This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS  ROME 000973 
 
SIPDIS 
 
 
SENSITIVE 
 
FROM U.S. MISSION TO THE UN AGENCIES IN ROME 
 
STATE FOR NEA/IR AMBASSADOR RAPHEL, IO A/S HOLMES, IO/EDA 
USDA/FAS FOR U/S PENN, ETERPSTRA, MCHAMBLISS, RTILSWORTH AND 
LSCHATZ 
USAID FOR AA/DCHA WINTER, AA/ANE, DCHA/OFDA, D/DCHA/FFP 
LANDIS 
JOINT STAFF FOR JE/J4/J5 
NSC FOR JDWORKEN 
 
E.O. 12958:  N/A 
TAGS: EAID EAGR AORC IZ WFP IRAQI FREEDOM
SUBJECT: IRAQ: WFP WARNS OF POSSIBLE BREAKS IN FOOD PIPELINE 
UNLESS COORDINATION ON CONTRACTS IMPROVES QUICKLY 
 
Sensitive but unclassified -- please handle accordingly. 
 
¶1.  (SBU)  Summary:  During February 26 meetings in Rome 
with the Coordinator for Iraq Reconstruction, Ambassador 
Robin L. Raphel, officials of the World Food Program (WFP) 
warned that difficulties in the management and coordination 
of food contracts and deliveries with authorities in 
Baghdad, if not corrected rapidly, could result in breaks in 
the pipeline of essential food commodities in the months 
ahead.  They said that, under current conditions, it was 
very difficult to ensure that a 3-month buffer stock of food 
would be on hand when sovereignty is transferred at the end 
of June.  WFP officials insisted that, with appropriate 
support and cooperation from the Iraqi Ministry of Trade 
(MOT) and the Coalition Provisional Authority (CPA), WFP is 
capable of meeting food delivery targets, and they 
reaffirmed their commitment to ensuring food security in 
Iraq during the current transition phase.  They explained, 
however, that slow release of funds, delays and apparent 
irregularities in contract specifications, contradictory 
instructions from MOT and CPA, and other obstacles have made 
it very difficult for WFP to do its job under the terms of 
the January 2004 MOT-CPA-WFP Memorandum of Understanding 
(MOU).  On February 27, Ambassador Raphel raised these 
issues with Iraqi Trade Minister Ali Allawi, who was in Rome 
on other business.  She and the U.S. Mission also arranged 
for WFP officials to discuss their concerns directly with 
the Minister that day.  Mission recommends that WFP and CPA 
officials meet at the earliest opportunity to discuss ways 
to improve coordination and cooperation, so that food 
insecurity does not further complicate the situation in Iraq 
during the crucial political transition later this year. 
After this message was drafted, WFP Country Director Torben 
Due traveled to Baghdad for 24 hours for extensive meetings 
with CPA, MOT, and Ambassador Raphel.  Due succeeded in 
working through some of the issues described below.  End 
summary. 
 
¶2.  (U)  In a day-long series of meetings at WFP on February 
26, Ambassador Raphel discussed food pipeline, contracts, 
procurement and transport issues in Iraq with Executive 
Director James Morris, Deputy Executive Director 
(Operations) Jean-Jacques Graisse, Middle East Regional 
Director Khaled Adly, Iraq Country Director Torben Due, Iraq 
Regional Operations Manager Amer Daoudi and other WFP staff. 
Andrea Farsakh (NEA/IR), Deborah Linde (IO/EDA) and Willem 
Brakel (Alternate Permrep, U.S. Mission) accompanied.  The 
discussions with senior officials took place at WFP 
Headquarters.  Detailed conversations at the operational 
level were held at WFP's special Iraq Logistics Unit located 
in a separate facility in the south of Rome. 
 
     --------------------------------------------- ------ 
     BACKGROUND: WFP-MOT-CPA MEMORANDUM OF UNDERSTANDING 
     --------------------------------------------- ------ 
 
¶3.  (U)  In the latter part of 2003, CPA and MOT made a 
specific request for WFP to provide support to Iraq's public 
distribution system (PDS) for food staples from 22 November 
2003 through June 2004.  On 7-8 January 2004, WFP, MOT and 
CPA signed an MOU that spelled out the terms of WFP's 
involvement and the responsibilities of each party.  The 
parties agreed to carry out the following activities (only 
highlights of each article presented here): 
 
     (1) Capacity Building and Training:  WFP to provide 
     training and support for MOT staff on procurement, 
     transport and pipeline functions, with a view to MOT 
     reassuming full responsibility for PDS management upon 
     termination of the MOU. 
 
     (2) Procurement of Buffer Stocks and Shortfall 
     Commodities:  MOT to provide WFP with detailed 
     commodity specifications for each commodity in the PDS 
     food basket within one week of the effective date of 
     the MOU.  WFP to procure, according to its own rules 
     and regulations, commodities as requested by CPA, 
     initially $110 million worth.  Additional WFP 
     procurement to follow as agreed by all parties until 31 
     March 2004, after which procurement becomes the 
 
 
     responsibility of MOT. 
 
     (3) Renegotiation of Contracts Amended under SCR 1483: 
     CPA to authorize WFP to further renegotiate terms of 
     delivery of food contracts renegotiated under this 
     resolution.  Except for quantities already afloat, WFP 
     to approach suppliers to propose renegotiation of 
     delivery terms from CIF 18 Governorates to FOB loading 
     port, and to revise prices to reflect current costs. 
 
     (4) Shipping and Overland Transportation: WFP to 
     deliver to Iraq all the commodities it procures under 
     the new and renegotiated contracts.  WFP to arrange 
     delivery of commodities under new contracts to one of 
     three designated hubs (Baghdad, Mosul, Umm Qasr).  WFP 
     to maintain offices in Jordan, Turkey, Syria and Kuwait 
     to monitor deliveries.  WFP responsibility for 
     shipments to end upon delivery at the hub and 
     certification of shipment by an independent surveyor, 
     after which title passes to MOT.  MOT to ensure that no 
     trucks carrying WFP shipments are diverted.  MOT to 
     ensure that truck offloading times at hubs do not 
     exceed 48 hours and to assume responsibility for 
     demurrage charges thereafter. 
 
     (5) Pipeline Data:  MOT to provide an updated monthly 
     allocation plan by commodity for each hub, taking into 
     account needs and stock levels.  MOT also to provide a 
     weekly countrywide stock report per commodity, and a 
     monthly stock report for each hub and for PDS stocks in 
     each governorate. 
 
     (6) Other PDS Management, Coordination and Capacity 
     Issues:  MOT to commit appropriate resources to manage 
     the PDS and to staff the Baghdad Coordination Center; 
     to provide accurate local and national inventory 
     monitoring systems; and to ensure adequate storage 
     space and handling capacity.  CPA to establish and 
     manage the Coordination Center; to assign liaison 
     staff; and to provide MOT with communications 
     capability. 
 
     (7) Financing:  The goods and services to be provided 
     by WFP were costed as follows: 
 
          Direct Operational Costs      $844,191,000 
          Direct Support Costs                $26,622,000 
          Indirect Support Costs (4.5%)  $39,187,000 
          Total WFP Costs                    $910,000,000 
 
     CPA is to fund the cost of commodities under Article 
     (2), external and overland transport, direct support 
     costs (with some exceptions) and indirect support 
     costs. 
 
¶4.  (U)  The MOU is effective from the date of signature 
until 30 June 2004, and, with respect to commodities 
procured or renegotiated still en route, until the date of 
delivery.  WFP undertook to assist in the supply of the 
following commodities: wheat, rice, pulses, vegetable ghee, 
sugar, tea, milk, salt, infant formula, weaning cereal, 
olive oil, as well as soap, detergent, sodium silicate and 
sodium sulfate. 
 
        --------------------------------------------- 
        WFP'S PROGRESS AND CONCERNS AS OF 26 FEBRUARY 
        --------------------------------------------- 
 
¶5.  (SBU)  In their discussions with Ambassador Raphel on 
26 February, WPF officials reaffirmed their commitment to 
assisting in procuring and delivering commodities for Iraq 
under the terms of the MOU.  They cited WFP's longstanding, 
close working relationship with Washington as a key factor, 
in addition to WFP's global food security mandate.  The WFP 
officials expressed concern, however, that current working 
relationships on the ground are hampering WFP's efforts in 
Iraq.  They are concerned about confused lines of authority 
and conflicting or uncoordinated instructions from CPA and 
MOT.  WFP staff feel that some in Baghdad are actively 
trying to impede and hamper WFP's work.  They warned that, 
 
 
if the situation is not corrected within the coming 1-2 
weeks, there will be no buffer stock and there is a serious 
risk of an interruption in the food pipeline.  One official 
said, "we're losing time."  Another added "this cannot 
continue," pointing out that it takes 3-4 months between the 
initial tendering and final delivery in Iraq.  Many of WFP's 
comments were linked to issues or perceived shortcomings 
regarding the implementation of various articles of the MOU. 
For the sake of clarity, we present WFP's key points in 
paras 6-14 below as they are sequenced in the agreement. 
 
Capacity Building and Training 
------------------------------ 
 
¶6.  (SBU)  WFP currently has four Iraqi women from MOT 
working in its Iraq Logistics Unit in Rome.  WFP officials 
recognized the importance of training, but they pointed out 
that involving Iraqi nationals directly in procurement and 
tendering operations poses potential conflict-of-interest 
problems.  They suggested it might be more useful to involve 
Iraqi trainees in procurement operations for other countries 
or regions, so that the trainees can observe WFP's 
procedures without running afoul of the auditors.  They 
noted, however, that some Iraqis expressed resentment over 
their perceived isolation, which they saw as a sign of 
mistrust, when in fact it is standard operating procedure 
for WFP.  One WFP official conceded that the relationship 
between WFP and MOT had deteriorated to the extent that not 
much capacity building was feasible. 
 
Procurement of Buffer Stocks and Shortfall Commodities 
--------------------------------------------- --------- 
 
¶7.  (SBU)  WFP staff called attention to what they consider 
serious delays and other problems with the contract 
specifications provided by CPA/MOT.  They said that, as of 
26 February, wheat specifications had not yet been 
finalized.  In their view, the initial specifications WFP 
received for rice at the end of January were so stringent as 
to be "virtually impossible."  At a February 25 coordination 
meeting in Amman, WFP was provisionally informed of new 
specifications for rice; but to WFP staff it appears that 
only U.S. suppliers can meet the new specifications -- at a 
cost up to 80% higher than Southeast Asian suppliers. 
Speaking more generally, WFP officials defended WFP's 
procurement procedures, which include secure firewalls 
around the tendering process.  They argued that WFP's 
procedures were approved by the Executive Board and 
procurement operations are rigorously audited.  They 
maintained that publishing details of prices and quantities 
on recently awarded contracts -- as some parties and 
suppliers have called for in the name of transparency -- is 
not appropriate for the international markets in which WFP 
is operating, as this gives too much of an advantage to 
suppliers. 
 
¶8.  (U)  According to WFP, the agency has finalized 210 
contracts for 1,357,636 MT, as of February 27.  Another 47 
contracts for 851,886 MT are termed "ongoing."  These and 
other figures are reported to MOT and CPA in a weekly email 
containing detailed spreadsheets that is sent out every 
Friday afternoon. 
 
Renegotiated Contracts 
---------------------- 
 
¶9.  (U)  WFP interlocutors reported that, as of February 27, 
WFP had renegotiated 409 contracts for 2,769,768 MT of 
commodities.  They estimated that the renegotiated Oil-for- 
Food contracts will be sufficient to meet requirements until 
May. 
 
Shipping and Overland Transportation 
------------------------------------ 
 
¶10.  (SBU)  The WFP Regional Operations Manager expressed 
concern about port congestion and MOT's limited capacity for 
offloading vessels.  Several vessels carrying Australian 
bulk wheat are already experiencing significant delays due 
to offloading constraints and inspection/certification 
 
 
delays.  On 26 February there were 2 vessels at Umm Qasr 
waiting since 5 and 6 February, respectively, for inspection 
and sampling.  One vessel was still waiting for 
berthing/discharging at Umm Qasr since arriving at Dubai 
Roads for inspection on 6 February.  Four additional wheat- 
laden vessels are due to arrive at Umm Qasr in March. 
Similar problems could arise at Aqaba.  The WFP official 
pointed out that, in addition to contributing to possible 
pipeline problems, such delays waste scarce resources when 
MOT is required to pay high demurrage charges. 
 
¶11.  (SBU)  WFP also is concerned by recent instructions 
from CPA to convert some delivery contracts from free on 
board (FOB) to cost, insurance and freight (CIF).  Such a 
change would put WFP in a precarious position of having to 
depend on third parties to certify delivery of shipments 
that it cannot confirm directly.  This opens up liability 
issues or could cast doubt on WFP's reliability in the 
market if it cannot pay promptly after delivery.  With 
regard to this particular instruction from CPA, WFP staff 
also expressed concern about the haphazard, ad-hoc nature of 
the communication, which came in the form of an improvised 
letter on hotel stationary. 
 
Pipeline Data 
------------- 
 
¶12.  (SBU)  WFP staff said they have not been receiving 
regular data on inventories, and what numbers they do 
receive are unreliable and subject to sudden, large and 
unexplained stock adjustments.  They maintained that, in 
this environment, it was difficult to plan deliveries 
rationally and effectively.  WFP officials also reported 
that they were not receiving vital information on arrivals 
of food and non-food cargo likely to impact port or storage 
availability for PDS commodities.  Meanwhile, on a more 
positive note, WFP reported progress on a baseline food 
security assessment that identifies areas of concentration 
of vulnerable populations within governorates. 
 
Other PDS Management, Coordination and Capacity Issues 
--------------------------------------------- --------- 
 
¶13.  (SBU)  According to WFP officials, the Baghdad 
Coordination Center lacks experienced staff and has not been 
able to do much in the way of coordination to support and 
facilitate logistics operations.  What, they asked, is the 
Center's added value?  They suggested a re-thinking of the 
Center's terms of reference.  WFP staff also complained 
about the peremptory tone of some communications received 
from CPA, which they found insulting as professionals. 
 
Financing 
--------- 
 
¶14.  (SBU)  WFP officials told Ambassador Raphel that funds 
for WFP's food procurement activities for Iraq had been slow 
to arrive.  The first tranche of $110 million was received 
in mid January.  The second tranche of $350 million was 
announced in late January, but was not received by WFP until 
February 24.  The remaining $531 million will be needed soon 
if WFP is to complete all necessary procurement by March 31. 
 
Looking Ahead 
------------- 
 
¶15.  (SBU)  In conclusion, Graisse and his colleagues 
reiterated that WFP is anxious to do the job well, and do it 
right.  They maintained that they could do this if obstacles 
were not thrown in their way.  They said they were worried 
there will be finger-pointing at WFP at the end of the day - 
- and indeed it has already begun, according to one WFP 
official.  Graisse noted that "we are burning our bridges 
with the new administration," which could limit WFP's future 
work in Iraq.  (Under the UN Strategic Plan for Iraq, WFP 
has been selected as the Task Manager of the Food Security 
Cluster.  Among the safety net activities is a school 
feeding project that, in its March-May 2004 pilot phase, 
will cover over 800,000 school children in 10 governorates, 
to be extended to 2 million children in its September 2004 - 
 
 
May 2005 expansion phase.)  The WFP officials said it was 
important to improve communication with Baghdad, and wanted 
an opportunity for discussions first with CPA. 
 
            ------------------------------------ 
            U.S. RESPONSE AND FOLLOW-UP MEETINGS 
            ------------------------------------ 
 
 
¶16.  (SBU)  Ambassador Raphel responded to WFP officials 
that Iraq's food pipeline is a key priority for Washington. 
She said she would take up the concerns expressed by WFP 
with the appropriate officials in Baghdad (where she would 
be going the first week of March).  She said that it might 
be appropriate to refine the scope of the Coordination 
Center, and perhaps concentrate first on the essential food 
contracts to ensure a 3-month buffer stock by July.  She 
said she also would speak directly to Trade Minister Ali 
Allawi (coincidentally in Rome on other business and whom 
she would be meeting the next morning), to inform him of the 
situation. 
 
¶17.  (SBU)  Minister Allawi reacted positively to Ambassador 
Raphel's suggestion of a direct meeting between the Minister 
and WFP representatives.  U.S. Mission therefore arranged 
for Allawi to meet WFP officials Graisse, Due, and Daoudi 
for an hour on the afternoon of 27 February.  Alternate 
Permrep also attended.  Graisse told Allawi that WFP wanted 
to do its job of delivering food under the MOU, but needed 
clear, consistent marching orders to do so.  He warned of 
potential pipeline breaks.  The Minister replied, "I give 
orders, but nobody marches."  He said he had set up a DG- 
level committee headed by his deputy to manage food and 
related contracts, and that he had heard complaints about 
WFP regarding tendering snafus, quality problems, delayed 
letters of credit, lack of updated information on contracts, 
and WFP's alleged tendency to deal with CPA instead of MOT. 
The WFP officials had convincing rebuttals to all of these 
allegations, which they sought to demonstrate were either 
erroneous or based on circumstances outside of WFP's 
control. 
 
¶18.  (SBU)  As the discussion turned to major recent WFP 
contracts, it was evident that Allawi had not been briefed 
by his staff and that he had not received clear information 
on the processes WFP was following.  The Minister and 
Graisse agreed that WFP would hand-deliver to the former at 
his hotel its latest weekly pipeline update, and that 
Operations Manager Daoudi would remain on standby to answer 
any questions the Minister might have before he departed 
Rome the following morning.  WFP contacts were grateful for 
the opportunity to clear up misunderstandings and set the 
record straight; but one of them subsequently pointed out 
that the Minister never called back for further information. 
 
¶19.  (SBU)  Finally, on 1 March, Lee Schatz (Office of the 
Administrator, USDA/FAS) transited Rome in returning to 
Washington from a CPA-MOT-WFP coordination meeting in Amman. 
U.S. Mission arranged for him to meet with Daoudi and three 
other colleagues at WFP, which allowed a fuller exchange 
that covered many of the issues described above and provided 
further clarification. 
 
                    -------------------- 
                    U.S. MISSION COMMENT 
                    -------------------- 
 
¶20.  (SBU)  WFP has been a outstanding USG partner in 
meeting emergency food needs and achieving U.S. humanitarian 
objectives in crisis areas around the globe.  This 
relationship has intensified in the past 12 years since WFP 
has had an American Executive Director.  It is large part 
due to the special relationship between the USG and WFP that 
the latter has responded positively to our request to assist 
in addressing Iraq's food needs.  This is an operation that 
lies outside WFP's usual mandate and is fraught with 
political and physical risks for the organization and its 
staff.  We have the highest confidence in the 
professionalism and integrity of WFP operations, and in Rome 
enjoy a close working relationship with WFP at the highest 
 
 
levels.  There are inevitable frictions in a tense post- 
conflict situation, but we are convinced that these can be 
resolved through frank communication.  We urge that WFP and 
CPA officials arrange to meet at the earliest opportunity to 
resolve any questions regarding WFP food procurement and 
deliveries to Iraq, and specifically to agree on priorities 
and a game plan to deal with an increasingly reluctant MOT. 
(This subsequently occurred March 3-4, as reported in 
Baghdad 0045.)  U.S. Mission stands ready to use its 
personal contacts and influence with WFP to facilitate 
contacts and address any unresolved questions. 
 
¶21.  (U)  Ambassador Raphel cleared this cable. 
 
¶22.  (U)  Minimize considered. 
 
HALL 
 
 
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 2004ROME00973 - Classification: UNCLASSIFIED