US embassy cable - 05BAGHDAD4040

S E C R E T BAGHDAD 004040 
 
SIPDIS 
 
E.O. 12958: DECL: 09/29/2015 
TAGS: ECON, ENRG, EPET, KCOR, KCRM, PGOV, IZ, Energy Sector, Petrolium 
SUBJECT: OIL WORKERS UNDER THREAT; MORE "UNOFFICIAL" FUEL 
PRICE RISES IN THE WORKS 
 
REF: BAGHDAD 3939 
 
Classified By: Economic Minister Counselor Tom Delare for reasons 1.4 ( 
b) and (d). 
 
1.  (S) Summary: Director General of the Oil Products 
Distribution Company at the Ministry of Oil Zuhayr Shakir 
(strictly protect) told us September 27 that he intends to 
institute further modest increases in fuel prices for both 
consumers and state-owned enterprises (SOEs).  He believes 
that he has tacit permission to do this.  Zuhayr said that 
oil company workers are increasingly under threat, reported 
the murder of one of his men in Baghdad that morning, and 
expressed concern regarding his own safety.  Zuhayr has also 
refused to provide carte blanche fuel deliveries authorized 
by senior GOI officials.  End Summary. 
 
2.  (S) In a September 27 meeting with Director General for 
the Oil Products Distribution Company at the Ministry of Oil 
Zuhayr Shakir (strictly protect), he told us he is continuing 
his efforts to rationalize fuel prices in Iraq.  Zuhayr said 
he presented further proposals for price rises to state owned 
enterprises (SOEs) September 22 to Minister of Oil al-'Ulum. 
Following recent practice, he does not expect the Minister to 
respond either positively or negatively.  When, "after a 
month or so," he hears nothing back, Zuhayr says he will put 
fuel price hikes for SOEs into effect. 
 
3.  (S) Zuhayr said he has further price rises in mind for 
consumers as well.  His idea is to first increase the number 
of mobile gas stations (where fuel currently sells for 
roughly $.26/gallon), co-locating them at existing gas 
stations.  This effectively lets people choose between the 
longer line at $.13/gallon, and the shorter line at 
$.26/gallon.  The mobile stations will then raise their price 
to, for example, $.39/gallon, while the gas stations move to 
$.26/gallon.  Zuhayr sees this as a gradual process. 
 
4.  (S) Zuhayr said he receives daily special requests to 
provide fuel for neighborhood or personal generators. 
Generally endorsed by Minister al-'Ulum or other high-ranking 
government officials, Zuhayr maintained that many of these 
requests are clearly for personal gain.  Zuhayr said he 
authorizes no shipments until one of his staff has personally 
verified the existence and capacity of the generator.  The 
amount of fuel delivered is only sufficient for storage 
facilities on hand, to prevent re-sale of the fuel on the 
black market.  Insisting that he will not break regulations, 
Zuhayr complained that no one above him says no - they simply 
pass the problem down to him, with a request that the fuel be 
issued.  If he denies a request from a powerful individual, 
he "has problems;" if he grants it without verifying, he 
breaks the law.  Compounding the problem, fuel deliveries are 
currently so low that he does not have sufficient fuel 
supplies on hand to meet demand in any case. 
 
5.  (S) Zuhayr was agitated as he reported the murder of one 
member of his verification team that morning in Baghdad and 
described the pressures and threats his people are under.  He 
said he requested that Minister al-'Ulum stop forwarding 
requests for fuel deliveries, and to have been told more or 
less that he (Zuhayr) is out of touch with political reality. 
 Zuhayr insisted that he no longer wants his position at the 
distribution company, but "can't find anyone he hates enough" 
to whom he could pass it.  His request for extra security was 
denied. 
 
6.  (S) Comment: We tend to take Zuhayr's word on the price 
hike process.  Our previous conversation with Oil Minister 
al-'Ulum showed the Minister to be intent on keeping aloof 
from the matter (reftel).  Yet tacit approval is a fragile 
basis for policy, and, without Zuhayr's initiative, it is 
unlikely that the GOI would be making any fuel price reforms 
this year.  If he is killed, it is difficult to see how 
anyone willing to engage on reforms would be willing to take 
his place. 
 
 
 
Khalilzad