VZCZCXRO2997
PP RUEHAG RUEHBC RUEHDE RUEHDH RUEHIHL RUEHKUK RUEHROV RUEHSL RUEHSR
DE RUEHGB #2078/01 2150944
ZNY CCCCC ZZH
P 030944Z AUG 09
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC PRIORITY 4174
RUEKJCS/DIA WASHDC
RHEHNSC/NSC WASHDC
RHEBAAA/USDOE WASHDC
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUCNRAQ/IRAQ COLLECTIVE

C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 002078 
 
SIPDIS 
 
E.O. 12958: DECL: 08/03/2019 
TAGS: EPET ENRG PGOV PREL EINV PINR IZ TU EUN
SUBJECT: IRAQ AND THE NABUCCO PIPELINE 
 
REF: A. BAGHDAD 01960 
     ¶B. BAGHDAD 01250 
     ¶C. ANKARA 1031 (NOTAL) 
 
Classified By: Classified by DCM for Assistance Transition Patricia Has 
lach, reasons 1.4 (b,d) 
 
¶1. (C) Summary:  At the Nabucco pipeline summit meeting in 
Ankara on July 13, Iraqi Prime Minister Maliki made an 
unexpected pledge to supply roughly half of the pipeline's 
projected capacity by 2015.  The announcement reflects 
Maliki's ambitions to see Iraq as a significant partner of 
Turkey and Europe.  But it does not reflect realities on the 
ground, since the GOI has no plan to build the infrastructure 
needed to meet this pledge, nor to allocate future natural 
gas extraction between exports and meeting pressing domestic 
needs.  In terms of U.S. policy, the way forward to get Iraqi 
natural gas into Nabucco is identical to our broader goal of 
seeing Iraq increase oil output to provide the resources to 
fund Iraqi development:  encouraging and supporting (a) 
increased international investment in the sector, (b) 
resolution of Kurd-Arab disputes over hydrocarbons, and (c) a 
long-term energy strategy.   End summary. 
 
The Out of Gas Plan 
------------------- 
 
¶2. (C) PM Maliki's attendance at the July 13 Nabucco summit 
in Ankara (ref C) came as a surprise.  In discussions with 
PAO following the summit, GOI Spokesman Ali Al-Dabbagh - a 
Maliki confidante who travelled to Ankara ahead of the prime 
minister - said Turkish PM Erdogan personally lobbied Maliki 
to attend the summit.  Dabbagh cast both the decision to 
attend and the pledge of Iraqi fuel for Nabucco in political 
terms, noting the pipeline's impact on decreasing Europe's 
dependence on Russia.  While Maliki said publicly that the 
GOI aimed to supply 15 billion cubic meters of gas annually 
to Nabucco by 2015, he made clear in private discussions that 
this would only be possible once annual oil production 
reached 6.6 million barrels per day, roughly triple current 
production.  This is the GOI target for 2015 although, as 
noted below, it does not have a clear plan to reach this 
target. 
 
¶3. (C) Follow-up discussions with senior Ministry of Oil 
(MoO) officials suggest that the MoO was not involved in 
preparations for the summit announcement.  The MoO Acting DG 
for Planning, Waddah Shareef, told EconOff on July 23 that 
the MoO does not have a plan in the works to export natural 
gas to Nabucco.  He said that the MoO wanted to eventually 
export natural gas but at present is focused on meeting 
domestic demand, and primarily the rapidly expanding need for 
gas to fuel electricity generation.  Waddah speculated that 
Iraq should be able to provide "some gas" for export in 
approximately six years, but admitted there is no plan to 
back this up. 
 
¶4. (C) On July 27 Deputy Oil Minister Abdul-Kareem Luaibi, 
responsible for upstream development, told EconOff that Iraq 
would not have any gas available for export for at least ten 
years.  Luaibi's assessment is also not based on any firm 
planning, but rather his own feeling that the needs of the 
Iraqi people (i.e., power generation and industrial 
development) must come first.  He did concede that with 
massive amounts of foreign capital and expertise Iraq could 
potentially meet the pledge made by Maliki.  But Luaibi said 
he believes the poor investment climate in Iraq and the 
absence of agreement on hydrocarbons legislation will delay 
necessary investment.  Further, he does not believe 
international oil companies (IOCs) are interested in natural 
Qinternational oil companies (IOCs) are interested in natural 
gas projects in Iraq, given the fact that near-term gas 
extraction will be devoted to domestic usage. 
 
Politicians Doing what Politicians Do 
------------------------------------- 
 
¶5. (C) Dr. Abdul-Hadi Al-Hassani, Deputy Chair of the 
Parliamentary Oil and Gas Committee and a political ally of 
PM Maliki, told EconOff that he saw Maliki's Ankara 
announcement largely as a political statementQ He saw this 
as a GOI move to prevent Turkey from cutting deals on natural 
gas development directly with the Kurdistan Regional 
Government (KRG).  Hassani confirmed the importance of Iraq 
building strategic partnerships with Turkey and Europe 
through Nabucco, but said that this can only come after the 
needs of the Iraqi people are met. 
 
Comment:  Way forward for USG 
----------------------------- 
 
BAGHDAD 00002078  002 OF 002 
 
 
 
¶6. (C) Iraq has the world's tenth largest natural gas 
reserves.  In theory it has the capacity to meet the pledge 
made by Maliki in Turkey, while at the same time meeting 
domestic needs (which, in addition to power generation and 
industrial development, includes injecting significant 
quantities of natural gas into oil fields to improve oil 
extraction).  But as Maliki admitted in private discussions, 
notwithstanding the political desire to become a major 
supplier of natural gas to Europe, the reality is that this 
goal can only be met once the GOI's ambitious plans to 
jumpstart oil production and export are achieved.  This 
process has proven painfully slow. 
 
¶7. (C) The recommended USG policy steps to bring Iraqi 
natural gas into Nabucco are essentially identical to our 
efforts to encourage increased oil production and export, as 
well as our parallel efforts to reduce Arab-Kurd tension over 
hydrocarbon resources.  We need to encourage and support GOI 
efforts to (a) accelerate the entry into Iraq of IOCs to 
boost both oil and natural gas production, (b) resolve 
disputes with the KRG over hydrocarbon legislation, which 
will accelerate development of hydrocarbon resources in both 
KRG- and GOI-controlled fields, and (c) complete a 
long-delayed strategy for development of the energy sector 
which defines how much natural gas is required for domestic 
use and how much available for export, and also introduces 
rational pricing schemes for electricity and other fuels 
(note:  the GOI has recently agreed that the World Bank will 
take over funding for this strategy; details and timeline are 
now being finalized).  As important, we need to continue our 
practice of cautioning Turkey and others from bypassing 
Baghdad and trying to work hydrocarbon deals directly with 
the KRG:  while the pressure of such deals can spur Baghdad 
into action, any move to consummate cross-border deals or 
begin exports without central government approval would 
surely provoke Kurd-Arab conflict. 
 
¶8. (C) The effort to get Iraqi gas into Nabucco is now an 
integral part of the broader USG strategy to get Iraq to 
develop its hydrocarbon resources in a manner that advances 
our goal of seeing a sovereign, stable and self-reliant Iraq. 
 Nabucco-specific engagement with the GOI will help advance 
the linked goals of getting Iraqi gas into Nabucco and 
accelerating development of the oil and gas sector.  European 
states that will benefit from Nabucco have a stronger 
incentive to engage.  We are already working with other 
embassies in Baghdad to send a consistent message to the GOI 
and KRG on the points above and the way forward; we need to 
coordinate even more closely with Turkey, EU member states, 
and the European Commission.  Embassy recommends that 
Washington consider the following the following 
Nabucco-related steps:  (a) expand existing USG discussions 
on Nabucco with Turkey and the EU to include harmonization of 
our messages to the GOI and KRG along the lines above, and 
(b) send a senior USG delegation to Baghdad to continue the 
dialogue launched in Ankara, using the visit as an 
opportunity to press the points above. 
FORD