US embassy cable - 05BAGHDAD2527

UNCLAS SECTION 01 OF 02 BAGHDAD 002527 
 
SIPDIS 
 
SENSITIVE 
 
USDA PLEASE PASS TO FAS/EC/KMILLER/MCHAMBLISS; 
FAS/G&F/PLETARTE/LBACHELDER/DWILLIAMS; FAS/OA/ETERPSTRA; 
FAS/CMP/FLEE; AND FAS/IRAQ TASK FORCE/LSCHATZ 
 
E.O. 12958: N/A 
TAGS: ETRD, EAID, IZ, ECON Development 
SUBJECT: IRAQI MINISTER OF TRADE: PDS, JEC AND THE ARAB 
LEAGUE BOYCOTT 
 
REF: STATE 97018 
 
1. (SBU) SUMMARY: Iraqi Minister of Trade Abd' al-Bassit 
Kareem is confident the Public Distribution (food ration) 
System (PDS) has enough wheat and rice supplies for the 
months of June and July.  The Minister, who has discussed 
the Arab League Boycott (ALB) demarche (reftel) with Prime 
Minister Ja'afari, noted that any legal revisions 
specifically related to ALB would not currently be possible 
given political sensitivities.  He will however, look into 
the possible issuing of instructions that would have the 
effect of stopping its ministerial enforcement.  In 
addition, the Minister will not be ready to submit Iraq's 
accession documents to the World Trade Organization until 
mid-July.  He is amenable to making a submission 
announcement at the Joint Economic Committee meeting 
tentatively scheduled for July 11 and hopes to sign the 
proposed U.S.-Iraq Trade and Investment Framework Agreement 
(TIFA) at the same time. END SUMMARY. 
 
2. (SBU) On June 14, Charge and EconOffs met with Minister 
of Trade Abd' al-Bassit Kareem in order to express concern 
over increasing reports of problems with the Public 
Distribution (food ration) System (PDS).  Our polling shows 
a recent uptick in the number of complaints of no or 
delayed PDS-supply deliveries throughout the country. 
Minister Kareem acknowledged our information claiming that 
problems stem from the previous administration's 
mismanagement that resulted in empty warehouses.  That is 
currently being remedied according to the Minister. 
 
3. (SBU) Minster Kareem cited his cooperation with the 
Minister of Finance on a financing/contracting committee 
headed by DPM Chalabi that meets twice weekly.  According 
to the Minister, this gives him the opportunity to discuss 
planned PDS purchases and ensure the Ministry of Finance 
provides the funding (problematic in the first quarter of 
2005.)  In addition, the Minister informed us that the 
Ministry of Trade (MOT) did an emergency procurement of 255 
thousand metric tons (MT) of wheat and 20 thousand MT of 
sugar in order to get through the months of May, June and 
July.  One million tons, more or less, remains to be 
purchased this year in order to meet Iraqi needs.  The 
Minister believes that he can begin to create a buffer 
stock with this purchase.  He also informed us that a 
committee investigating allegations against Australian 
wheat (septels) has determined that the remaining wheat, 
some 150,000 metric tons is fit for consumption and should 
be distributed.  The Minister noted that the Ministry of 
Health publicly certified the wheat as well. 
 
4. (SBU) Minister Kareem believes that a focus on greater 
efficiency will create positive changes in the PDS system 
very quickly.  For example, he is working to sort out 
discrepancies in the allocation of PDS supplies to various 
governorates.  He mentioned that it was brought to his 
attention that Najaf governorate was getting the smallest 
share of wheat supplies in the country.  He has since 
reviewed the allocation of supplies and brought Najaf's 
portion into alignment with those of the other 
governorates.  The Minister also told us that he intends to 
fight corruption and substitution of products in the PDS 
system by announcing purchases to the public.  As part of 
the announcement he will both show the product and give the 
quality specifications so that the public will be aware of 
the type of goods to expect and can report substitution to 
the MOT when it occurs.  The Minister is confident that 
there is enough rice in the PDS system for June and July 
and that upcoming procurements will see the system through 
the end of 2005.  He will focus the early procurement 
process on wheat, rice and pulses and intends to only deal 
with internationally reputable suppliers for PDS 
commodities, avoiding middlemen.  We again offered our 
support in this process.  The Minister was grateful and 
assured us he would be in touch if anything were needed. 
 
5. (SBU) In raising the recent Arab League Boycott (ALB) 
demarche, Charge Jeffrey citied several examples where 
acceptable solutions have been found in order to maintain a 
productive relationship between the U.S. and its trading 
partners.  He urged the Minister to pursue a decision on 
the matter.  The Minister explained that he has looked into 
the ALB matter.  According to Minster Kareem, there is no 
Iraqi law that implements the ALB.  Instead, directives, 
issued as "explanation regulations" to the old Investment 
Law created the practice and some organs of the government 
are still implementing them irregardless of CPA-era laws. 
Kareem, who indicated he has raised the issue with PM 
Ja'afari, went on to explain that specifically mentioning 
or repealing the boycott is too politically sensitive 
"impossible" at this time.  He is however willing to issue 
internal MOT regulations that would rescind regulations 
requiring MOT institutions from asking about the 
nationality of firms, etc.  The Charge urged Minister 
Kareem to address these issues as soon as possible, 
however, Minister Kareem is traveling to Northern Iraq 
(Sulaymaniyah) for the next two weeks in order to defend 
this Ph.D. thesis and is not expected to return to Baghdad 
in early July. 
 
6. (U) REOs Basrah, Hillah, Kirkuk, Mosul minimize 
considered. 
 
Jeffrey