VZCZCXRO4154
OO RUEHBC RUEHDE RUEHIHL RUEHKUK
DE RUEHGB #3550/01 2670615
ZNY CCCCC ZZH
O 240615Z SEP 06 ZDK ZUI RUEHDM 7495 SVC
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7045
INFO RUCNRAQ/IRAQ COLLECTIVE

C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 003550 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 09/17/2026 
TAGS: ENRG EPET IR IZ TK
SUBJECT: IRAQ AGAIN FACING KEROSENE SHORTAGE IN WINTER 
 
BAGHDAD 00003550  001.2 OF 002 
 
 
Classified By: CDA DANIEL SPECKHARD, EO 12958, REASONS 1.5 (B) AND (D) 
 
1.(C) In a September 17 meeting with the Econ 
Minister-Counselor and the IRMO Senior Oil Consultant, Dr. 
Falah J. Alamri, Director General of the State Oil Marketing 
Organization (SOMO), warned that Iraq faces a potentially 
serious shortage of kerosene this winter.  Kerosene is Iraq's 
principal home heating fuel.  Since production can not keep 
up with demand in the winter months, it is necessary to begin 
stockpiling kerosene in the summer.  Alamri claimed that 
gasoline shortages this summer caused a reallocation of 
dollars from kerosene to gasoline, resulting in reduced 
kerosene imports.  As a result, Iraq has only 30,000 metric 
tons (MT) in storage now, as opposed to 150,000MT a year ago. 
 
2.(C) Alamri said that daily demand for kerosene during the 
cold season (length undefined) is 14,000MT per day.  National 
production capacity is 6,000MT/day. (Note: Current production 
is slightly below 6,000).  Currently, SOMO is importing 
350/day from Kuwait and 400MT/day from Syria.  Both figures 
are half or less of the nominal, contracted quantities. 
Alamri said that imports from Iran have not yet begun due to 
a technical specification problem, and imports from Turkey 
have stopped pending payment of charges for past shipments. 
Currently, Iraq is consuming all of the kerosene that it 
imports and produces, so no additions to the stockpile are 
being made for winter use.  The impending shortage of 
kerosene for 2006 follows shortages in 2003, 2004 and 2005. 
 
3.(C) Alamri's goals are to increase imports from Kuwait to 
1,500MT/day and from Syria to 1,000MT/day, start importing 
1,600MT/day from Iran and resume shipments from Turkey.  Even 
if the import targets from Iran, Kuwait and Syria are met, 
SOMO will still be short 3,900MT/day during winter months. 
This figure would be reduced by the quantity of kerosene 
purchased from Turkey, but Alamri realizes that he must first 
negotiate a settlement with the Turks for past, overdue fuel 
payments in order to restart shipments. 
 
4.(C) (Note: Alamri's figures are at variance with IRMO data, 
which indicates a winter demand of 8500MT/day, but the 
shortfall remains similar.  Since January 1, 2006, combined 
production and imports equaled demand for only one week. 
Imports never exceeded 2800MT/day.  For five weeks in 
mid-summer Iraq imported no kerosene, and weekly production 
fell to as low as 18% of weekly demand.) 
 
5.(C) Alamri explained that in February of this year, SOMO 
and the GOT negotiated payment of $950 million past due fuel 
charges from 2005. SOMO agreed immediately to pay $650 
million in 9 monthly installments, with the balance subject 
to further verification.  SOMO has since agreed that they owe 
$200 million of the remainder, leaving approximately $100 
million still to be resolved.  Although, according to Alamri, 
the Prime Minister has ordered the Ministry of Finance to 
release the $200 million, MOF is still refusing to do so. 
Alamri said that he is going to Turkey next week to try to 
resolve this issue, but he will not have the $200 million and 
will be attempting to barter HFO (which Iraq already exports 
to Turkey) for kerosene with Turkish fuel companies.  (Note: 
Several days after our meeting, Alamri told the IRMO senior 
oil consultant that he had found $50 million within MoO's 
budget to help pay the $200 million.  Alamri said that he 
will propose to the GOT that he pay the $50 million now and 
the remainder in four installments (also from MoO funds). 
Nevertheless, the MOF is increasingly the focal point of 
Iraq's inability to execute its budget.  Post will be 
following up with MOF to press for release of the $200 
million, irrespective of Alamri's efforts to solve the 
problem with MoO dollars.) 
 
6.(C) Comment: In a separate meeting with Minister of 
Electricity Karim Walid Hasan, the minister said that MoE's 
winter peak is equal to its summer peak, even though there is 
a huge demand for power in the summer to run air 
conditioners.  Husan attributed the winter peak to the use of 
electric space heaters.  This means that a kerosene shortage 
does not exactly translate to a lack of home heating of equal 
magnitude.  Given the chronic electricity shortages, however, 
homeowners are probably not able to rely on electricity as 
their sole source of home heating.  End Comment. 
 
 
 
 
 
 
 
 
 
 
 
 
 
BAGHDAD 00003550  002 OF 002 
 
 
 
 
 
SPECKHARD