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Cablegate: Fuel Availability in Anbar Province Improves, But

VZCZCXRO3272
PP RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK
DE RUEHGB #3128/01 2720714
ZNR UUUUU ZZH
P 280714Z SEP 08
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC PRIORITY 9670
INFO RUCNRAQ/IRAQ COLLECTIVE PRIORITY

UNCLAS SECTION 01 OF 02 BAGHDAD 003128

SBU
SIPDIS

E.O. 12958: N/A
TAGS: ENRG EINV ELTN
SUBJECT: FUEL AVAILABILITY IN ANBAR PROVINCE IMPROVES, BUT
DEMAND OUTSTRIPS SUPPLIES

SENSITIVE BUT UNCLASSIFIED. NOT FOR INTERNET DISTRIBUTION.

1. (SBU) This is a PRT Anbar reporting cable.

Summary
-------

2. (SBU) Anbar Province experienced severe fuel shortages
during the Sunni insurgency in 2006-2007. Fuel supplies have
now increased, notably with the re-establishment of security,
the reopening of a small refinery in the western part of the
province, and the privatization of fuel deliveries. However,
local demand has outpaced growth in the fuel sector. Even
with some supply restrictions removed, controls on fuel
prices have prevented market equilibrium and allowed a black
market to continue. The increased demand has provided
fertile ground for corruption and theft and, with a
limitation in fuel distribution infrastructure, inhibited the
government from receiving its full monthly fuel allocation.
End Summary.

Remarkable Increase in Fuel
---------------------------

3. (SBU) Sitting inside a dust-filled office in Ramadi,
director general (DG) of fuel for Anbar province Abdulghani
Abdulwahab recalled that in March 2007 the Governor gave him
cash for a purchase of 5,000 liters of fuel for government
use, but he found only 1,600 liters in the city. In those
days, the inability to transport fuel by truck because of
Al-Qaeda security concerns had created severe shortages.
Today however, the security environment permits commercial
truck companies to carry large shipments of fuel. Shortages
still exist, but the situation has improved.

4. (SBU) The Ministry of Oil sets fuel allocation weekly,
based on production factors at the Bayji Oil Refinery (BOR)
in neighboring Salah ad Din Province. In August, Anbar
received 75 percent of its fuel allocation of 63 million
liters. The province,s ability to take this allocation has
increased enormously since the period September 2007 to March
2008, when only 10 percent of allocation was received. Two
developments have occurred to facilitate this change.

Delivery and Refining
---------------------

5. (SBU) The first development was the privatization of the
truck delivery process. The provincial government, with the
Ministry of Oil, made the decision to privatize fuel delivery
as a strategy to safeguard fuel shipments. The Fajr Al
Jazeera Company won the contract, and since April has been
required to send 158 fuel trucks every three days to the BOR
to pick up Anbar's fuel allocation. Official numbers
indicate a 488 percent increase in local fuel supplies and a
20 percent decline in street fuel prices since the
privatization.

6. (SBU) The other source of improvement was the 18 July
reopening of the K3 oil refinery in western Anbar, which has
helped to offset shortages in diesel and kerosene. Situated
near Haditha, the refinery has begun to supply the western
part of the province with 5,500 barrels per day (bbl/d) but
has the capacity to produce 16,000 bbl/d. It has become a
welcome complement to the BOR, expanding overall fuel supply
by 20 percent.

7. (SBU) Seen from Abdulghani,s office window was an endless
flow of fuel trucks entering the Ramadi Fuel Distribution
Center (FDC); they swarm around the pumps that offload fuel
from Bayji. They are then reloaded in order to replenish
government and commercial fuel stations throughout the
province.

8. (SBU) Abdulghani was upbeat about continued improvement in
fuel availability. When pressed for a reasonable guarantee
that continued growth would be met with increased fuel
delivery, he noted "Even six months ago, the situation was
something to cry over; now, it is completely different."
However, Abdulgahni,s optimism is not shared by many in the
business community.

Discontent in the Business Community
------------------------------------

9. (SBU) At a raucous September 9 town hall meeting in the
Provincial Council,s auditorium, furious businessmen shouted
for adequate fuel supplies. Many claimed that fuel was being
siphoned from their trucks at the FDC. Abdulghani, who was
present at the meeting, was accused of complicity. There
were also murmurs that Sheikh Ali Hatem, the owner of The

BAGHDAD 00003128 002 OF 002


Fajr Company, was involved in the graft. Factory owner and
PC member, Sheik Ra,ad Sabah, claimed that the retail price
of fuel is 350 dinar but he is forced to pay 400 wholesale.
When asked for a receipt he could not produce one.

10. (SBU) Leakages occur throughout the fuel delivery
distribution channel. Wily mechanisms at the Ramadi FDC
include tricking the meter into thinking that fuel has been
drained from the truck when only pressurized air has flowed
through the hose. Drivers then depart with full or partially
full tanks. The subterfuge obviously requires cooperation
between drivers and the pump handlers. Huge profits are made
by selling the stolen fuel on the informal market or abroad.

Comment
-------

11. (SBU) As the town hall meeting indicates, public
expectation for better service is rising faster than the
government,s ability to provide for better services. Even
as fuel availability has increased, the provincial government
is still hobbled by theft as well as by an inadequate
fuel-distribution infrastructure. A recent CERP project at
the fuel distribution center aims to add additional fuel
loading and unloading facilities. This will expand the
facility,s throughput capacity by 30 percent, enabling
trucks to spend more time making deliveries instead of
waiting in line at the distribution center. Shortages of
fuel, however, ultimately will not be resolved until
administrative controls on the fuel price are removed,
allowing the price to move freely according to demand. End
Comment.
CROCKER

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