US embassy cable - 05BAGHDAD4322

C O N F I D E N T I A L BAGHDAD 004322 
 
SIPDIS 
 
E.O. 12958: DECL: 10/19/2015 
TAGS: ECON, ENRG, EPET, MOPS, MARR, PGOV, PREL, TU, IZ, Petrolium, Energy Sector 
SUBJECT: OIL MINISTRY OFFICIAL SAYS IRAQ WILL PAY ARREARS 
"SOON" 
 
REF: ANKARA 6231 AND PREVIOUS 
 
Classified By: Economic Minister Counselor Tom Delare for reasons 1.4 ( 
b) and (d). 
 
1.  (C) Summary: Senior Advisor to the Minister of Oil Abdul 
Sahib al-Qutub said that he was working with the Ministry of 
Finance to organize payment o/a October 19 of some $450 
million in arrears to Turkish firms for fuel imports. 
Ministry of Oil officials blamed the poor security situation 
in the north - which blocks pipelines to and from Bayji 
refinery and thus limits domestic production - for the 
"doubling" of Iraq's fuel imports.  They also blamed Turkish 
mis- or non-supply of appropriate fuel for the shortage of 
gasoline in the northern provinces.  End Summary. 
 
------------------------- 
"The Check's in the Mail" 
------------------------- 
 
2.  (C) In a meeting with Emboffs October 18, Senior Advisor 
to the Minister of Oil Abdul Sahib Al-Qutub acknowledged that 
$450 million dollars was past due to Turkish companies for 
fuel imports.  According to him, another $250 million was 
also owed but that account was current.  (Comment: This is 
does not match Turkish claims cited reftel, but al-Qutub was 
not prepared to acknowledge any more than the figures given 
here.  End Comment).  Al-Qutub, recently appointed head of 
the State Oil Marketing Organization (SOMO) Oversight 
Commission, said that he and other Ministry of Oil (MoO) 
officials were working with officials from the Ministry of 
Finance to organize a payment of $450 million "today or 
tomorrow." 
 
3.  (C) Al-Qutub said that the arrears had been over $800 
million twice before: once in May 2005 and again in 
July/August.  The GOI had paid down these debts to roughly 
half each time.  "From time to time, there is a little delay, 
he said.  Al-Qutub maintained that other suppliers were more 
patient with Iraq's "difficult situation" than Turkey, where 
"commercial interests are superseding friendly relations." 
 
----------------------------------- 
Wrong Product, Insufficient Amounts 
----------------------------------- 
 
4.  (C) Al-Qutub said that a number of Turkish supply 
contracts had recently been terminated and new ones signed 
effective October 1, 2005.  He cited failure to deliver the 
minimum amounts of fuel required under the old contracts and 
what al-Qutub said was a Turkish government preference to 
have a smaller number of larger suppliers working with SOMO 
as reasons for the cancellations. 
 
5.  (C) Al-Qutub maintained that Turkish suppliers had not 
been sending the agreed-upon amounts and types of fuel since 
August, and that this misdelivery of fuel type (eg. kerosene 
instead of gasoline) has caused problems meeting fuel 
requirements in the northern provinces.  "Supply is done 
according to the desire of the Turkish companies, not 
according to Iraq's needs," he said. 
 
--------------------------------- 
Poor Security Equals More Imports 
--------------------------------- 
 
6.  (C) Al-Qutub said that Iraq had been forced to double its 
imports because poor security in the north had limited 
domestic fuel production, a concern echoed by Deputy Director 
General for Distribution Bassin.   In particular, Bassin said 
that failure to safeguard the crude pipeline from Kirkuk to 
Bayji affects negatively the amount of fuel that Iraq can 
produce; the failure to secure the product pipeline from the 
Bayji Refinery to Baghdad impacts MoO's ability to move what 
it does produce to consumers.  Lack of security on the road 
from the Turkish border to Mosul is also problematic, Bassin 
said, adding that criminals are smuggling fuel out of the 
north faster than the GOI can bring it in. 
 
 
 
 
 
Satterfield