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Cablegate: Ninewa-Salah Ad Din Border Area Depressed but Has

VZCZCXRO0860
RR RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK
DE RUEHGB #2102/01 1891101
ZNR UUUUU ZZH
R 071101Z JUL 08
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 8179
INFO RUCNRAQ/IRAQ COLLECTIVE
RUMICEA/USCENTCOM INTEL CEN MACDILL AFB FL//CCJ2//
RHMFISS/HQ USEUCOM VAIHINGEN GE

UNCLAS SECTION 01 OF 02 BAGHDAD 002102

SENSITIVE
SIPDIS

DOD FOR TFBSO

E.O. 12958: N/A
TAGS: ENRG PGOV EPET EINV EAID MARR PINR IZ
SUBJECT: NINEWA-SALAH AD DIN BORDER AREA DEPRESSED BUT HAS
POTENTIAL

REF: BAGHDAD 2052

1. (U) This is a Ninewa Provincial Reconstruction Team (PRT)
message, in cooperation with the Salah ad Din PRT.

Summary
-------

2. (SBU) Southern Ninewa Province and the Sharqat district in
northern Salah ad Din Province suffer from lack of
infrastructure investment and unemployment of at least 50
percent. This area, collectively known as the Zaab Triangle
of the Tigris River Valley, would benefit from GOI
infrastructure investments that provide long-term employment
and create an attractive environment for private investment.
The presence of three potentially major industrial facilities
(a sulfur plant in need of refurbishment, an unfinished
electrical generation station and a currently producing oil
refinery) represents a solid economic base. The location of
the region along the main road from Baghdad to Mosul on the
banks of the Tigris favors industrial, transportation and
agricultural development. The PRT is working with willing
local leaders to harness the region's multiple economic
benefits and collectively improve energy, water and
transportation development across tribal and sectarian lines.
National investment in the region's infrastructure and
naturally profitable service- and construction-oriented
industries would help set up the region for long-term growth.

Depressed Zaab Triangle Has Potential
-------------------------------------

3. (SBU) PRT Ninewa's southern Branch Office, out of Forward
Operating Base QWest, covers the southernmost part of Ninewa
and, in collaboration with Salah ad Din PRT, the northernmost
Salah ad Din district of Sharqat, including areas on both the
eastern and western sides of the Tigris River. Most of the
region's inhabitants on the western side of the Tigris are
Sunni Bedouin, while the majority in Ninewa's Makhmour
district on the eastern side of the river are Kurdish. The
entire region suffers from dilapidated transportation and
energy infrastructure exacerbated by slow and inefficient
budget execution. The security situation has improved over
the past year although terrorist and criminal activities
still disrupt daily life.

4. (SBU) Major industries are the Mishraq Sulfur Plant,
destroyed by fire in 2003 (reftel), the Al Shemal thermal
electrical generation plant, unfinished and paying storage
fees in the United Kingdom for Rolls-Royce generators
purchased fifteen years ago, and the Qayyarah Refinery, which
produces asphalt from the heavy crude oil found in the region
and has recently added another line to produce benzene.
These state-owned facilities represent the potential for a
strong economic base should they be repaired, restored,
finished and brought to full production. On the northern
margins of this region, the Hammam al Alil cement plant, 15
miles south of Mosul, profitably churns out cement for the
booming central and eastern Ninewa construction industry.

5. (SBU) Beyond the state-owned factories, the province's
economic activity currently depends on central government
financing of capital projects. Local officials complain
about inefficiency in this budget execution process, citing
delays in repairs to several Tigris bridges that are needed
to boost intra-regional commerce. Because budgets rarely
include funding or expertise for operations and maintenance,
the little capital investment that does occur quickly decays,
as seen in a broken-down water station that left 50,000
Sharqat residents without full water supply.

6. (SBU) There is currently little legitimate private sector
activity with growth potential in this area. Private sector
economic activity has consisted mostly of involvement in
stolen fuel marketing and transportation. Decrepit
infrastructure, continued security concerns and the lack of a
fully functioning banking system discourage local and
international investment. Current construction industry
activity in Zaab Triangle is limited to private houses for
the well-off, with the shortage of credit or GOI investment
hindering both small and medium-sized business development.

7. (SBU) Like the rest of northern Iraq, the lengthy drought
has reduced agricultural productivity to - at best - a low
subsistence level. While the current level of agricultural
production does not support agricultural processing, the area
would be ideally suited to use its strategic location,

BAGHDAD 00002102 002 OF 002


available water and potential power to process profitably
local agricultural products. Improved irrigation would help
resolve some of the drought-induced issues and provide a
local demand for grain processing. Grain from local silos is
currently sent to Erbil for grinding.

8. (SBU) The recent GOI attention on Mosul - mainly through
Prime Minister al Maliki's special advisor Zuhair Chalabi -
has led to hopefulness from local officials that investment
and budget execution will improve. The GOI's promises to
execute the budget more efficiently, add supplemental budget
funds and focus efforts on the electric grid and
infrastructure in general have encouraged the region's
inhabitants to begin stockpiling construction materials and
amass funds for small businesses.

Comment
-------

9. (SBU) Two initiatives would directly assist the Zaab
Triangle's economic situation: efficient distribution of
Ninewa and Salah ad Din provincial budget funds for
infrastructure and targeted industrial rehabilitation
projects. First, GOI-funded infrastructure reconstruction
and maintenance projects would improve transportation and
power networks, while pushing more cash into the local
economy. Politically, local implementation of these
infrastructure projects would dovetail with ongoing,
PRT-supported municipal efforts to organize local utility
districts to fill gaps in national service provision. Water
management improvements and drought countermeasures, now
under study by PRT, would help revive the agricultural sector
and provide immediate, low-skilled employment.

10. (SBU) Second, targeted investment in the underperforming
Mishraq Sulfur Plant, Al Shemal power plant and Qayyarah
refinery would provide construction and maintenance jobs in
the short term while setting up the region for sustainable
long-term growth. The sulfur plant sits on the world's
largest natural reserve of sulfur and requires only $100
million to be fully functional (see details reftel). The Al
Shemal power plant's original generation design may now be
outdated, but the existing location's shell could be
exploited to bring state-of-the-art generation to the region
more quickly than building a completely new plant for the
ground up. An increase in dedicated power for the Qayyarah
refinery would assist that plant's output of much-needed
asphalt for local road reconstruction projects.

CROCKER

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