US embassy cable - 05BAGHDAD3103

C O N F I D E N T I A L SECTION 01 OF 05 BAGHDAD 003103 
 
SIPDIS 
 
E.O. 12958: DECL: 07/31/2015 
TAGS: ENRG, EPET, MASS, MOPS, EFIN, EAGR, PREL, PGOV, IZ, Security, Petrolium, Energy Sector 
SUBJECT: IRAQ INFRASTRUCTURE SECURITY:  FIRST REAL PROGRESS 
REPORTED TO NATIONAL ENERGY COUNCIL ON OIL PIPELINE SECURITY 
 
REF: BAGHDAD 2790 AND PREVIOUS 
 
Classified By: ECONOMIC MINISTER COUNSELOR ANNE DERSE FOR REASONS 1.4 B 
 
 AND D. 
 
 1. SUMMARY:  (C) On July 4, the Deputy Commander of the 
Iraqi Armed forces briefed the NEC on a new plan for the 
defense of the oil infrastructure in the vicinity of 
Kirkuk-Bayji, including the Al-Fathah Crossing.  The key 
elements were the planned commitment of two battalions of the 
Iraqi Army to control the area while the current Strategic 
Infrastructure Battalions (SIBs) were assimilated into the 
Iraqi Army.  The command of the entire area will be under the 
Commander of the Iraqi 4th Infantry Division, headquartered 
in Kirkuk.  The Iraqi forces will conduct security operations 
until the SIBs are assimilated into the regular army 
(including necessary vetting) and then trained to appropriate 
standards to guard the pipelines and key oil infrastructure 
nodes.  MNF-I will provide resources to support the initial 
defense, including intelligence support and a quick reaction 
force to support the Iraqi forces.  Iraqi forces will begin 
to use aerial reconnaissance, using small airplanes to patrol 
the routes over the pipelines.  It was reported that MNSTC-I 
would assist in training the forces. 
 
2.  (C) The Ministry of Oil will provide specialized training 
on oil protection.  Priority of defense of linear oil 
infrastructure was designated at the meeting, with Kirkuk to 
Bayji being highest, then Bayji to Mosul, followed by Bayji 
to Baghdad, and finally Baghdad to Basrah. Hardening of 
infrastructure will be concurrent, with key nodes being 
hardened and guard forces established over the next few 
months. The MOD will become responsible for the security of 
the oil infrastructure as of August 1, 2005. The DPM thanked 
the Armed Forces and General Casey for their work in bringing 
forward this plan of protection; however, the Minister of 
Industry reminded all that success would not be declared 
until oil flowed to Turkey. END SUMMARY. 
 
3.  (C) DPM Ahmed Chalabi convened the eleventh meeting of 
the ITG National Energy Council (NEC) on July 4.  The purpose 
of the meeting was to receive a new briefing on an 
MNF-I/Ministry of Defense plan to defend the northern Iraqi 
oil pipelines.  Those attending included the Ministers of Oil 
(MOO), Electricity (ME), Water Resources (MWR), Planning and 
Development (MOPD), Industry and Minerals (MIM), Agriculture 
(MOA), Deputy Minister of Finance (MOF), Deputy Minister of 
Interior (MOI), Deputy National Security Advisor, MOD 
Director General of Programs and Budget, Deputy Commander of 
the Iraqi Armed Forces, Commander of the 4th Iraqi Division, 
EMINCOUNS, IRMO Director and emboffs.  The DPM opened the 
meeting with his assessment of the current strategy of the 
insurgents, and said that in his opinion, their strategy was 
to attempt to strangle the economy of Iraq by cutting off 
essential services to Baghdad, citing the interruptions of 
water, electricity and fuels.    He then stated there was a 
major disinformation campaign and infighting against the ITG 
by political parties campaigning against the current 
government.  He warned each of the ministers that they had no 
right to interfere in any judicial decisions. He complimented 
the ministers by saying they were all doing good work, and 
was pleased to tell them there had been no explosions or 
major attacks against the infrastructure for the past six 
days.  The Minister of Oil responded to this compliment by 
saying, "Inshallah". 
 
--------------------------------------------- ---- 
REVISED PLAN FROM MOD/MNF-I TO GUARD OIL PIPELINES 
--------------------------------------------- ---- 
 
4.  (C) The Deputy Commander of the Iraqi Armed Forces, LTG 
Abadi, briefed the new infrastructure security plan to the 
NEC.  LTG Abadi began by effusively thanking DPM Chalabi for 
his efforts in talking to General Casey of MNF-I to open the 
door for Iraqi Forces to be employed to defend the oil 
infrastructure.  He said General Casey had agreed to support 
the Iraqi efforts to protect the infrastructure, to include 
providing back-up quick reaction forces. 
 
5.  (C) LTG Abadi provided an assessment of the security 
situation at Al Fathah Crossing, saying there were many 
problems, especially with checkpoints along access roads into 
the area.  To rectify this situation, LTG Abadi said the 
Iraqi Army would move a brigade to the vicinity of the 
northern oil infrastructure to enhance security and provide 
quick reaction forces.  The initial forces are in place and 
only small adjustments are required.  He also said Iraq was 
going to receive $16 million to support this effort. 
Initially, MNF-I will provide support by placing two officers 
in the intelligence cell to improve intelligence support to 
the infrastructure protection forces.  A road will be built 
parallel to the pipeline to provide quick reaction access to 
the pipeline corridor.  Better intelligence links will be 
needed between the security forces and the intelligence cell; 
these are dependent on improved communications.  Two radios 
have been requested for each battalion.  The planners for 
this operation are currently on a three-day visit to the 
North; the results of their reconnaissance visit will be 
reported at the next NEC meeting. 
 
6. (C) LTG Abadi described the new plan as a joint effort by 
Iraqi armed forces, including ground troops and aerial 
reconnaissance along the pipeline corridors.  He said that 
Iraq would use six small planes for this purpose, adding that 
Iraq already has the trained pilots and planes, but 
insufficient spare parts.  The ground forces will include two 
trained Iraqi Army battalions from the 4th Iraqi Infantry 
Division (ID).  The command and control for the operation 
will remain with the Commander of the 4th ID.  The four 
current Strategic Infrastructure Battalions (SIBS), made up 
of tribal forces, will be integrated as quickly as feasible 
into the Iraqi Army.  That process of integration is 
currently occurring, with about 450 soldiers assimilated per 
day.  The key aspect of screening of the soldiers is the 
intelligence interview to screen out insurgents from these 
units.  LTG Abadi said, "We are doing a good job of 
recruiting and assessing these soldiers."  The Deputy 
Minister of Interior (DMOI) offered support to screen these 
recruits and assist in background investigations.  The MNSTCI 
training requirement restriction, is that they will only 
train members of the Iraqi Army, so that is why all the 
security forces must be part of the Iraqi Army.  MOO will 
provide training for the soldiers to prepare them for the 
unique aspects of guarding oil infrastructure. 
 
7.  (C) Priority of defense of oil infrastructure was 
designated at the meeting by consensus of the NEC ministers, 
with Kirkuk to Bayji being highest, then Bayji to Mosul, 
followed by Bayji to Baghdad, and finally Baghdad to Basrah. 
Hardening of infrastructure will be concurrent, with key 
nodes being hardened and guard forces established over the 
next few months.  Close coordination will be required between 
the ministries of Oil, Defense and Interior.  The MOD will 
become responsible for the security of the oil infrastructure 
as of August 1, 2005. 
 
8.  (C) LTG Abadi explained the units would not have 
sufficient four-wheel-drive vehicles, so these units would be 
issued two-wheel-drive pickup trucks until other military 
vehicles could be found.  He said 120 officers would be used 
to train the new battalions.  He emphasized that this had 
been a rapidly evolving plan, and the budgeting had not 
caught up with the force planning and proposed moves.  He did 
say the units had about 60 percent of the required equipment 
for operational capability. He said MNF-I would be providing 
$60 million for the battalions for equipment.  (NOTE: MNSTC-I 
has promised to match MOD expenditures of up to $35M.  END 
NOTE.) He requested the MOO provide the armed forces with 
technical oil maintenance and repair teams.  The Army could 
transport them to attack sites and protect them while they 
conduct repairs.  He said, "We want specialists in oil repair 
and protection." He specifically stated key nodes, like the 
pumping stations and important valves, would be hardened and 
guarded with concrete barriers and guard towers. 
 
9.  (C) The Commander of the 4th ID said each battalion 
should be increased in strength by 250 soldiers for these 
missions. The Deputy National Security Advisor then stated 
that the NEC should determine how the brigades should be 
constructed and deployed to meet the larger mission in the 
north.  He continued by explaining that the defensive area to 
be covered for the pipelines is quite extensive, extending 
all the way to the Turkish border.  The Commander of the 4th 
Infantry Division responded that there would be a second 
phase of this operation to secure the area along the pipeline 
north from Bayji to Mosul and then to the border.  The CG of 
the 4th ID requested that the NEC ministers not disrupt the 
Chain of Command and let him figure out the deployments and 
stationing of the brigades and battalions.  He concluded by 
saying, "Let's keep it simple!" 
 
10.  (C) LTG Abadi said he needed to do more planning for 
future deployments and troop stationing, as he also needed to 
begin assessing how to protect the electrical towers and 
other infrastructure across the country. The MOF stated the 
budget allocated $800 million for oil production. DPM Chalabi 
stated, "We have managed to increase the importance of 
producing oil.  I do not believe we can go forward unless 
making this the first priority for reconstruction." DPM 
thanked the Armed Forces, General Casey and the US Ambassador 
for their work in bringing forward this plan of protection. 
The Minister of Industry commented, "Success should not be 
declared until oil flows to Turkey." 
 
------------------------- 
ELECTRICITY UPDATE TO NEC 
------------------------- 
 
11.  (SBU) The Minister of Electricity (ME) announced to the 
NEC that electricity production had exceeded pre-war levels, 
as 5300 MW of peak power and 124000 MWH had been reached, 
with an average generation capacity reaching 4800 MW this 
week.  This still only resulted in 3 hours on and 3 hours off 
for electricity across much of Iraq.  The DPM asked if the 
deal for the power from Iran had been fixed, and the ME 
responded that Iran was in the midst of the high summer 
demand period and had no excess power available.  The ME 
continued that he had met with the Iranians that morning and 
he will sign the final agreement with Iran shortly.  The ME 
followed this with a report that he was still trying to get 
400 MW of electricity from Turkey, but there continues to be 
an EU constraint against Turkey selling power to Iraq.  The 
DPM said, "It is all in the hands of Iran; you need to 
negotiate with them." ME said he would need about $300 
million to pay for electricity imports. The DPM then asked 
for an update on the Youssifiya Project.  The ME said, "I 
talked to the people in the North, and there could be a new 
electric power station for 1400 MW." The MOWR said, "The 
Bakhman Dam could provide 1400 MW, but the current design 
provides for only 400 MW."  ME said the V94 alone would add 
260 MW.  The ME told the DPM, "We have been told we need to 
provide 20K MW, but we can provide only 8K MW. It will take 
25,000 metric tons of oil per day to generate 20K MW of 
Power." 
 
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NATURAL GAS 
----------- 
 
12.  (SBU) The ME said, "We should focus on free resources, 
not oil.  We should use dry gas.  Sixty-five percent of the 
gas is flared."  The DPM concurred, saying, "We need a plan 
for gas."  The MOO said, "We have gas from the oil fields at 
Khurmala and Quds and large gas fields at Missan and 
Az-Zubayr."  The DPM said, "We need to focus on refineries 
and gas."  The MOO said, "ME and MIM should quit using gasoil 
(diesel) for factories and electricity.  We need to quit 
using gasoil, and we need to build a gas infrastructure 
network to capture, process, and use the dry gas."  The DPM 
said, "A gas plan is desired." 
 
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REFINERIES 
---------- 
 
13.  (SBU) The DPM asked, "What is the processing capacity of 
our refineries?"  The MOO responded, "If all refineries were 
working at full capacity, we would refine 650,000 bpd of 
crude oil.  The only cracking plant is at Bayji. We have a 
plan to develop the refineries.  We have a plan for a 70,000 
bpd expansion at Doura Refinery, and additional planned 
expansions at Basra. We produce 50 percent of our refined 
products at Basra."  The DPM said, "We need more expansion 
than those plans."  MOO responded, "We have long-term plans 
for a 300,000 bpd refinery at Basra and a 70,000 bpd refinery 
at Sulimaniya."  DPM said, "We cannot afford those, but we 
could with private investment.  We need a Petroleum Law." 
MOO said, "We have a plan for a Petroleum Law to present to 
the TNA to permit the import and refining of fuels and 
authorization for private sales of fuels.  I have talked to 
several refining companies about private sector investment in 
Iraq."  DPM replied, "Good idea. We need to be able to export 
from our refineries."  The DPM continued, "There has been a 
decline in the production from the southern fields.  Last 
year we were producing 2.4 million bpd, and it is now 
declining.  We have no vision for our national budget, and we 
do not have the right management skills to run our oil 
fields.  We had a $3 billion budget for oil, and we did not 
use this money for investment, but rather we used it for fuel 
imports."  MOO added, "MOO has problems in technology, 
drilling fields, and entering the modern petroleum world.  We 
need to bring back INOC (Iraqi National Oil Company).  It 
needs to be independent.  We need to send the INOC Plan to 
the Assembly."  The DPM said, "Send the INOC Plan to me, and 
I will review it and sign it." 
 
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COMMENTS 
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14.  (C) COMMENT:  The NEC made a great leap forward at the 
July 4 meeting.  There is now the basis of a viable plan for 
the protection of the critical infrastructure across Iraq. 
The NEC has set the priorities for protection, and the MOD is 
supporting with the planned commitment of trained Iraqi Armed 
Forces.  This illustrates a positive commitment and 
coordination between the MOD and the MNF-I in future planning 
and force deployments, a positive development for the 
maturation of the Iraqi government.  This is also an 
important Iraqi military response to continued attacks on 
strategic infrastructure. The NEC can be expected to expand 
this planning to the other key aspects of national essential 
infrastructure over the next few months, helping to ensure 
the provision of basic essential services for the people of 
Iraq.  The ministers of the NEC are cooperating and there 
appears to be the beginnings of coherence in national level 
planning and execution.  While the words sound positive, they 
must be followed with funding decisions that provide the MOD 
with the financial resources to accomplish this mission. 
 
12.  (C) The NEC discussion on private sector investment and 
best use of petroleum/natural gas resources is another giant 
leap forward.  Any discussions or plans to obtain electricity 
and/or fuel from Iran and Turkey need to be watched 
carefully.  The Iraqis are presenting their views of the 
economic benefits to Iraq of an integrated and synchronized 
electrical grid constructed between Turkey, Iran and Iraq, 
permitting power sharing and maximizing the regional benefits 
of both hydropower and natural gas resources. The NEC 
discussion on expanding refineries hints at the long-term 
goals of the Iraqi petroleum sector to follow the model of 
Saudi Arabia, and enhance the income stream from oil 
production and refining prior to export.   The 
reestablishment of INOC would be a major step in the 
direction of providing management and coherence to the 
petroleum sector of the Iraqi economy. END COMMENT. 
 
 
Khalilzad