VZCZCXRO6893
OO RUEHDE RUEHIHL RUEHKUK
DE RUEHBC #0092/01 1541554
ZNY CCCCC ZZH
O 031554Z JUN 06
FM REO BASRAH
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0365
INFO RHEHNSC/WHITE HOUSE NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEKJCS/SECDEF WASHINGTON DC
RUCNRAQ/IRAQ COLLECTIVE
RUEHBC/REO BASRAH 0384

C O N F I D E N T I A L SECTION 01 OF 02 BASRAH 000092 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL:  6/3/2016 
TAGS: PGOV PTER PREL PINS ECON EPET ETRD ENRG IZ
SUBJECT: BASRAH FUEL MARKET THRIVES ON SMUGGLING 
 
REF: A) BASRAH 69, B) BASRAH 63, C) BASRAH 38 
 
BASRAH 00000092  001.2 OF 002 
 
 
CLASSIFIED BY: Mark Marrano, DEPUTY REGIONAL COORDINATOR, REO 
BASRAH, DEPARTMENT OF STATE. 
REASON: 1.4 (b), (d), (e) 
 
 
 
¶1. (C) Summary: In a series of meetings with Poloff, petroleum 
and security officials in Basrah painted a stark picture of 
Basrah's fuel market and the black market in petroleum products. 
 Smuggling is relatively easy because of Iraq's porous borders. 
There does not appear to be any organized cartel of fuel 
smugglers, rather rampant profiteering by enterprising 
individuals.  The overall poor security situation provides 
traffickers with a free license to operate.  Iraqi institutions 
identified key equipment shortages and weak law enforcement 
mechanisms as the primary reasons why they are not able to 
apprehend, prosecute, and convict smugglers.  The result is an 
overall climate of fear and chaos that permits traffickers to 
operate with impunity. End Summary. 
 
The Border, a Revolving Door 
---------------------------- 
 
¶2. (C) On April 27, Poloff conducted a discussion with Brigadier 
General (BG) Abbas Muhsin Ali, Commander of the 4th Brigade 
Iraqi Border Police.  BG Abbas described his area of 
responsibility as the entire international border with Kuwait, 
the Al Faw peninsula, and extends north to include the provinces 
of Basrah and Maysan with Iran.  He also stated that he has 
overseas inland waterways and oil infrastructure between 
Nassiriya and Zubair. 
 
¶3.  (C) BG Abbas commented that of all of the illicit businesses 
he confronts in border enforcement, petroleum product 
trafficking was the most lucrative.  He identified the 
marshlands as his chief area of concern, where his forces have 
also discovered pyrotechnics, IEDs, and narcotics.  Migrants 
were well armed and dangerous, BG Abbas said, and his operations 
suffered from material shortages, in particular, a radio 
communications network. 
 
¶4.  (C) He expressed gratitude for a fleet of airboats that he 
said the United Kingdom had provided for operations in the 
marshes.  He said that these boats would be operational by the 
first week in June. The boats currently being used on the inland 
waterways were regular civilian boats, not patrol craft 
specifically suited for the task of combating smuggling. 
(Comment: The donated airboats are similar to those used by U.S. 
law Enforcement in the everglades and Mississippi delta.  End 
Comment.) 
 
¶5. (C) In an April 17 meeting, Ayad Janni, head of the Oil 
Protection Force (OPF), echoed BG Abbas' complaints of equipment 
shortages to REO Poloff.  Because of these shortages, the OPF 
was unable to patrol the entire petroleum infrastructure in its 
AOR.  Equipment shortages included a lack of working patrol 
vehicles, and Ayad said that he had requested additional 
vehicles from the Ministry of Oil.  The shortage is exacerbated 
by administrative requirements to the Ministry of Oil that Janni 
termed "silly," such as the requirement to provide a written 
justification for any expenditure over USD 25. 
 
¶6. (C) Ayad said that the greatest threat he faced was from 
well-armed tribal elements and other unspecified terrorist 
groups that blackmail the OPF with "protection rackets" for 
critical production nodes, such as exposed pipelines, which pass 
through tribal areas. 
 
¶7.  (C) In a May 6 meeting with the Regional Coordinator, 
General Manager of the Southern Oil Company Jabbar Ali Husayn 
al-Lu'aybi raised similar concerns about tribal interference in 
the security of key oil infrastructure, particularly in the 
vicinity of the West Qurnah oil field. (see Ref. A) 
 
Weak Law Enforcement on Smuggling 
--------------------------------------------- - 
 
¶8. (C) In a May 28 meeting, Assaf Husam Aldin Assaf, Judicial 
Investigator at the Basrah Higher Judicial Court (protect), 
discussed the issue of petroleum product trafficking with 
Poloff.  Assaf has a deep understanding of the legal aspects of 
prosecuting oil smuggling due to his experience in current and 
past court cases, as well as police investigations.  He said 
that the difficulty in addressing smuggling was that there was 
no organized group of individuals, such as a cartel or 
syndicate, conducting the smuggling operations.  Smuggling was 
informal, and anybody with the access to oil products and the 
means to move it around could participate in smuggling.  He 
asserted that many senior government officials were profiting 
from smuggling, including Basrah Governor Mohammed Wa'ili and 
 
BASRAH 00000092  002.2 OF 002 
 
 
Provincial Council Chairman Sadoon Obadi and a number of police 
officers (Ref. B).  He also alleged that former Prime Minister 
Jaafari benefited from it. 
 
¶9. (C) Assaf said that the most common method of illicit oil 
(see note above) shipping was by barge or boat down the 
waterways of Iraq to Iran or Kuwait, where the cargo was either 
sold or re-flagged for a longer transit.  The longer transits 
usually terminated in the United Arab Emirates.  Assaf said that 
the practice of re-flagging was not new, and that the Iraqi 
government informally encouraged it as a means to get around the 
Oil For Food program petroleum sales caps under the Baath 
regime.  This has resulted in a relatively high level of 
expertise in smuggling oil out of Iraq. 
 
¶10.  (C) Assaf shared a 2005 report on combating oil smuggling 
from the "Combined Coordination Committee for Counter-Smuggling" 
with Poloff.  This report outlined an interagency approach for 
enforcing smuggling laws and achieving convictions at a local 
level.  Assaf expressed frustration that the documents were 
never supported by the relevant central government agencies. 
 
No Scarcity of Fuel 
-------------------- 
 
¶11. (C) A local private fuel station in Basrah, Attamiem, 
informed the REO that he sold Type 93 gasoline at 150 Iraqi 
Dinars (ID)/liter and kerosene at 20 ID.  He said that he 
experienced occasional shortages of fuel depending on the 
severity of the security situation, but these occurrences were 
infrequent.  He said he believed his supplier bought fuel 
directly from a local refinery.  When the supplier was short on 
fuel and fuel shortages occurred in Basrah, he bought fuel 
smuggled in from Iran and resold it at higher prices. 
 
¶12. (C) Hamid Al-Moosawi (protect), a REO contact and younger 
brother of a prominent moderate Shia cleric in Basrah, stated 
there is "no fuel shortage" on the market in Basrah, but said 
that there was a perception of fuel shortages because fuel-truck 
drivers are at a high risk for hijacking.  According to Civilian 
Police Advisory Training Team (CPATT) data, 8 out of every 20 
trucks that cross the Iraq-Kuwait border are diverted.  Some are 
hijacked, but others are suspected to be voluntarily turning 
over their cargo to criminal interests in return for a payoff. 
 
 
¶13. (C) Comment:  Smuggling abounds in the permissive 
environment of Basrah.  Prime Minister Nouri Al Maliki 
spotlighted oil smuggling in Basrah during his May 31 press 
conference on overall security in Basrah.  Although we hear 
repeatedly that crude smuggling is a problem, it is not one for 
which the production and export numbers provide much evidence. 
Even the MoO Inspector General in a recent report on smuggling 
had virtually nothing to say on the subject of crude smuggling - 
aside from a one-sentence assertion in his summary that the 
problem exists.  In order to combat smuggling of all types, in 
particular of petroleum products, security improvements need to 
be coupled with the necessary economic reforms (see reftel C) to 
remove fuel subsidies, and with them, the incentive to smuggle 
petroleum products.  End Comment. 
MARRANO