US embassy cable - 05BAGHDAD3400

UNCLAS SECTION 01 OF 02 BAGHDAD 003400 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ENRG, IZ, Energy Sector 
SUBJECT: 6 August 2005 Meeting with Dr. Mohsin Shalash, 
Minister of Electricity and IRMO Director, Daniel 
Speckhard 
 
SENSITIVE BUT UNCLASSIFIED 
 
1. (U) SUMMARY. On 6 August 2005, Dr. Mohsin Shalash, 
Minister of Electricity, IRMO Director Speckhard and 
Senior Advisors met to discuss how IRMO can assist the 
Ministry of Electricity (ME) to alleviate its immediate 
energy and security issues. Shalash discussed a number of 
issues, which lead to a severe and somewhat sustained 
decline in hours of power in Baghdad.  Recent 
interdictions have created extensive damage to the 
transmission lines, leading to a loss of about 600 MW of 
power (~5-6 hours of power) particularly to the Baghdad 
area.  He believes the infrastructure security needs to 
be strengthened.  Complicating this issue is Shalash's 
desire to replace the head of ME's Electrical Power 
Security Services (EPSS), a force of 7,000.  In addition, 
Shalash discussed the failure of the Basra and Nasiriyah 
governorates to honor power transfer agreements and 
provide 200 MW of power (~1-2 hours of power) to the 
Baghdad area.  Shalash believes the impact of these two 
issues that occurred at the same time could have been 
mitigated by sufficient fuel supply for Baghdad area 
power plants. Shalash stressed the need for an 
alternative solution to their existing dependency on the 
Ministry of Oil (MoO). Finally, the need for funds 
through other donors and revenue generation through 
tariffs were discussed as USG donor funds are being 
depleted rapidly. END SUMMARY. 
 
2. (SBU) Infrastructure Security and Interdictions.  The 
security situation was a subject at the forefront in the 
meeting.  The need to develop the electricity 
infrastructure security is crucial at this stage, as the 
recent escalation in the magnitude of interdictions has 
critically damaged transmission lines to a precarious 
level. The drastic drop in hours of power in Baghdad from 
12 hours to 4 hours is the result of repeated 
interdictions on the Bayji to Baghdad West #1 & #2 lines, 
which provides as much as 600 MW of power.  Minister 
Shalash stressed the need for coordination between Iraqi 
and Coalition forces in order to increase security on key 
transmission line corridors and not to exclude the use of 
aerial surveillance. Complicating and exacerbating this 
is Shalash's intention to terminate Director General 
Faris, the head of EPSS, along with ten to fifteen 
members of Faris's staff within the next two weeks. 
Faris's replacement, selected by the Minister to be 
General Sa'ad Hashim, has extensive prior experience in 
protecting the electricity infrastructure.  However, this 
information has leaked and Sa'ad has been threatened on a 
number of occasions by EPSS.  Both the Minister and US 
personnel fear retaliation from Faris and his extensive 
supporters within EPSS.  As a temporary solution, the 
Minister requested military support to identify and 
position rapid response coalition forces to be deployed 
at ME headquarters or other key ME static sites around 
Baghdad.  For the short term, IRMO Electricity requests 
that coalition forces remain on site at ME facilities 
while they are present.  The Minister is currently 
working with the Prime Minister's office to develop a 
strategy that will allow General Sa'ad to replace DG 
Faris.  The Minister has also requested support in 
securing weapons and equipment recently provided to EPSS 
under an IRRF-funded training and equipment contract. 
 
3. (SBU) Power Sharing.  Further impacting hours of power 
has been the failure of the South to honor its obligation 
to transfer power to Baghdad.  Minister Shalash recently 
visited the National Dispatch Center (NDC) to address 
this issue and assess the NDC operation.  At the NDC, the 
Minister personally contacted and convinced the Governor 
of Al Anbar Province to increase power transfer to 
Baghdad by 50 MW.  He also contacted the Governor of 
Basra to increase the power transfer to 100 MW.  The 
Governor of Basra failed to comply with the Minister's 
request, which, when combined with the interdicted 
transmission lines, led to Baghdad hours of power 
decreasing to 4 hours per day between July 29 and August 
6, while Basra enjoyed 18 hours.  The Minister was unable 
to successfully contact the Governors of Hillah and 
Nasiriyah to ask for similar power transfer support. 
Following his assessment of the NDC, the Minister has 
decided to replace some personnel at the NDC, citing 
incompetence.  To further tackle the power sharing issue, 
a meeting is planned to take place in the near future 
with the Prime Minister (PM) who will lead a discussion 
between governors, ministers, local and regional leaders. 
The Minister will ask the PM to clarify whether ultimate 
authority lies with the governorates or centrally with 
the ME. Shalash also intends to ask the PM to order the 
governors and local councils to cooperate and comply with 
the power-sharing plan as developed by the ME. The ME 
hopes to advance a power-sharing plan designed to provide 
equitable power with a goal of at least 12 hours of power 
per day across all of the governorates for the summer. 
Meeting this goal was progressing successfully until the 
recent interdictions to transmission line and the 
obstruction to power transfer from the South to Baghdad. 
 
4.   (SBU) Fuel Supply.  Shalash also stated a need to 
mitigate the dependency of the ME on MoO for fuel as well 
as the need to explore options for more efficient sources 
of fuel supply.  Shalash recently met with the Minister 
of Oil to assess the availability of natural gas for the 
next two to three years in order to evaluate the 
potential for the development of new gas combustion power 
stations at strategic locations.  At that meeting, the 
Minister of Oil admitted that no additional gas would be 
available in the next two to three years unless oil 
production increased to allow for the collection and 
distribution of associated natural gas.  Shalash would 
therefore like to explore, with donors, opportunities to 
develop gas fields and to site natural gas power stations 
on these fields.  Shalash is of the opinion that the 
Ministry of Oil is paralyzed and is incapable of 
partnership in the execution of such key projects.  The 
emergence of the Electricity Sector Working Group, 
announced during last week's Baghdad Coordination Group 
meeting and expected to meet next week, couples 
interested donors and Iraqi leaders and can serve as an 
important forum for the Minister to raise this problem. 
 
 
5. (SBU) Funding and Tariffs.  Finally, Shalash expressed 
the need for further funding, as USG donor funds are 
depleting rapidly.  He explored the possibility of the 
USG providing additional funds for the Electrical 
infrastructure through soft loans, similar to the way 
other countries are providing this support.  As an 
example, the Minister discussed soft loans available to 
Iraq from Iran, Germany and Japan summarized below: 
 
-Iran has promised $1 Billion USD in soft loans 
-Germany has promised 1 Billion Euros in soft loans 
-Japan has promised $3.5 Billion USD in soft loans 
 
6.  (SBU) In addition to funding projects and its 
operation through donor funds, the need for the ME to 
generate revenue through the increase of tariffs was also 
discussed.  In order to successfully implement an 
increase of tariffs, Shalash strongly believes that all 
subsidies for food, refined products and electricity 
should begin to be phased out later in 2005, a direction 
for which he will continue to advocate with the PM.  He 
also believes that a public relations campaign must be 
be 
developed to explain to the population the reason for and 
the manner in which the subsidies will be phased out. 
Shalash also stated he did not believe the Coalition 
effort had resulted in any real megawatt contribution. 
IRMO Director Speckhard and IRMO Electricity Senior 
Advisors objected to this comment and perception.  The 
Senior Advisors agreed to provide Shalash with factual 
information to clearly show the contributions made by the 
Coalition. 
 
KHALILZAD