US embassy cable - 05ANKARA5065

C O N F I D E N T I A L SECTION 01 OF 02 ANKARA 005065 
 
SIPDIS 
 
E.O. 12958: DECL: 08/29/2010 
TAGS: ETRD, ECIN, PREL, IZ, TU 
SUBJECT: FUEL FLOWING AGAIN TO IRAQ 
 
REF: ANKARA 4880 
 
Classified By: Charge Nancy McEldowney.  Reasons 1.4 (b) and (d). 
 
1.  (C)  Summary.  Fuel shipments through Turkey to U.S. 
military and SOMO depots appear to have resumed following the 
partial clearing of SOMO payment arrears owed to Turkish 
suppliers and the establishment of a new Turkish system for 
monitoring deliveries in order to reduce smuggling.  At the 
same time, the Iraqis and Turks remain deadlocked on the 
fundamental issue of where to locate a second border gate, 
which is the only sustainable way to deal with the strains on 
Habur.  According to a Turkish MFA official, only U.S. 
intervention can break this deadlock.  End Summary. 
 
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SOMO Payments and Export/Transit Licenses 
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2.  (C)  In an August 29 meeting with Economic Counselor, 
Foreign Ministry Deputy Director General for Economic Affairs 
Mehmet Gucuk confirmed reports we have been receiving through 
U.S. military email channels that Turkish companies have 
resumed shipping fuel products to both U.S. military and SOMO 
depots in Iraq following an interruption last week (week of 
August 22).  State Minister Kursat Tuzmen had also told 
Charge August 25 that the issues delaying shipments had been 
fixed.  Gucuk said that the reason for the interruption was 
both payments arrears owed by SOMO to Turkish suppliers and 
the decision of Turkey's Foreign Trade Undersecretariat (FTU) 
to "do something" about smuggling and illicit sale in Turkey 
of fuel purchased by SOMO by making shippers verify 
deliveries back to the Turkish Government. 
 
3.  (C)  Gucuk confirmed that Turkish suppliers had received 
large payments from SOMO during the past week.  Since the end 
of May, SOMO has paid approximately $933 million to the 
companies, covering deliveries through June and part of July. 
 On August 26 in Ankara, Iraqi Oil Ministry Advisor and SOMO 
Supervisor Samhi Faraj agreed with the FTU to regularize a 
system for future payments whereby payments for an entire 
month will be paid during the first 20 days of the following 
month, with 50% of the amount due paid during the first week 
of the following month.  Gucuk stressed that this was an 
informal agreement that would be tested when August payments 
came due during the first week of September. 
 
4.  (C)  Econ/C stressed the critical importance of both 
sustainment and SOMO fuel shipments to shared U.S. and 
Turkish interests in Iraq.  Understanding the responsibility 
of the FTU to regulate trade and combat smuggling, Econ/C 
asked that the Embassy be informed in advance of any such 
initiatives that had the potential to disrupt vital supplies. 
 Gucuk readily agreed, saying that following last week's FTU 
actions (which had come as a surprise to MFA) the many 
Turkish agencies regulating this trade had concluded an 
agreement among themselves to keep each other informed. 
 
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Second Gate 
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5.  (C)  Gucuk said that the Turks and Iraqis remained 
"deadlocked" on the second gate issue, with each side 
insisting on its political priorities.  A KDP interest in 
retaining control of the border trade was, he said, the main 
stumbling block to a reasonable solution.  He argued that the 
Iraqi proposal to put a second gate only 5 km away from Habur 
made no practical sense as it would not be supported by an 
expanded road network on both sides.  Econ/C replied that the 
U.S. had made a proposal to fund an impartial study that 
would examine just such issues.  Our idea was that this study 
would provide an objective basis on which to make a decision. 
 
6.  (C)  Gucuk said that, frankly, the Turks could not accept 
the risk that a feasibility study would not result in a 
conclusion favoring the Turkish option, or that the Iraqi/KDP 
side would not block a conclusion favoring the Turkish 
option.  He suggested that "some kind of indication or 
assurance from the United States that the Turkish proposal 
would not be put aside" would give the GOT what it needed to 
go forward with the TDA study. 
 
7. (SBU) Representatives from Itochu, a Japanese firm that 
has been contracted by the GOT to do a study on their 
proposed border gate at Ovakoy (where the Turks would prefer 
to build a second crossing), met with PolMilCouns on Aug. 22. 
 They estimate that it will cost $100M for two bridges and 
other equipment at the crossing and asked for USG support to 
encourage &both sides8 to support this option.  PolMilCouns 
responded that this is a bilateral issue between Iraq and 
Turkey. 
 
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Comment 
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8.  (C)  Gucuk also argued that the increasing congestion at 
Habur added to the risk of smuggling of fuel and other 
perhaps dangerous products.  As we described in reftel, Habur 
will continue to be a bottleneck and problems will continue 
to arise periodically as we, the Iraqis and the Turks attempt 
to force more goods through a limited opening.  Gucuk is 
clearly correct that the Turks and Iraqis are blocked on the 
second gate issue.  Without taking sides, some type of USG 
action that reassures the Turks that their concerns will be 
respected seems needed to help break the deadlock. 
MCELDOWNEY