US embassy cable - 05BAGHDAD4231

C O N F I D E N T I A L BAGHDAD 004231 
 
SIPDIS 
 
E.O. 12958: DECL: 10/14/2015 
TAGS: ECON, ENRG, EPET, PGOV, PREL, TU, IZ, Petrolium, Energy Sector 
SUBJECT: SOMO ARREARS MOUNTING, FUEL IMPORTS INTERRUPTED 
 
REF: A. KIMMEL-GOLDBERGER-YOUNG EMAILS 
     B. ANKARA 6231 
     C. ANKARA 6095 
 
Classified By: Economic Minister Counselor Tom Delare for reasons 1.4 ( 
b) and (d). 
 
1.  (C) Summary: Fuel imports from Turkey have been reduced 
due to canceled contracts, allegations of corruption, and 
Iraqi arrears to Turkish suppliers.  State Oil Marketing 
Organization (SOMO) officials said October 6 that their 
outstanding debt to Turkish firms (reftels/emails) was $25 
million, although Finance Minister Allawi acknowledged that 
arrears of some $870 million were owed to Turkish firms at a 
National Energy Council (NEC) meeting the same day.  End 
Summary. 
 
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GOI Payment Discrepancies 
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2.  (C) In response to Ref C, post was informed October 6 by 
Deputy Minister of Oil Ahmad al-Shamaa and SOMO 
representatives that they had cleared the "$200 million 
arrears to the Turkish suppliers," and are now down to a more 
manageable $25 million debt.  Finance Minister Allawi 
acknowledged at a National Energy Council (NEC) meeting the 
same day, however, that arrears of some $870 million were 
owed to Turkish firms.  Turkish MFA reported current arrears 
of $900 million on October 14 (Ref A). 
 
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Contract Confusion 
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3.  (C) Compounding the confusion, SOMO officials said they 
had terminated some existing six-month contracts midway 
through their validity, on the grounds that the Turkish 
suppliers were not meeting their minimum supply obligations: 
only 35% of the scheduled deliveries had been completed.  New 
contracts have been awarded to a number of smaller firms, 
bringing the total number of contracts down from 19 to 11, 
according to SOMO.  MoO officials alleged that the Turkish 
government is preventing these new, smaller suppliers from 
exporting unless the firms make illicit payments to Turkish 
officials.  Since October 1, imports have indeed been 
sporadically interrupted, with certain fuels arriving in bulk 
(kerosene, diesel) while gasoline shipments are lagging.  It 
is unclear whether this phenomenon is due to the contracts, 
arrears issue or both. 
 
4.  (SBU) Embassy will approach relevant Iraqi authorities 
ASAP to urge them to establish a better tracking system for 
fuel arrears and to make timely payments for deliveries. 
 
 
 
Khalilzad