -------------- -------------- ¶7. (SBU) Mohie al-Din said the stakeholder group would include 14 members, one president, one vice president, and 12 members. Ali al-Alaq, the Secretary General of Iraq's Council of Ministers (who also heads Iraq's Joint Anti-Corruption Council) will chair the committee, and Mohie al-Din will be the vice chair. Mohie al-Din will retain day-to-day management of the EITI effort for the GOI, which will be named the Iraqi Extractive Industries Transparency Initiative (IEITI). Of the 12 regular members, there would be four members each representing the government, civil society, and oil companies. The government representatives would include the Ministry of Oil, the Board of Supreme Audit, the Ministry of Finance, and the Central Bank. Mohie al-Din said that the GOI had invited "all" of Iraq's civil society organizations and said they would choose their own representatives. The oil companies would be represented by two of the 26-27 companies currently purchasing Iraqi oil on the open market, plus one representative from among Iraq's three state-owned oil companies, plus one representative from among the international companies with current oil production operations (CNPC or BP). ¶8. (SBU) Previous reporting (reftel B) had Mohie al-Din projecting the inclusion of the Council of Representatives (CoR) as a government stakeholder and possibly representatives from the Kurdistan Regional Government (KRG) and Iraqi Ministry of Minerals and Industry. However, Mohie al-Din said that the Prime Minister did not intend to submit the EITI workplan to parliament, nor would the CoR take part as a stakeholder. He said there was no legal requirement for a CoR role, and the government wanted to avoid any potential for "extreme partisan debate." Instead, the GOI would work in this next immediate phase to build consensus within civil society through the stakeholders group; it would engage with parliament on EITI after elections. ¶9. (SBU) Comment: EITI is a welcome infusion of transparency in Iraq's most important industry; indeed its addition to the roster as the EITI candidate with the largest proven oil reserves thus far has potential to move the goalposts on transparency for the entire region. Given the high stakes involved with any monitoring of oil income, the GOI will need to reach a modus vivendi on EITI implementation with "troublesome" oil unions and guard against "state capture" of the civil society groups who will enroll as stakeholders. A further complication may arise from the apparent exclusion of KRG-based stakeholders (both companies and civil society),as such exclusion could perpetuate the Qand civil society),as such exclusion could perpetuate the divisions on oil management and governance that have been impediments to investment and political reconciliation. End Comment. FORD