US embassy cable - 04ROME2768

UNCLAS  ROME 002768 
 
SIPDIS 
 
 
SENSITIVE 
 
FROM U.S. MISSION IN ROME 
 
BAGHDAD FOR AMBASSADOR NEGROPONTE AND USAID DIRECTOR 
STATE FOR NEA/IR AMBASSADOR RAPHEL, IO A/S HOLMES, IO/EDA 
USDA/FAS FOR U/S PENN, ETERPSTRA, MCHAMBLISS, RTILSWORTH AND 
LSCHATZ 
USAID FOR ADMINISTRATOR NATSIOS, AA/DCHA WINTER, AA/ANE 
KUNDER, DCHA/OFDA, D/DCHA/FFP LANDIS 
JOINT STAFF FOR JE/J4/J5 
NSC FOR JMELINE 
 
E.O. 12958:  N/A 
TAGS: EAID, EAGR, AORC, IZ, WFP, IRAQI FREEDOM 
SUBJECT: WFP'S VIEW ON THE PRESENT STATUS OF IRAQ'S PUBLIC 
DISTRIBUTION SYSTEM 
 
REF: (A) ROME 00973, (B) ROME 00936 
 
SENSITIVE BUT UNCLASSIFIED - PLEASE PROTECT ACCORDINGLY. 
NOT SUITABLE FOR INTERNET POSTING. 
 
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Summary 
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1. (SBU) US Mission/Rome met with WFP senior officials on 
Iraq food commodity operations on June 27 and July 2. If 
current ration levels are maintained, the Iraq Public 
Distribution System (PDS) is likely to experience shortages 
in a number of commodities throughout the coming months, 
according to WFP's June 25 "PDS Pipeline Projection." There 
will be little or no buffer stock built up within Iraq as of 
July 1. Although the Iraqi Ministry of Trade has engaged in 
procurement of certain food commodities in recent months, 
information currently available indicates that just three 
Letters of Credit have been issued, suggesting that the 
schedules of listed arrival dates may be somewhat 
optimistic. Moreover, the management, structure and systems 
of the Ministry of Trade appear to have been disrupted over 
the course of the past year. In WFP's view, an overhaul of 
management and systems will be required for effective 
control of the PDS to be maintained. End summary. 
 
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Background 
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2. (U) More than a year after the recent war and the end of 
sanctions, Iraqis continue to depend heavily on the public 
food distribution system (PDS). The chronically bad economic 
situation has particularly affected the education and health 
care sectors, placing children, women and the chronically 
sick most at risk. 
 
3. (U) In the immediate aftermath of the war in Iraq in 
2003, WFP was instrumental in preventing the collapse of the 
vital PDS supply chain, transporting 2.1 million metric tons 
of food commodities into the country under what was WFP's 
largest relief operation ever. 
 
4. (U) At the end of 2003, CPA/Ministry of Trade (MoT) 
officially requested WFP to assist with the procurement and 
delivery of food for the PDS to mid-2004 (or until delivery 
of commodities was completed). Activities were defined 
through a tripartite Memorandum of Understanding signed by 
CPA, MoT and WFP in January 2004, and included: (a) 
procurement of commodities for the PDS; (b) renegotiation of 
some contracts already amended under UN SCR 1483; and (c) 
technical support and capacity building for MoT staff. 
 
5. (SBU) Recent events in Iraq indicate a deterioration of 
security conditions which, in turn, has led to an increase 
in humanitarian needs in crisis areas. Food, however, does 
not appear to be an issue. Reports received by WFP from all 
18 Iraqi governorates indicate that PDS food distribution to 
all Iraqis continues despite shortages. 
 
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Status of 2004 WFP commodity purchases to support the PDS 
--------------------------------------------- ------------ 
 
6. (U) WFP concluded on 1 April the international 
procurement of 1.6 million metric tons (mts) of food, as 
follows: wheat, 897,500 mts; rice, 222,500 mts; vegetable 
ghee, 121,500 mts; sugar, 201,700 mts; tea, 24,000 mts; 
milk, 58,600 mts; salt, 19,670; infant formula, 4,800 mts; 
soap, 13,000 mts; and detergent, 56,700 mts. Total, 
1,619,970 metric tons, valued at U.S. $581,524,041. 
 
 
7. (SBU) Over 730,000 mt of commodities have been so far 
delivered to all MoT warehouses in the 18 Iraqi governorates 
(about 420,000 mts in June). The delivery operation is 
expected to be concluded by September 2004. 
 
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WFP's analysis of the PDS pipeline and buffer stocks 
--------------------------------------------- ------- 
 
8. (SBU) The latest Iraq PDS Pipeline projection produced by 
WFP, dated June 25, projects shortfalls in a number of the 
commodities to be distributed to the Iraqi population in the 
monthly food-basket. Of critical importance over the course 
of the next three months are Infant Formula, Weaning 
Cereals, Pulses and Soap. Procurement of national wheat by 
the Ministry of Trade is now ongoing, but projections for 
future months' arrivals have not been confirmed. 
 
9. (SBU) For example, MoT projects a total of 681,000 mts of 
Oil-For-Food commodities to be delivered into Iraq during 
the period June to December. The WFP Pipeline projection 
shows 229,866 mts of Oil-For-Food commodity arrivals for the 
same period, based on documentation received by WFP 
indicating intended or actual dispatch of the commodities 
and information on arrivals and discharge of vessels 
carrying OFF rice and wheat. 
 
10. (SBU) On buffer stocks, by September 1, the MoT 
projection shows a 3-month buffer stock achieved for salt, 
with a 2-month buffer stock achieved for milk, tea, pulses 
and national wheat. WFP, on the contrary, does not believe 
that a 3-month buffer stock will have been created either by 
July 1 or by September 1 for any commodity. 
 
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Logistical constraints affecting the PDS pipeline 
--------------------------------------------- ---- 
 
11. (SBU) In the delivery of WFP cargoes to date, a number 
of operational constraints have been encountered which 
directly impact on the delivery of goods to Iraq: 
 
A. Congestion at border crossings.  A heavy flow of 
military/commercial transport leaving Iraq on the Turkish 
border crossing has severely extended truck turn-around time 
in this corridor. WFP has requested that a dedicated lane or 
procedure be established to expedite the flow of trucks 
designated for food commodities. 
 
B. Security inside Iraq.  The security situation in the 
country, particularly in the South, has resulted in a 
disruption of deliveries to central MoT warehouses. Certain 
areas (e.g. Najaf, Karbala) are effectively "no go" areas, 
where insecurity is so acute that truck drivers are 
unwilling to deliver cargo to these locations. 
 
C. Increase in transport prices.  Fuelled in part by the 
issues mentioned above, as well as an increased demand for 
transport from commercial traffic, transport prices have 
spiraled upwards in the course of the past month. Military 
and private commercial entities are now paying a premium to 
ensure sufficient transport to meet their requirements. WFP, 
bound by long-term transport contracts with fixed rates 
established in March, is finding its transport companies 
unable to provide the contractual supply of trucks. This has 
resulted in lower-than-projected dispatch rates, affecting 
expected delivery of commodities for the PDS. 
 
D. Port of Umm Qasr bottleneck.  Operational, political and 
security issues continue to affect the port of Umm Qasr, 
rendering discharge of vessels undependable. Confused lines 
of authority and control of port management have further 
limited efficiency. 
 
 
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MoT - Operational worries/WFP-assisted capacity building 
--------------------------------------------- --------------- 
- 
12. (SBU) WFP contends that, within the Ministry of Trade, 
the disrupted structure and a senior and middle management 
with limited official authority has had a direct impact on 
operations. Instructions emanating from MoT Baghdad are 
often disregarded by MoT representatives at the governorate 
level (this has been further exacerbated by a lack of 
dependable communications within the country). 
 
13. (SBU) On WFP-assisted/MoT capacity building, there is a 
current two-month secondment exercise with WFP in Rome for a 
group of ten individuals drawn from the Ministry of Trade 
and the Ministry of Transport. CPA had expressed the 
intention of creating a Logistics Cell within the MoT, made 
up of the individuals currently undergoing this training. 
However, more senior officials from the Ministry of Trade 
have repeatedly stated their belief in the benefits of 
continuing to procure and manage food commodities in 
accordance with the systems of the past decade. In WFP's 
view, it appears unlikely, therefore, that any immediate 
changes will occur in the culture and management of the 
Ministry of Trade as a result of the current capacity- 
building activities. 
 
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WFP recommendations to address the current situation 
--------------------------------------------- ------- 
 
14. (SBU) The following represent priority areas for action 
in order to ensure effective management of the PDS in the 
coming months: 
 
A. Continued involvement by USG dedicated food security 
personnel with the Ministry of Trade.  USAID personnel 
specialized in food security and commodity management should 
remain intimately involved with Ministry of Trade officials 
to oversee management of the PDS and its support functions. 
 
B. Establishment of a Ministry of Trade presence in corridor 
countries.  The Ministry of Trade would greatly benefit from 
re-establishing its coordination offices in key ports and 
border crossing points, allowing for greater control of 
discharge and onward transport operations. 
 
C. Ensuring sufficient funding to continue procurement 
activities.  Funding must be available to ensure the 
continued procurement of commodities required for the PDS. 
 
D. Establishment of regular and effective data management 
systems in Baghdad and at governorate level.  A commitment 
to technology and systems will be necessary to achieve 
integrity of the core data used to manage the PDS. In 
addition, strong oversight and mechanisms for reconciling 
and addressing data inconsistencies will need to be 
introduced. 
 
E. Review of MoT procurement practices.  Budgetary and 
efficiency considerations will likely dictate a transition 
from the current practice of procuring commodities on a CIF 
(Commodity, Insurance, Freight) basis to Free on Board/Free 
Carrier Alongside (FOB/FCA) contracts, resulting in cost 
savings and providing MoT with increased control over the 
supply chain. 
 
F. Review and reform of PDS.  The new Government of Iraq 
will need to carefully examine the continued viability of 
the PDS and the possibility of reforming this system to 
something more sustainable in the long-term while 
maintaining essential social safety nets. 
 
 
G. Achievement of Buffer Stock.  In order to achieve a 3- 
month buffer stock of the PDS food-basket commodities by 
October 1 (one month's supply plus a three-month buffer 
stock), procurement of a total of approximately 1.89 million 
MT of additional commodities is required. 
 
--------------------------------------------- -------- 
Comment from Ambassador Hall to Ambassador Negroponte 
--------------------------------------------- -------- 
 
15. (SBU) Under Jim Morris' leadership, our WFP colleagues 
have shown wonderful commitment to Iraq and have 
consistently been upfront and candid with the US Mission in 
their assessments of what works and what needs fixing. Given 
the number of emergency operations on their plate, they are 
not anxious to maintain a major presence in Iraq for any 
longer than absolutely necessary. On the PDS procurement- 
side, the WFP "curtain" will come down by September and they 
will move off the PDS procurement stage. We all need to 
ensure that the turnover is smooth and the new government is 
positioned to carry out this big job of keeping the PDS 
functioning until a better safety net can be devised. 
 
16. (U) Baghdad minimize considered. Hall 
 
 
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	2004ROME02768 - Classification: UNCLASSIFIED