US embassy cable - 05DAMASCUS5972

UNCLAS SECTION 01 OF 02 DAMASCUS 005972 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON EAGR ELTN ECIN 
SUBJECT: TRANSPORT OF IRAQ-BOUND U.S. WHEAT REMAINS A 
PERSISTENT PROBLEM 
 
REF: A) DAMASCUS 4187  B) DAMASCUS 4762 
 
1.  (SBU) Summary:  Over the past three months, Post has 
witnessed an incremental increase in the amount of Iraq- 
bound, U.S. wheat accumulating at the port of Tartous 
awaiting transport from Syria into Iraq.  On the surface, 
the reason for the delay in wheat transport is a lack of 
available trucks.  From what others tell Post, however, 
trucks are available and other commodities are being 
transported to Iraq.  Perhaps closer to the truth, the 
relationship between the three principal parties - Cargill, 
Iraqi Ministry of Transport, and the SARG - continues to 
deteriorate and seems to be the largest obstacle to finding 
a solution that would reduce the backlog and allow Iraq and 
Syria to benefit from wheat transshipments through the 
Syrian port.  End summary. 
 
2.  (SBU) The movement of grain from the Syrian port of 
Tartous to Iraq has been a continual problem that Cargill 
has encountered since April (reftels).  Cargill expressed 
repeated frustration at its inability to obtain trucks and 
drivers for transport of the wheat from the Syrian port of 
entry at Tartous to various points in Iraq.  The problem 
intensified after the Iraqi Ministry of Transportation (MOT) 
took over from Cargill the responsibility for moving the 
wheat from Tartous to Iraq, at which point Cargill and the 
MOT began to compete directly for trucks, drivers, and grain- 
storage facilities.  Both Cargill and the MOT have been 
unable to consistently obtain the large number of trucks 
necessary for wheat transport and both have blamed the other 
of sabotaging their efforts to do so, though neither can 
offer a satisfactory explanation as to why trucks are 
inaccessible.  Post contacts report that the MOT 
specifically only has access currently to about 30 percent 
of the trucks it needs to move grain from the port. 
 
3.  (SBU) Cargill's contract in April represented the first 
direct commercial sale of U.S. wheat to Iraq in several 
years.  To transport the 330,000 MT of grain, Cargill 
contracted exclusively with a transportation agent, who owns 
no trucks himself and must sub-contracts trucks from other 
sources.  Cargill has relied primarily on this agent and a 
U.S.-based USDA grains inspector in who travels regularly to 
Tartous, rather than a Cargill employee, to oversee its 
interests and ensure that cargo is expeditiously offloaded 
and transported.  As problems with truck accessibility 
intensified, Cargill sent a representative to Tartous who 
was initially instructed to not meet with visiting Iraqi MOT 
officials to find a means of reducing grain shipment delays. 
Comment:  Though the Cargill representative did eventually 
meet, the meeting was acrimonious and ended with both sides 
restating their pre-existing grievances against each other. 
End comment. 
 
4. Though Cargill currently controls most of the trucks 
moving U.S. wheat from Tartous to Iraq, a recent delegation 
from the Iraqi MOT sought to wrest control of the 
transportation chain from Cargill.  On October 24, at the 
insistence of the Iraqi MOT delegation, the Syrian Minister 
of Transport Makram Obeid signed a memorandum of 
understanding that required Cargill and any other company 
carrying GOI-owned cargo to seek approval from the Iraqi MOT 
in order to utilize Iraqi trucks for transport of goods. 
Also, the Iraqi MOT had previously expressed to us lukewarm 
feelings on the transport of grain through Tartous to Iraq, 
preferring instead to divert vessels to the port in Umm Qasr 
regardless of additional freight fees, insurance costs, and 
contracting of security guards to monitor cargo. 
 
5.  (SBU) Comment:  Post believes that Cargill and the Iraqi 
MOT continue to work at cross purposes, despite the fact 
that Cargill will fulfill its wheat transport 
responsibilities by the end of this week.  Specifically, 
post contacts have suggested that Cargill shipped the most 
recently arrived vessels to the port of Tartous in rapid 
succession so that the Iraqis would be unable to discharge 
grain at a fast enough rate to avoid demurrage fees, 
currently 15,000 USD per ship per day.  End comment. 
 
6.  (SBU) The SARG has remained relatively passive in its 
involvement with the transport of grain to Iraq.  Thus far 
it has failed to enforce the MOU signed on October 24 and 
has not consistently provided Iraqi ships priority for 
offloading as it had agreed to do in August.  The success of 
the MOT's transfer of grain to Iraq in the coming months may 
dictate the extent to which it decides to utilize the 
Tartous port in the future.  If the Iraqi MOT decides to 
divert all shipments of grain to Umm Qasr in lieu of 
Tartous, the SARG Port Administration stands to lose the 
port and offloading fees that it collects from these vessels 
in addition to customs fees and secondary revenues like the 
lucrative transportation contacts Syrian truckers currently 
enjoy. 
 
7.  (SBU) Comment.  The Iraqi MOT's ability to efficiently 
transport its grain will be tested in the upcoming weeks, 
especially with additional vessels slated to arrive in 
December.  The current contract marks the MOT's first 
attempt at managing the transportation of wheat into Iraq 
from Syria, and based on Post's observation, the MOT's 
challenge is not only to obtain trucks in Tartous to ensure 
a steady supply of grain into Iraq, but also to ameliorate 
business relations with Cargill and convince the SARG to 
implement the written commitments it has made to facilitate 
Iraq-bound wheat shipments.  For its part, the SARG's 
seeming indifference to the potential loss of transshipment 
revenue is shortsighted but also characteristic. 
 
SECHE