Identifier
Created
Classification
Origin
09BASRAH21
2009-04-26 14:08:00
CONFIDENTIAL
REO Basrah
Cable title:  

BASRAH: NEW TWIST IN IRAN-BASED HOUSING PROJECT

Tags:  PGOV PREL ECON EINV IZ IR 
pdf how-to read a cable
VZCZCXRO9203
PP RUEHDE RUEHDH RUEHIHL RUEHKUK
DE RUEHBC #0021/01 1161408
ZNY CCCCC ZZH
P 261408Z APR 09
FM REO BASRAH
TO RUEHGB/AMEMBASSY BAGHDAD PRIORITY 0435
RUEHC/SECSTATE WASHDC PRIORITY 0857
INFO RUCNRAQ/IRAQ COLLECTIVE
RUEHBC/REO BASRAH 0894
C O N F I D E N T I A L SECTION 01 OF 02 BASRAH 000021 

SIPDIS

E.O. 12958: DECL: 4/26/2019
TAGS: PGOV PREL ECON EINV IZ IR
SUBJECT: BASRAH: NEW TWIST IN IRAN-BASED HOUSING PROJECT

REF: A) BASRAH 0019; B) BASRAH 0017; C) BASRAH 0014; D) BAGHDAD 0768

BASRAH 00000021 001.2 OF 002


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

Summary
-----------
C O N F I D E N T I A L SECTION 01 OF 02 BASRAH 000021

SIPDIS

E.O. 12958: DECL: 4/26/2019
TAGS: PGOV PREL ECON EINV IZ IR
SUBJECT: BASRAH: NEW TWIST IN IRAN-BASED HOUSING PROJECT

REF: A) BASRAH 0019; B) BASRAH 0017; C) BASRAH 0014; D) BAGHDAD 0768

BASRAH 00000021 001.2 OF 002


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

Summary
--------------

1. (C) Basrah Investment Commission (BIC) advisor Ihsan
Abdul-Jabar told REO that, contrary to widely held assumptions,
the BIC has not submitted to Baghdad for approval a proposal for
a USD 1 billion Iran-based Karman Company housing and
development project in Basrah. In strictest confidence, Ihsan
told REO officers that he and other BIC officials, and at the
behest of then-Governor Mohammed Wa'eli, have stalled this
project, warding off an aggressive Iranian push for the
project's approval. Karman, suspicious of this delay, recently
re-packaged their investment proposal so that the entire project
could be approved by the BIC alone, without the need for
central-government approval. Ihsan said the BIC will continue
to stall the project, but is unsure how much longer they can
delay. End summary.

Highly publicized Iranian development project
-------------- --------------

2. (C) Basrah Investment Commission (BIC) advisor and frequent
REO contact Ihsan Abdul-Jabar initially called on REO officers
on April 9 to brief on the status of an anticipated USD 400
million "Sports City" project to be built in Az Zubayr, outside
of Basra city. Ihsan also talked about the status of a highly
publicized proposal from Iran-based construction firm Karman to
build a vast housing and development complex in Basrah (refs B
and D). According to BIC and media reports, Karman submitted a
proposal in February 2009 that would represent Iran's largest
investment in Iraq since 2003. The project envisions some 5,000
housing units, a shopping mall, scores of stores, three-star and
four-star hotels, villas, a supermarket, mosques, health
facilities, and electricity generating and water treatment
facilities. (Note: Ihsan said that Karman, and its parent Abb
Hayatt, are owned by former Iranian president Rafsanjani's

brother-in-law. End note.)


3. (C) According to Ihsan and other local contacts, the price
tag has varied from just under USD 1 billion to well over that
amount. The lower price was meant to expedite the approval
process in Basrah and Baghdad, but Ihsan confided that the
project will likely be much more costly and take longer to
complete. (Note: Although the National Investment Law does not
make it very clear, standard practice in Iraq has been that
investment projects up to USD 250 million only require BIC
approval; projects between USD 250 million and USD 1 billion
require approval of the BIC, the National Investment Commission
(NIC) and the Prime Minister (PM); and projects greater than USD
1 billion require approval by the NIC, the PM and Council of
Ministers. End note.) It has been widely reported that the BIC
approved the license for the project, and sent it on to PM
Maliki for his approval.

Dragging their feet on the approval process
-------------- --------------

4. (C) However, Ihsan revealed that the project in fact had
never left the BIC, and was never sent to Baghdad. (Note: Ihsan
requested strictest confidence about this disclosure. End note.)
Ihsan said that his close friend and mentor, outgoing Governor
Wa'eli, encouraged him not to approve or send the proposal to
Baghdad, yet to publicly claim otherwise. Ihsan said that
several other BIC members - but not all - also opposed the
project. "Publicly we say we welcome this project, but in
reality we don't. For them [Iran], this project is not just
about housing, but part of a much larger Iranian national
strategy for control over Iraq." Ihsan claimed that neither BIC
Chairman Haider Ali nor Prime Minister Maliki know about this
BIC maneuver.

Iran repackages the deal
--------------

5. (C) According to Ihsan, an impatient and increasingly
suspicious Karman recently sent its local ally, outgoing Basrah
Provincial Council (PC) Chairman Mohammed Sadorn Siher al-Obadi,
to the BIC to "see what was going on." (Note: According to
local contacts, al-Obadi is a dual citizen of Iraq and Iran,
strongly pro-Iranian and anti-American. End note.) Al-Obadi
told BIC officials that Karman had been in touch with GOI
officials in Baghdad, who told Karman that they had not received
the investment proposal from BIC. According to Ihsan, in an
attempt to speed up the approval process, Karman then submitted
a new proposal, consisting of four separate projects, each
totaling just under USD 250 million, which does not require PM
approval. Ihsan said that Karman and its Iranian allies could
now focus all their lobbying attention on BIC alone.

Project evokes general Basrawi unease with Iran
-------------- --------------

BASRAH 00000021 002.2 OF 002



6. (C) While there is no polling data on the issue of Iranian
influence and investment in Basrah, there is ample anecdotal
evidence that it is controversial, and at times outright
unwelcome (refs B and D). Basrawis, who suffered
disproportionately during the 1980-88 Iran-Iraq War, often
express discomfort with Iranian influence, including legitimate
economic activity. According to BIC officials and several REO
business contacts, Iranian investment interest in Basrah has
increased in the past year, apart from the proposed mega
project. (Note: These same business leaders cite the fact that
there are few other ready investors. End note.) Ihsan said
that for Iran, this project is not just about housing, but part
of a wider Iranian national goal of strategic dominance, with
ulterior political motives, and repeated a commonly heard phrase
here that "a flower offered from Iran never smells good." He
questioned the very economic assumptions of the project, saying
that the numbers "do not add up," and that there must be a
hidden Government of Iran subsidy, especially given all the
planned "extras" - an electrical generator, water purifier,
luxury villas, mosques.

Possible French, Canadian proposals, but not any time soon
-------------- --------------
--------------

7. (C ) Ihsan said that BIC was courting other foreign
investors, specifically a French and a Canadian firm, which
visited Basrah and were shown specific areas of the city where
land was available. In contrast, BIC still had not identified
specific locations for Karman. Ihsan, however, lamented that
these firms were far behind Karman in their level of commitment
to the project.

Running out of excuses
--------------

8. (C) Earlier, Ihsan said that he was to have led a small BIC
delegation to Tehran on April 15, to follow up with Karman on
progress. One week before this appointment, he expressed
reluctance about going, given his view that Iranians were aware
of some BIC officials' desire to thwart the deal, and feared
Iranian strong-arming and even intimidation. He ended up not
going, claiming an illness in the family. Ihsan said BIC would
continue to put "obstacles in the way" of this project, but
worried that "we're running out of excuses." However, with a
new PC now in place (ref A),local political contacts indicate
that the PC could seek substantial changes to BIC's composition.
It is hard to say whether a Maliki-dominated State of Law
coalition would allow such a project or not.

Biographical note
--------------

9. (C ) Ihsan Abdul-Jabar is a biochemical engineer. Before he
took up his position at BIC in 2006, he was an engineer at
Southern Oil Company (SOC). He has also worked as an oil
consultant, as well as an assistant to former Governor Mohammed
Wa'eli on reconstruction and infrastructure issues. While he
was nominated to his position at the BIC by Wa'eli's Fadhila
Party and is close to Wa'eli, he is not politically oriented.
It is unclear whether Ihsan will retain his position in the BIC
when and if the new PC makes changes at the BIC. In any case,
he can return to his position at SOC. Like former Governor
Wa'eli, he has been described as pro-American, at least by the
standards and context of Basrawi society. REO contacts indicate
that he is about 32 years old.

Comment
--------------

10. (C) We cannot verify Ihsan's account, but his more general
views about Iran generally track with those of other local
contacts. Ihsan is also a longtime REO contact, who met us
regarding another topic altogether (the Sports City
development). Only at the end of the meeting was the Iran
development project discussed. Ihsan's Fadhila party's
anti-Iranian outlook must be taken into account, and its
possible the BIC has other motives for stalling the project.
But Ihsan appears at heart a technocrat. We will continue to
follow the fate of the Iranian housing project.
NEGRON