Iraq Likely to Gain EITI Candidacy

UNCLAS SECTION 01 OF 02 BAGHDAD 000082 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: EPET PGOV KCOR EFIN ECON IZ NO SUBJECT: Iraq Likely to Gain EITI Candidacy REF: (A) Baghdad 3135, (B) Baghdad 2214, (C) Baghdad 1134 BAGHDAD 00000082 001.2 OF 002 ¶1. (SBU) SUMMARY. Iraq's political leaders renewed their support for improved transparency of oil export revenues and the country is now poised for candidacy status in the Extractive Industries Transparency Initiative (EITI). During a conference January 10-11, the Ministry of Oil Inspector General (who is leading the Iraqi EITI) got agreement on a workplan and organizational structure for managing the EITI process among government and civil society stakeholders. Iraq's candidacy will now go to the EITI Board of Directors for a vote in February, with Iraq likely to become the 35th and EITI's largest oil producing candidate. End Summary. ¶2. (SBU) Prime Minister al-Maliki (committed the GOI to oil revenue transparency, paving the way for Iraq's formal admission into the EITI, as part of a major conference convened in Baghdad by the Ministry of Oil (MOO) on January 10-11. Other key leaders including Deputy Council of Representatives Speaker Khalid al-Attiya, and Oil Minister Shahristani, and Ministry of Industry and Minerals Fawzi Hariri, also attended the conference and pledged support. Civil Society Focus -------------- ¶3. (SBU) MOO Inspector General Ala' Mohie al-Din, supported by EITI International Secretariat Director Jonas Moberg and officials from Revenue Watch Institute and the World Bank (both organizations play a supporting role in the process),convened a working session with approximately 20 civil society organizations (CSO's) on January ¶11. These CSO's elected four representatives from among their ranks to serve on the EITI stakeholder council (SC). The GOI also secured the group's buy-in to a proposed workplan and organizational structure. This CSO election and the workplan agreement complete Iraq's four-step process to submit an EITI candidacy bid, a process the GOI formally launched in February 2008. (Reftels provide additional background). The CSO monitoring and related public awareness efforts - together with oil export audits - constitute the main elements of EITI transparency. Explaining the concept for Iraq, Revenue Watch director in New York, Karen Lissakers, noted on January 11 that "the EITI standard of government partnership with citizens in revenue management will be a powerful tool in Iraq's struggle for political stability. This . . . is a commitment to government collaboration with an independent civil society, which in turn builds public trust in government." ¶4. (SBU) The four CSO representatives who will now serve on the EITI stakeholder council are: Laith Hassan Shamsa, Economic and Business Forum (Najaf); Ahmad Abdul Razaq Al-Khafaji, Pro-Integrity Organization (Babil); Dr. Bushra Karim Al-Janabi, Sofouh Organization for Women and Child Development, (Erbil); and Salah Hanun Alawi, Iraqi Bar Association (Baghdad). Most of the 20 organizations that participated in the January 11 launch had been working with the GOI during previous discussions of the workplan; however, it was clear from their own deliberations (which ACCO was allowed to observe, after GOI and EITI officials had withdrawn) that they had not yet developed deep familiarity with either EITI or one another. Included among the organizations was at least one labor union from Basra, which voiced concerns about workers' rights and the need for labor to be present in the EITI process. (Comment: the CSO's and the individuals who were nominated are unknown to the Embassy. They are also unknown to the IG of the Oil Ministry Inspector General. End comment.) Q ¶5. (SBU) According to three of the CSO representatives we spoke to, the stakeholder selection process was not open to tribal sheikhs, religious figures or media, as these are registered separately from CSO's (or NGO's). This was confirmed by MOO staff who helped organize the event. Comment: EITI Iraq staff indicated that CSO's had been invited through media announcements, but the low turnout indicates either some limitations on outreach or, as one CSO participant and ACCO contact told us, "a lack of interest in initiatives that don't come with immediate financing." There was no CSO representation from Anbar or other largely Sunni provinces. In previous engagements with the Embassy, the GOI had committed to including KRG civil society and made an effort to invite one CSO from Erbil, but no Kurdish media were invited, and no senior Kurdish leaders were there to offer "buy-in" on the first day of the conference. That said, MOO IG Mohie al-Din promoted the KRG representative by urging NGO participants to consider including a purely humanitarian group, along with those who could offer technical and professional expertise for the SC. When it was announced that two of the elected CSO reps were actually serving members of the GOI, and thus disqualified from the EITI NGO group, the CSO participants then voted in the KRG CSO representative. Those who attended the event acknowledged that they expected some pushback when other civil society groups came to realize the importance of the EITI role in good governance. ¶6. (SBU) Revenue Watch indicated it had raised some concerns with the GOI, but ultimately noted it was "their" process and that external players could only have so much influence. Revenue Watch BAGHDAD 00000082 002.2 OF 002 also told ACCO staff that the problems with NGO legislation in Ethiopia had derailed the EITI process there, as it was judged the NGO's could not be sufficiently independent of the government. (Comment: Those concerns bear watching as the process unfolds in Iraq, where there is few independent sources of income for civil society or media. MOO IG told us he was not concerned that "interested parties" would try to intervene with the CSO participants; this will be the key to judging EITI progress here. End Comment.) EITI Purview -------------- ¶7. (SBU) EITI, working with Revenue Watch, told conference participants it will recommend that the GOI seek external audits of both proceeds of oil export sales to the government and government declared receipts for the same transactions. These audits would be compared, and the reports made public. This cross-check and public dissemination would provide transparency in export sales income (over 80% of the GOI' revenue in 2009). Indeed, Iraq's EITI launch prompted Revenue Watch to declare on January 11 that "by joining the voluntary global initiative it has established itself as the Middle East's most important champion of the principles of transparency and accountability in the management of oil and gas resources." ¶8. (SBU) Nonetheless, Iraqi media and civil society representatives posed several questions about the process, showing some degree of skepticism and voicing concerns about the GOI controlling corruption and managing Iraq's oil wealth more efficiently. One journalist and three CSO representatives pressed the MOO IG on better management of contracts, better management of oil assets (i.e., oilfield management) smuggling, and monitoring of oil products used domestically. Mohie al-Din indicated that these issues fell under his jurisdiction to monitor and audit as the Inspector General, and that they were not part of the EITI mandate, which would cover only oil export revenues. Next Steps -------------- ¶9. (SBU) Updating us on the SC membership (see also ref A) Mohie al-Din indicated the business representatives that have been "pre-selected" are Exxon-Mobil and another company whose name the IG did not provide but which markets Iraqi oil mainly in Asia, Statoil (oilfield developers),and the Northern Oil Company (representing Iraqi National Oil Companies). These members of the Stakeholder Council will be formalized now, and Iraq will submit its candidacy request to Oslo. The EITI board will then meet in February to vote on Iraq's candidacy. EITI International Secretariat Director Moberg told us that the Board is likely to agree on the candidacy, while Revenue Watch indicated there were lingering concerns about legislation stalled in the Council of Representatives to formalize the operations of Non-Governmental Organizations. Mohie al-Din indicated the CSO groups would next meet with the other members of the SC in April, presumably after the candidacy status is formally approved and announced. ¶10. (SBU) MOO IG told us that he would contact us to request financial and other support. The World Bank is also working with the MOO on EITI. Diplomatic and Commercial Buy-In -------------- ¶11. (SBU) World Bank Mideast Director told Embassy's Assistant Chief of Mission for Assistance Transition on the margins of his visit for the conference that he was very pleased with the EITI conference. According to EITI's Moberg, Norway will soon open a full-fledged embassy in Baghdad and will provide strong support to (Oslo-based) EITI, as will other Scandinavian countries and the UK. Q(Oslo-based) EITI, as will other Scandinavian countries and the UK. (NOTE: ACCO will coordinate with UK and Scandinavian reps in Baghdad on support for the Iraqi efforts. END NOTE.) Revenue Watch noted that it had been in touch with companies who are working in oilfield development, telling us that all were "fully on board with the reporting requirements" that will be incumbent on them as part of EITI.