Cablegate: Najaf Airport Terminal Expansion; Dissatisfaction With

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RR RUEHWEB

DE RUEHGB #2536/01 2650728
ZNR UUUUU ZZH
R 220728Z SEP 09
FM AMEMBASSY BAGHDAD
TO SECSTATE WASHDC 4779

UNCLAS BAGHDAD 002536

SIPDIS

E.O. 12958:N/A
TAGS: EAIR PREL PGOV IZ
SUBJECT: NAJAF AIRPORT TERMINAL EXPANSION; DISSATISFACTION WITH
INVESTMENT PARTNER AL AQEEQ

REF: 08 BAGHDAD 2299

1. This is a PRT Najaf reporting cable.

2. (SBU) Summary: Najaf airport opened its passenger terminal
expansion on September 8, 2009. The provincial government is very
dissatisfied with performance of investment partner Al Aqeeq (AA),
which has only spent US$7 million of the US$50 million the
provincial government expected AA to spend during the past year.
Najaf is sending a delegation to Kuwait to insist that AA live up to
its promises. If not the delegation may seek to terminate its
relationship with AA. AA is also seven million USD behind in its
payments to airport security contractor Sabre. The province has
told both Sabre and the PRT that it wants Sabre to be part of Najaf
Airport's future, whether Al Aqeeq goes or stays, and would be
willing to pay Sabre going forward. Najaf Airport remains the
provincial government's top priority project in Najaf, and the
Governor is serious when he says he wants to attract a direct flight
between the United States and Najaf. End summary.

Terminal Expansion Opening

3. (SBU) On September 8, the Najaf Airport opened its gleaming
passenger terminal expansion, doubling the space of its current
temporary passenger terminal. Governor Adnan Zurfi (a dual
Iraqi-American citizen) and PC Chair Sheikh Fayed al Shimmeri
officiated at an Iftar for about five hundred, including
considerable media coverage. PRT members were honored guests in the
front row at the remarks and during the Iftar. Team Leader found
himself sitting between the Governor and the son of Imam Qubanchi
(Note: Although more moderate recently, Imam Qubanchi has been a
regular critic of the U.S. in Friday sermons in Najaf. The PRT
reports on the Imam's sermons each week in its SitRep. End note.)
The provincial government, and not airport investor Al Aqeeq, funded
the terminal expansion project through a mix of local funds, and a
special allocation from Baghdad as a result of special appeals to
the PM and Ministry of Finance.

Al Aqeeq Has Not Met Contract Obligations

4. (SBU) According to the provincial leaders (including the Governor
and the PC Chair), Al Aqeeq has failed to meet its obligations as
the airport operator over the last year. It was apparently supposed
to spend 50 million USD during the last year, but is estimated to
have spent only about seven million USD. It has only paid airport
security contractor Sabre one million USD of the eight million USD
that it owes Sabre. Al Aqeeq is about eight months behind in
installing ILS (instrument landing system) equipment which will
allow precision instrument approaches in weather conditions as
adverse as one half mile visibility.

5. (SBU) As a result, the airport operates only in the daytime under
Visual Flight Rules. The Airport has installed a Very High
Frequency Omnidirectional Range navigation system (VOR) and
submitted a VOR approach to the Iraq Civil Aviation Authority
(ICAA). Based on the history of stalled development at the Airport
(of which the ILS is a prime example), the ICAA has not approved the
VOR approach. OTA reports that the ICAA views the VOR as an interim
step for Instrumental Flight Rules (IFR) services and will not
approve the approach until there is progress on the ILS.

Crunch Time

6. (SBU) Governor Zurfi told TL and Transportation Advisor Bentson
that the province was presenting Al Aqeeq with an ultimatum to
either perform in accord with the contract or withdraw. He
maintained that Al Aqeeq's initial response was positive. Acting on
that positive sign, the Governor reports that he will dispatch a
delegation to Kuwait to carry out further negotiations imminently.
delegation to Kuwait to carry out further negotiations imminently.
The Governor's representative at the airport Sadiq Laban asked
Transportation Advisor to provide a non-paper with the key points
that should be part of any new contract. Transportation Advisor
commented that AA, which is really an investment company, should
hire a professional airport management company and agreed to provide
the non-paper. Laban was clear that going forward the airport must
be ICAO compliant, and that security for the airport must be world
class.

Sabre Owed Money by AA

7. (SBU) Sabre has told PRT that Al Aqeeq owes Sabre seven million
USD since January. Sabre has tired of AA's stalling tactics and has
already told AA that it cannot afford to continue operations unless
it is paid. Sabre's predecessor, as security contractor, Global,
also quit last January over payment issues. The Governor told Sabre
that the province would like Sabre to remain the security contractor
at the airport even if AA goes. The province has told Sabre and us
that it would be ready to step in and pay Sabre going forward.
However, in one conversation, Laban mentioned that Sabre would have
to go after AA to receive unpaid fees from its contract with AA. It
is unclear whether Sabre could/would be willing to continue
operations if it is not compensated for its work over the past six
months. Sabre currently employs more than two hundred at the
airport and would already be augmenting its staff and training for
the future if it had received its fees. The province says making
sure that Sabre is paid promptly will be an early test of AA's
sincerity.

Relatively Modest USG/PRT Contributions to Najaf Airport have
Leveraged Progress

8. (SBU) Cooperation between the USG, Najaf Province, and the GOI
has been highly successful in moving this key project forward. USG
contributions have been important, on the technical and management
coordination side, but relatively modest in financial terms. Since
2007, the USG facilitated a number of important activities at the
Airport. On a pro bono basis, Boeing visited to survey the former
military airport and runway on the present airport site to determine
the suitability for various classes of passenger aircraft. The USG
hired Stanley Engineering with US$2.5 million in ESF funding to
prepare the Airport's master plan. ESF/PRDC funding built the
airport heliport for US$918,000 and a further US$300,000 provided
for necessary work on the apron. The FAA conducted an ICAO-based
airport inspection in December of 2008. OTA is considering
providing US$1.5 million in security equipment to the airport and
will travel to Najaf to check on the progress addressing the
deficiencies identified in the FAA inspection.

9. (SBU) The most important contribution has been through constant
technical advice (on a daily basis through PRT transportation
advisor Kirk Bentson and frequent contributions from OTA) ensuring
understanding of what needed to be done to achieve ICAO compliance
and international standards. The PRT has played a vital role,
working with OTA, to bring about coordination between Najaf
authorities and the ICAA/Ministry of Transportation to ensure that
air traffic controllers, customs and immigration personnel arrived
in a timely manner for each phase of airport operations. Almost all
Najafis, including the marja'iyah, are well aware, and highly
appreciative of USG support of the Najaf Airport project (reftel).
This in turn has provided the USG with very positive IO; the PRT
attributes increased acceptance by Najafis to the PRT's
contributions in this area.

Getting the Flights to Fly

10. (SBU) Neither the provincial government nor AA has been
successful in motivating the ICAA to negotiate bilateral agreements
to bring flights to the Airport. Al Aqeeq's lack of experience has
contributed to a myopic focus on getting the airport open. Their
naivety led them to believe that "if they built it, they would come"
and flights from all destinations would be permitted to land. AA
did not devote enough attention to the marketing and bilateral
agreements necessary to permit and stimulate international arrivals
at the new airport.

11. (SBU) The ICAA is responsible for negotiating bilateral
agreements for Iraq, and its overriding concern is to protect Iraqi
Airways. That protectionism will be to the detriment of Najaf
Airport. Mahan Airlines discontinued their flights from Iran to
Najaf as a result of an impasse over compensation from Mahan to
Iraqi Airways for an imbalance in the number of flights flown by
each airline. As a result, relations between Mahan and ICAA are
currently very poor, which does not bode well for future flights
from Iran to Najaf. The province has lost, and stands to lose,
significant tourism revenue but does not appear to be working with
the ICAA, the MOT, or the legislature to change the policies that
are damaging their interests.

12. (SBU) The province previously had a healthy relationship with
12. (SBU) The province previously had a healthy relationship with
the ICAA. Since the change in leadership both in the provincial
government and in the ICAA early this year, their interaction
appears to have ground to a halt. AA's involvement and failure to
deliver on promises had always made the relationship a challenging
one, but that on-going communication was more productive than the
current silence between the parties.

13. (SBU) This project is at the top of Najaf's agenda, a key step
in building its vision of the future as a modern center of learning,
tolerance, culture, and exchange while maintaining its tradition as
the revered center of Shi'ism. This vision for the future is
exemplified by the last session of the Organization of the Islamic
Conference accepting Najaf as a "capital of Islamic culture in
2012."

14. COMMENT: The problems with Al Aqeeq are not new. The company
is not an experienced airport developer. OTA and the PRT have
advised the province of AA's deficiencies, but the province has been
reticent to cancel the agreement with AA even in the face of
recurring non-performance. Najaf Airport will not reach its
potential unless AA meets its contract obligations, relinquishes its
management role, and hires a competent airport management company.
Even with those challenges, there is no doubt that the provincial
government will devote significant attention to working to get the

airport right. Sheikh Fayed and the provincial council have met to
discuss and authorize the negotiations with Al Aqeeq. It is
difficult to tell whether AA's reluctance to put more money into the
project over the last year reflects financial worries or possible
political worries. AA initially contracted with the prior ISCI-
dominated provincial administration. The airport was only a small
part of AA's planned investment in the province. Their plans also
included a large residential real estate project out by Bahar Najaf,
but that development has stalled as well.

15. The Najafi vision for the future is re-enforced by an uptick in
interest in English studies, the Governor's strong support for
Najaf's first sister city relationship with Minneapolis, calls from
Najaf elites for a U.S. consulate to be established, and the
Governor's interest direct flights between the U.S. and Najaf
(however unlikely that may be), and to Europe.

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