US embassy cable - 05BAGHDAD2593

C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 002593 
 
SIPDIS 
 
E.O. 12958: DECL: 05/31/2015 
TAGS: EAGR, ECON, EFIN, ENRG, EPET, IZ, MASS, MOPS, PGOV, PREL, Security, Energy Sector, Parliament 
SUBJECT: IRAQ INFRASTRUCTURE SECURITY:  MOD PLAN NOT 
APPROVED BY NATIONAL ENERGY COUNCIL 
 
REF: BAGHDAD 2517 AND PREVIOUS 
 
Classified By: ECONOMIC MINISTER COUNSELOR ANNE DERSE FOR REASONS 1.4 B 
 
 AND D. 
 
1. (C) SUMMARY: On June 16 Iraq's National Energy Committee 
(NEC) sent the Iraqi Army back to the drawing boards on its 
proposed infrastructure security plan, stating that the plan 
presented was too costly and inconsistent with guidance the 
NEC has provided in its recent meetings.  The NEC remains 
concerned with oil pipeline security.  DPM Ahmed Chalabi 
instructed the Commander of the Army to immediately develop 
an effective security plan for the northern pipelines using 
Iraqi military forces that had already been trained.  The 
Minister of Electricity (ME) was praised by all the Ministers 
present for the increased availability of electricity across 
the country. ME used the opportunity to ask for an additional 
$50 million for spare parts for repairing the energy grid and 
fixing generation capacity.  The Deputy Minister of Oil (MOO) 
asked if he could change banks for MOO lines of credit. The 
DPM asked what this financial action was, and the Deputy MOO 
answered they were using oil production as collateral for the 
loans.  The amount owed or the line of credit amounts were 
not disclosed in the discussions at the table. END SUMMARY. 
 
2. (C) DPM Ahmed Chalabi convened the 6th meeting of the ITG 
National Energy Committee on Jun 16.  The Ministers of 
Electricity (ME), Water Resources (MWR), Finance (MOF), 
Industry and Minerals, and Deputy Minister of Oil (MOO) were 
present as well as the MOD Director General of Programs and 
Budget, and the Commander of the Iraqi Army. The Charge', 
EMINCOUNS, and IRMO Acting Director MG Heine attended.  The 
meeting was held to review the proposed plan of the Ministry 
of Defense to defend the northern Iraqi oil pipelines. 
 
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ARMY COMMANDER BRIEFED INFRASTRUCTURE PROTECTION PLAN 
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3.  (C) The Commander of the Army provided the briefing to 
the NEC on the proposed infrastructure protection plan.  The 
plan proposed using the untrained, and in some cases 
unformed, Strategic Infrastructure Battalions (SIBs) at an 
initial cost of $70 Million for four battalions, which would 
not be ready for six months. The DPM said he was dissatisfied 
with the plan, severely chastising the Commander of the Army 
for not following the prior instructions of the NEC.  He then 
publicly apologized to the Commander for his use of public 
criticism in front of the other Ministers.  He told the 
Commander of the Army that he was to come back on Monday, Jun 
20, with a new plan using Iraqi Army trained forces to guard 
the pipelines and other critical infrastructure at a cost of 
$35 million, which has been identified for this purpose.  The 
DPM said the Iraqi Government had spent a lot of money 
raising and training the Iraqi Army, and he now he wanted it 
employed to provide infrastructure protection. 
 
4.  (C) The Ministers present concurred, saying the Strategic 
Infrastructure Battalions are ineffective and there was an 
immediate need for trained Iraqi forces.  The pipelines need 
to be protected now, not in six months or later.  The oil 
export pipeline from Kirkuk to Bayji, then north toward 
Turkey was to be the priority for planning and protection as 
directed by the NEC. 
 
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INCREASED ELECTRICITY ACROSS IRAQ 
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5.  (SBU) The Minister of Electricity (ME) said he was glad 
to report that the rates for the generation of electricity 
across Iraq had crossed the 5000 MW threshold, and the ME was 
now generating 5100 MW of sustained power, and he expected to 
report 6000 MW by the end of the summer.  He was immediately 
praised by the DPM and his fellow Ministers for this positive 
result, and the DPM asked him when he could meet the demand 
of 8000 MW.  The ME responded that if the ITG would "give me 
enough money I will produce twice that much electricity." 
The ME then used this opportunity to ask for $50-Million for 
repair parts and spares for repairing the energy grid and 
fixing generation capacity across Iraq. The DPM told him they 
could discuss those funds later, and commended him once again 
for his effective running of the ME. 
 
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MOO REPORTS DESIRE TO CHANGE THEIR BANK LINES OF CREDIT 
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6.  (C) The Deputy Minister of Oil asked the DPM if they 
could change their financed lines of credit from Morgan 
Stanley Bank to Citibank because Citibank would give them a 
three year line of credit compared to the 12-18 months with 
Morgan Stanley.  The DPM was upset over the revelation that 
MOO was active in the international financial markets outside 
the appropriate channels in the Iraqi Government.  The DPM 
asked them how they did this, and the Deputy MOO answered 
they were using oil production as collateral for the loans. 
The DPM said this needed to be discussed further in a 
different forum.  The amount owed or the line of credit 
amounts were not disclosed in the discussions at the table. 
 
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AGENDA FOR NEXT MEETING OF NATIONAL ENERGY COMMITTEE 
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7.  (C) The DPM said the Monday, June 20 meeting of the NEC 
would review the new plan by the Ministry of Defense for 
defense of the northern Iraqi pipelines. 
 
 
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COMMENT 
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8.  (C) COMMENT:  DPM Chalabi dominated this meeting of the 
NEC, as he has previous meetings.  The NEC meeting 
illustrated the continuing dispute between NEC and MOD over 
how to defend the pipelines.  The NEC wants immediate 
protection of the critical northern export pipeline and does 
not want to spend a large amount of funds in addition to 
those already provided to MOD to build the Iraqi security 
forces. The MOD seeks additional funding and is willing to 
wait six or more months to provide protection for critical 
infrastructure.  The revelation that the MOO was engaging in 
financial arrangements with international banks appeared to 
come as surprise to the DPM, and he appeared concerned over 
the impact this might have on other financial arrangements 
for the government of Iraq. END COMMENT. 
Jeffrey