VZCZCXRO3272
PP RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK
DE RUEHGB #3128/01 2720714
ZNR UUUUU ZZH
P 280714Z SEP 08
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC PRIORITY 9670
INFO RUCNRAQ/IRAQ COLLECTIVE PRIORITY

UNCLAS SECTION 01 OF 02 BAGHDAD 003128 
 
SBU 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ENRG EINV ELTN
SUBJECT: FUEL AVAILABILITY IN ANBAR PROVINCE IMPROVES, BUT 
DEMAND OUTSTRIPS SUPPLIES 
 
SENSITIVE BUT UNCLASSIFIED.  NOT FOR INTERNET DISTRIBUTION. 
 
¶1. (SBU) This is a PRT Anbar reporting cable. 
 
Summary 
------- 
 
¶2. (SBU) Anbar Province experienced severe fuel shortages 
during the Sunni insurgency in 2006-2007.  Fuel supplies have 
now increased, notably with the re-establishment of security, 
the reopening of a small refinery in the western part of the 
province, and the privatization of fuel deliveries.  However, 
local demand has outpaced growth in the fuel sector.  Even 
with some supply restrictions removed, controls on fuel 
prices have prevented market equilibrium and allowed a black 
market to continue.  The increased demand has provided 
fertile ground for corruption and theft and, with a 
limitation in fuel distribution infrastructure, inhibited the 
government from receiving its full monthly fuel allocation. 
End Summary. 
 
Remarkable Increase in Fuel 
--------------------------- 
 
¶3. (SBU) Sitting inside a dust-filled office in Ramadi, 
director general (DG) of fuel for Anbar province Abdulghani 
Abdulwahab recalled that in March 2007 the Governor gave him 
cash for a purchase of 5,000 liters of fuel for government 
use, but he found only 1,600 liters in the city.  In those 
days, the inability to transport fuel by truck because of 
Al-Qaeda security concerns had created severe shortages. 
Today however, the security environment permits commercial 
truck companies to carry large shipments of fuel.  Shortages 
still exist, but the situation has improved. 
 
¶4. (SBU) The Ministry of Oil sets fuel allocation weekly, 
based on production factors at the Bayji Oil Refinery (BOR) 
in neighboring Salah ad Din Province.  In August, Anbar 
received 75 percent of its fuel allocation of 63 million 
liters.  The province,s ability to take this allocation has 
increased enormously since the period September 2007 to March 
2008, when only 10 percent of allocation was received.  Two 
developments have occurred to facilitate this change. 
 
Delivery and Refining 
--------------------- 
 
¶5. (SBU) The first development was the privatization of the 
truck delivery process.  The provincial government, with the 
Ministry of Oil, made the decision to privatize fuel delivery 
as a strategy to safeguard fuel shipments.  The Fajr Al 
Jazeera Company won the contract, and since April has been 
required to send 158 fuel trucks every three days to the BOR 
to pick up Anbar's fuel allocation.  Official numbers 
indicate a 488 percent increase in local fuel supplies and a 
20 percent decline in street fuel prices since the 
privatization. 
 
¶6. (SBU) The other source of improvement was the 18 July 
reopening of the K3 oil refinery in western Anbar, which has 
helped to offset shortages in diesel and kerosene.  Situated 
near Haditha, the refinery has begun to supply the western 
part of the province with 5,500 barrels per day (bbl/d) but 
has the capacity to produce 16,000 bbl/d.  It has become a 
welcome complement to the BOR, expanding overall fuel supply 
by 20 percent. 
 
¶7. (SBU) Seen from Abdulghani,s office window was an endless 
flow of fuel trucks entering the Ramadi Fuel Distribution 
Center (FDC); they swarm around the pumps that offload fuel 
from Bayji.  They are then reloaded in order to replenish 
government and commercial fuel stations throughout the 
province. 
 
¶8. (SBU) Abdulghani was upbeat about continued improvement in 
fuel availability.  When pressed for a reasonable guarantee 
that continued growth would be met with increased fuel 
delivery, he noted "Even six months ago, the situation was 
something to cry over; now, it is completely different." 
However, Abdulgahni,s optimism is not shared by many in the 
business community. 
 
Discontent in the Business Community 
------------------------------------ 
 
¶9. (SBU) At a raucous September 9 town hall meeting in the 
Provincial Council,s auditorium, furious businessmen shouted 
for adequate fuel supplies.  Many claimed that fuel was being 
siphoned from their trucks at the FDC.  Abdulghani, who was 
present at the meeting, was accused of complicity.  There 
were also murmurs that Sheikh Ali Hatem, the owner of The 
 
BAGHDAD 00003128  002 OF 002 
 
 
Fajr Company, was involved in the graft.  Factory owner and 
PC member, Sheik Ra,ad Sabah, claimed that the retail price 
of fuel is 350 dinar but he is forced to pay 400 wholesale. 
When asked for a receipt he could not produce one. 
 
¶10. (SBU) Leakages occur throughout the fuel delivery 
distribution channel.  Wily mechanisms at the Ramadi FDC 
include tricking the meter into thinking that fuel has been 
drained from the truck when only pressurized air has flowed 
through the hose.  Drivers then depart with full or partially 
full tanks.  The subterfuge obviously requires cooperation 
between drivers and the pump handlers.  Huge profits are made 
by selling the stolen fuel on the informal market or abroad. 
 
Comment 
------- 
 
¶11. (SBU) As the town hall meeting indicates, public 
expectation for better service is rising faster than the 
government,s ability to provide for better services.  Even 
as fuel availability has increased, the provincial government 
is still hobbled by theft as well as by an inadequate 
fuel-distribution infrastructure.  A recent CERP project at 
the fuel distribution center aims to add additional fuel 
loading and unloading facilities.  This will expand the 
facility,s throughput capacity by 30 percent, enabling 
trucks to spend more time making deliveries instead of 
waiting in line at the distribution center. Shortages of 
fuel, however, ultimately will not be resolved until 
administrative controls on the fuel price are removed, 
allowing the price to move freely according to demand.  End 
Comment. 
CROCKER