TRADE MINISTER DEFENDS GOI EXCLUSION OF CARGILL ON

C O N F I D E N T I A L BAGHDAD 000162

SIPDIS

USTR FOR DAWN SHACKLEFORD, CHRISTIAN DEANGELIS

E.O. 12958: DECL: 01/20/2020
TAGS: EAGR EAID ECON ETRD IZ KCOR PREF WFP
SUBJECT: TRADE MINISTER DEFENDS GOI EXCLUSION OF CARGILL ON

GRAIN, OFFERS WAY FORWARD

REF: A. 2009 BAGHDAD 2621

B. 2009 BAGHDAD 3055

Classified By: Assistant Chief of Mission for Assistance Transition Pat
ricia Haslach for reasons 1.4 (b) and (d).


1. (C) Summary: In a January 19 meeting with Assistant Chief
of Mission for Assistance Transition (ACMAT) Haslach, Acting
Trade Minister Safaa al-Deen al-Safi defended the GOI's case
against U.S. food marketer Cargill, which has asked Post to
intervene in a trade dispute over contractual obligations
related to missing grain shipments. As a result of the
dispute, the GOI has placed Cargill on its no-trade list.
Al-Safi offered some recommendations for resolving the
dispute, including discounted grain prices for future Cargill
sales or remuneration from Cargill based on a negotiated
price. End Summary.

Established Details of the Dispute
--------------


2. (C) In the January 19 meeting with ACMAT, al-Safi said he
had prepared civil and criminal cases against Cargill and
others for violating terms of a 2005-2006 wheat supply
contract. At issue, according to al-Safi, is a dispute over
remuneration to the GOI for Cargill's failure to deliver
wheat valued at $17-$20 million. Under terms of its contract
with the GOI, Cargill was responsible for providing inland
transportation, which it subcontracted to a Syrian shipping
company. Only 80,000 tons of the 180,000 tons were delivered
to Iraqi flour mills, according to al-Safi.

Grain Board's "No-Trade" List
--------------


3. (C) Cargill asserts that the GOI or agents thereof were
complicit in the theft. Cargill says that it has provided
proof, including border-crossing documentation and truck and
silo receipts, that all the grain in the dispute was shipped
to Iraq. Though nearly 100,000 tons of wheat went missing,
Cargill received full payment under the terms of the letter
of credit that accompanied the contract. Since the dispute,
the Trade Ministry's Grain Board of Iraq (GBI) has excluded
Cargill from tendering bids on GBI's wheat and rice
contracts. These contracts feed the GOI's $7 billion Public
Distribution System (PDS) (reftels),a significant market
even for a company as large as Cargill.

Future Dialogue Important
--------------


4. (C) Al-Safi told ACMAT Haslach that he had delayed
pursuing legal action against Cargill based on discussions
with the company. He said, however, that Cargill had not
followed up on commitments made during the October U.S.-Iraq
Business and Investment Conference, the last discussions the
two parties held. As a result, time for court action was
rapidly approaching, al-Safi said. The matter had become
more urgent, according to al-Safi, because an (undisclosed)
statute of limitations under Iraqi law was nearing, and noted
he was considering imposing a two-week deadline on Cargill.
Haslach talked al-Safi back from this implicit threat, and
gained assurances that he would not seek legal action at
least until additional discussions with Cargill had exhausted
all other options.

Alternatives on the Table
--------------


5. (C) Al-Safi said he hoped to avoid court action, and that
he had offered Cargill alternatives, including 1)
remuneration to the GOI based on a to-be-negotiated market
valuation of the missing wheat, or 2) Cargill discounting
future grain sales. (Note: This option, according to
al-Safi, could be complicated by the GBI's competitive
Qal-Safi, could be complicated by the GBI's competitive
bidding structure. End Note) Embassy AgAttache has relayed
this information to Cargill's Washington office.

Comment: Resolution Seems Possible
--------------


5. (C) Comment: Al-Safi's posturing with us probably plays
into the GOI's negotiations with Cargill. He likely has no
interest in uncovering Iraqi complicity for the theft of the
wheat shipments. Instead, his focus is on a cash settlement.
In separate discussions, the Director General of the GBI,
Hassan Ibrahim, has suggested that Cargill send a
representative to Baghdad to negotiate the settlement.
GRAIN, OFFERS WAY FORWARD

Hassan favors resolution with Cargill as well as Cargill's
removal from the GOI's "no-trade" list as a way to introduce
additional pressures on the competitive bidding for the GBI's
contracts. End Comment.
HILL