VZCZCXRO1000
RR RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK
DE RUEHGB #4056/01 3471504
ZNR UUUUU ZZH
R 131504Z DEC 07
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 4831
INFO RUCNRAQ/IRAQ COLLECTIVE

UNCLAS SECTION 01 OF 02 BAGHDAD 004056 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON ETRD EAID EFIN IZ
SUBJECT: Currency in the city - A Diyala Banking Update 
 
¶1. (U) This is a PRT Diyala reporting cable. 
 
SUMMARY 
-------- 
 
¶2. (SBU) Despite various setbacks in September, October was a very 
successful month for banking in Diyala.  Most significantly, 
Ministry of Finance contracted money trucks are now being used to 
transport funds from Baghdad to Baqubah essentially eliminating 
theft by Iraqi Army security forces.  Although assurances of 100 
Billion ID shipments have been provided, this has yet to happen 
necessitating multiple money runs per month to obtain adequate 
currency supplies. 
 
September marked by currency shortages 
--------------------------------------- 
 
¶3. (SBU) Banking in Diyala suffered several setbacks in September. 
First, the amount of currency released by the Central Bank of Iraq 
was less than in previous months, and far less than the amount 
promised and required.  The provincial bankers and PRT had received 
word from multiple Government of Iraq (GOI) and US sources that the 
shipment would consist of $75 billion Iraqi Dinar (ID).  $50 billion 
would be for the monthly government salary and pension requirements, 
and an additional $25 billion would be sent as the first installment 
of the GOI reconstruction funds.  Unfortunately, only $37 Billion ID 
was actually released, with no explanation as to the reduction. This 
reduced shipment of money will cause widespread liquidity problems 
within the province as bankers tap into shallow cash reserves and 
what is left of customer savings accounts to make up the shortfall. 
 
 
¶4. (SBU) The second setback was in the capacity of the Iraqi Army to 
successfully move the monthly currency shipment from Baghdad to 
Baqubah.   In July and August, no money was lost in transit.  In 
September, however, $317 million ID (approximately $254,000 USD) was 
stolen.  After being briefly searched by Coalition Forces (CF), the 
Iraqi Army soldiers who were on the movement were turned over to the 
Iraqi major crimes unit (MCU) police.  It is unclear whether they 
are being detained or were merely questioned. 
 
¶5. (SBU) After the PRT's bank reconstruction projects came 
temporarily to a standstill in September, due to QRF funding delays 
and the end of the U.S. fiscal-year affecting CERP, they are back on 
track in October.  Battle damage assessments have been completed on 
all of the banks in Baqubah, the scopes of work (SOW) are completed, 
and contractors have begun reconstruction of the primary bank in the 
province, Rafadain 14. 
 
October Currency Movements Improve 
---------------------------------- 
 
¶6. (SBU) October saw significant movement toward Iraqi self-reliance 
in successfully organizing and executing currency shipments from 
Baghdad to Diyala.  Despite the failure of Baghdad to release the 
full amount of currency requested in October, the currency shipment 
that was executed on 22 October represents a significant step 
forward since the mission was completed entirely by the coordinated 
efforts of the Iraqi banking system and IA forces - and all funds 
arrived safely.  An initial money movement was scheduled for Sunday, 
21 October.  However, this movement failed because the IA did not 
properly coordinate movement through the various IA battle spaces. 
The Diyala Acting DG of Banking and the IA returned to Baqubah and 
on their own initiative made arrangements to try again the following 
day. 
 
¶7. (SBU) At approximately 1330 on Monday, 22 Oct, five Rafadain 
contracted trucks transporting 50.4B ID arrived in Baqubah from 
Baghdad.  Security for these trucks was provided by the IA, but for 
the first time since March of 2006 Rafidain fulfilled its transport 
obligations and provided five contracted vehicles to handle the 
actual currency.  These trucks were not filled to capacity and had 
they been, no more than three would have been required.  The use of 
Rafidain trucks dramatically decreased the threat of theft by the IA 
escorts and as a result 100% of the currency released, arrived in 
Baqubah.  The movement was hit by one IED during the return trip, 
but it detonated between vehicles and only one IA soldier suffered a 
dislocated shoulder. 
 
¶8. (SBU) Repeating a pattern that has established itself over the 
last year, prior to the October currency shipment, assurances were 
given that 100 Billion ID would be sent to Diyala, but only half of 
this amount was released.  The projected fiscal requirement for 
Diyala for the month of October is 129B ID.  The 50.4B ID received 
amounts to 39% of the month's requirement and 50% of the amount 
requested by the Governor, necessitating bi-weekly money movements 
to acquire the remaining needed provincial operating funds. 
 
COMMENT 
-------- 
 
¶9. (SBU) The viability of the banking system in Diyala has improved 
 
BAGHDAD 00004056  002 OF 002 
 
 
significantly.  Of note was the appointment of a Deputy General for 
Banking for Diyala.  This office is responsible for overseeing all 
banking operations in Diyala including the planning, coordination 
and execution of money runs to obtain the currency necessary to 
conduct provincial business matters. 
 
BUTENIS