VZCZCXRO7393
RR RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK
DE RUEHGB #3310/01 2780507
ZNR UUUUU ZZH
R 050507Z OCT 07
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 3700
INFO RUCNRAQ/IRAQ COLLECTIVE

UNCLAS SECTION 01 OF 03 BAGHDAD 003310 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ETRD EMIN IZ
SUBJECT: EPRT AL ASAD - STATE-OWNED ENTERPRISES IN WESTERN AL ANBAR 
 
¶1. (U) SUMMARY: The State-Owned Enterprises (SOE) in Western Al 
Anbar Province are under considerable strain to achieve even modest 
production goals.  The availability of raw materials, fuel, and 
stable electricity are primary factors in lagging production for 
products that have a substantial economic impact to the province and 
the country. Resuming operation of the Iraqi Railroad (IRR), coupled 
with restoration of oil refining operations and distribution at the 
K-3 refinery south of Hadithah, would have a significant impact on 
the ability of SOEs to increase production.  END SUMMARY 
 
The Al Qaim Phosphate Plant 
--------------------------- 
¶2. (SBU) The Al Qaim Phosphate Plant started construction in 1976 
and began operations in 1984.  The product from this plant is highly 
desired and has significant export potential.  Production has been 
disrupted since 1991 when sanctions interfered with receipt of 
materials and maintenance items.  Ensuing conflict and past 
instability in the region has continued to depress production 
capacity. 
 
¶3. (U) The Phosphate Plant is actually a combination of several 
production facilities all within one compound.  These are: 
phosphoric acid, sulfuric acid, ammonia, three types of fertilizer, 
aluminum fluoride/cryolite, and freon production.  Only half of 
these are operational, namely the phosphoric acid, sulfuric acid, 
and 3 types of fertilizer.  For all intents and purposes, fertilizer 
(triple sodium phosphate, mono-amino phosphate, and nitrogen 
phosphate) is the only remaining product from the plant. 
 
¶4. (U) The plant purchases most all of its minerals for making 
fertilizer.  Phosphate rock comes from the Akashat mine, sulfur from 
Mishraq and Kirkuk, ammonia and urea from Basrah, and potassium 
chloride from Jordan.  The inability to use the railroad to 
transport raw material is a prime factor contributing to decreased 
production.  Combined with electrical power shortages (only half the 
MWs required are being provided, i.e., 15 versus 30MW) the 
productivity is now only 10% - 30% of capacity.  While 15MW is 
enough for much higher production the shortage of materials is the 
main limiting factor at this time. 
 
¶5.  (SBU) The US Army Corps of Engineers will soon finish with 
electrical work (substations) that will have the potential to 
stabilize much of the power to the plant.  While the work will 
provide added stability to the supplied power there is not expected 
to be a gain in actual megawatts provided until the Hadithah Dam 
begins generating more power.  The dam must be given higher priority 
in terms of GoI funds for capital investment and major maintenance. 
 
¶6.  (U) Special interest is being focused on getting the railroad 
lines cleared so that raw materials can be received and finished 
product moved to market.  Recently, multiple test runs have been 
done and a crane is being sought to move 6 derailed cars off the 
tracks near Camp Al Qaim.  The IRR has stalled on this issue for 
more than one year.  An operational railroad will give the phosphate 
plant access to more raw materials to enhance production but IRR 
must cooperate and get the crane out to the area. 
 
¶7.  (U) The viability of the Akashat mine to meet production demands 
is questionable as well.  The mine (located 150km away) is having 
problems.  They use a water system in the mining process and the 
pressure does not allow full use; they have resorted to manual labor 
to jackhammer phosphate rock for extraction.  There are apparently 
many taps and pressure losses along the pipeline route.  While the 
water treatment plant that is part of the phosphate plant generates 
1,000M3/hr.  Half of this is distributed to Karabilah and the rest 
to Akashat, New Obeidi, and the T1 pumping station.  The system 
requires repair to allow the mine to meet production demands.  There 
exists the possibility of using explosives to disengage phosphate 
rock and the Anbari authorities in May 2007 to submit a letter to 
the Prime Minister's office requesting cooperation of MNF-I in 
acquiring them. The Prime Minister's office forwarded the letter to 
MNF-I four months later.  It has been retrieved and a response 
letter is now in the process of staffing in MNF-I. 
 
¶8.  (U) The plant is operating 24 hours per day but using a limited 
workforce given the decreased production levels.  Of 4,000 employees 
on record only 1,250 are currently working.  The remaining employees 
are on salary with reduced benefits.  With stability in the region 
at an all time high it is crucial to move forward with advancements 
in the industrial capability so evident in this region. 
 
The Al Qaim Cement Plant 
------------------------ 
¶9.  (U) Not far from the phosphate plant is the Al Qaim Cement 
Plant.  One of three cement plants in Al Anbar, the Al Qaim plant is 
most valued for its highly sulfur resistant cement.  The plant was 
built by a Romanian construction company and began operations in 
¶1989.  The plant has a current staff of approximately 960 personnel. 
 The plant operates one production line 24 hours per day using three 
shifts. 
 
¶10. (SBU) The plant manager has identified three factors that if 
 
BAGHDAD 00003310  002 OF 003 
 
 
tackled would result in an increase in production, namely: power, 
fuel, and transportation.  Currently, the plant is running at 
approximately 1/3 capacity but is drawing 10MW out of a requirement 
for 20MW at full capacity.  While power is fairly regular there are 
fluctuations that affect the normal processing of the cement down 
the line.  Ten days ago power to the plant was reduced and the plant 
has shut down operations entirely.  This is a critical issue and is 
being worked now at MNF-W and the Anbar PRT.  Power redistribution 
must be coordinated to allow resumption of this vital industry.  The 
new 400KV station at Camp Al Qaim and three new/reworked 132KV 
sub-stations (one of which is at the Phosphate plant) will provide 
more power for the SOE but only once more megawatts are pushed from 
the dam.  The new electrical stations will at least provide more 
stable power with less fluctuation in the voltage/amperage. 
 
¶11. (U) As for fuel; a steady supply of fuel is critical for the 
plant to be successful and the requirement is approximately 250K 
liters per day.  While it is more expensive to truck in fuel the 
plant has indicated they are not losing trucks to piracy at this 
time.  The K-3 refinery must be put back on-line to allow enough 
steady fuel to maintain operations.  The plant is experiencing 
significant cost growth in expenses for transportation as a result 
of the rail lines being shut down.  Trucking in materials and 
trucking out finished product is a high cost of doing business.  The 
train line must be made functional in order to see a significant 
benefit from increased production. 
 
The Kubaysah Cement Plant 
------------------------- 
¶12. (U) The Kubaysah Cement Plant is the second of two plants 
operating in Western Al Anbar.  The factory was built in 1982 by a 
Japanese company.  Approximately 1,150 workers are employed at the 
plant with 950 of these as engineers and technicians. 
 
¶13. (U) There are two production lines in this factory; each 
contains a two step production process:  one to break the clay down 
and mix it with limestone and gypsum and the other to complete the 
final production process of drying and mixing and packaging the 
cement.  Whereas the plant used to manufacture their own bags, a 
shortage of paper has forced them to purchase bags from external 
sources.  They do not envision restarting this bag making facility. 
 
¶14. (U) The factory manufactures a type 2 Portland cement.  The 
factory operates on a design capacity of 2M tons/yr but is currently 
only producing 20-30K tons/month or approximately 300K tons/year. 
Reasons for the dramatic underproduction are attributed to the 
following, in priority order: 
     a. Electricity shortages.  The factory is only getting about 
25% of its needed electricity requirement of 50MW.  The flow of 
electricity is unstable, not continuous and the voltage varies. 
     b. Fuel.  The factory uses about 5 million liters per month of 
fuel oil which yields 20 productive days of work.  Deliveries can be 
sporadic and irregular.  The furnaces can operate on the waste oil 
products of the K-3 refinery or any other refinery (Baji/Samarra). 
Unfortunately, the K-3 refinery is not in operation.  At full 
capacity the factory will consume about 12 million liters of fuel 
per month.  Regular fuel deliveries must occur to sustain 
production. 
     c. Spare Parts.  The factory has a modest spare parts budget 
and this is derived from production sales which have been down. 
This has created a significant spare parts problem and resulted in 
cannibalization of one production line to help maintain the other. 
Both furnaces are long overdue for a complete maintenance overhaul. 
One is inoperative and two of four electric motors used to turn the 
mixing drums are inoperative.  Cost estimates run up to $5M for 
standard maintenance and another $5M to purchase 10 new electric 
motors; a few of which would be backup motors.  Per the plant 
manager, if parts and electricity were restored they would be able 
to operate the plant at near full capacity without additional 
personnel. 
 
¶15. (U) The Iraqi State Cement Company is the central control point 
for all cement plant operations in the province. They set spending 
limits for each plant manager for parts, supplies, major repairs, 
etc.  Their tendency is to be unresponsive to plant manager 
requirements.  The Company makes all the orders for parts, fuel 
deliveries and/or other contract work as needed based on inputs from 
the plant managers.  Unfortunately, the cheapest possible parts are 
usually ordered and this leads to additional maintenance and 
breakdown problems downstream. 
 
¶16. (U) Link to K3 Refinery: If this refinery were running, the 
waste fuel would be excellent for use in the furnaces of the cement 
plants in Kubaysah and Al Qaim.  As such, the plant likely wouldn't 
have a fuel problem if, in addition, the IRR were running.  As oil 
is refined and the useable products like propane, kerosene, benzene, 
light oils, etc., are extracted.  The residual waste fuel oil is 
ideal for use in the furnaces.  A synergy exists between the 
refinery, the IRR, and the cement factory production process. 
 
COMMENT 
------- 
 
BAGHDAD 00003310  003 OF 003 
 
 
¶17. (SBU) The SOEs in Western Al Anbar have high potential, not as 
the current employer of over 6,000 Anbaris, but as a factor in the 
overall economic growth and reconstruction of the country through 
fertilizer for agricultural advancement and cement for 
infrastructure repairs and new construction.  The three crucial 
linchpins to increased success in this province will require high 
level Iraqi central government action to restore operations at the 
K-3 refinery, the Iraqi Railroad, and to implement major repairs to 
the Hadithah dam for increased generation of electricity for western 
Al Anbar and the SOEs. 
 
¶18. (U) Drafted by EPRT Al Asad Business Specialist, Jay Cooper. 
Coordinated with RCT-2, MNF-W, and the Anbar PRT. 
 
Crocker