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Viewing cable 04ANKARA1086, TURKISH OFFICIALS COMPLAIN RISING TRUCKING COSTS

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Reference ID Created Released Classification Origin
04ANKARA1086 2004-02-25 08:49 2011-08-24 01:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Ankara
This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 02 ANKARA 001086 
 
SIPDIS 
 
 
SENSITIVE 
 
 
E.O. 12958: N/A 
TAGS: ENRG ETRD IZ PGOV PREL SY TU
SUBJECT: TURKISH OFFICIALS COMPLAIN RISING TRUCKING COSTS 
MAY FORCE SUSPENSION OF FUEL DELIVERIES TO IRAQ'S SOMO 
 
 
REF: A. 03 ANKARA 7444 
     B. 03 ANKARA 7452 
     C. HQ CPA 0583 
     D. HQ CPA 0606 
 
 
Sensitive but Unclassified -- not for internet distribution. 
 
 
1.  (SBU) SUMMARY:  Turkish officials at the Trade 
Undersecretariat and Turkish Petroleum International (TPIC) 
warned that truck transport of fuel to Iraq under the 
contract with SOMO may be suspended due to higher fees paid 
to Turkish truckers.  TPIC's contract called for fuel 
deliveries of 90,000 tons per month.  Delta Petroleum, SOMO's 
other major supplier from Turkey, said it had halted its 
deliveries since December, and assumed that KBR must be 
supplying enough fuel to meet Iraq's domestic demand.  TPIC 
reported that a small amount of fuel is moving by rail via 
Syria, but this option remains very limited due to the poor 
condition of Iraq's rail system.  The Trade official said 
Turkish authorities have tried to improve processing at the 
Habur border crossing, but said the government considers the 
daily maximum capacity at 3,200 vehicles, well below the 
government's commitment in the December talks to increase the 
level to 3,700.  End Summary. 
 
 
2.  (U) Econoff spoke with Sevket Ilgac, Deputy Director 
General, Foreign Trade Secretariat, Osman Turan, Vice 
President, Turkish Petroleum International (TPIC) and Mustafa 
Asur, President of Delta Petroleum, about fuel deliveries 
from Turkey to Iraq and the rail option via Syria.  Turan 
explained that following talks in December 2003 hosted by 
Trade Minister Tuzmen (ref a) TPIC and SOMO agreed to begin 
deliveries of kerosene within two weeks, followed by 
deliveries of gasoil and gasoline.  The agreement called for 
bartering refined products from Turkey for fuel oil from 
Iraq.  According to Turan, the goal was for monthly 
deliveries of 90,000 tons -- 30,000 tons each of kerosene, 
gasoil and gasoline.  By the end of December, TPIC began 
significant deliveries of kerosene, reaching a total of 
90,000 tons by early February.  Turan clarified that the deal 
with SOMO was on a commercial basis and was not under the 
Border Trade Agreement, signed with the Hussein regime, under 
which TPIC and other Turkish companies delivered goods to 
Iraq in exchange for petroleum. 
 
 
TPIC Warns of Suspension 
 
 
3.  (SBU) However, the barter deal lasted only a few weeks 
because of price fluctuations and the unexpected cost of 
transporting Iraqi fuel oil.  Turan explained that TPIC 
originally planned to use the same tanker trucks that 
delivered light products (kerosene, gasoline) to Iraq to 
transport heavy fuel oil to Turkey but learned that the cost 
of cleaning each tanker was $500 per trip.  In January, TPIC 
and SOMO agreed to continue to make deliveries on a cash 
basis. 
 
 
4.  (SBU) The change from cash to barter did not solve TPIC's 
problem.  Turan said TPIC will be forced to suspend all truck 
deliveries on March 30 because of rising transport costs. 
Turan and Ilgac said that the deal KBR's contractors reached 
with truckers to end the December truckers' strike (ref b) -- 
raising the fee from USD 45 to USD 70 per ton --  forced TPIC 
and Delta to raise their payments, too.  Turan said the 
higher fees put TPIC in the red, which will force the company 
to stop shipments March 30, after completing delivery of 
30,000 tons waiting in the queue. 
 
 
5.  (SBU) TPIC is talking with SOMO, seeking to renegotiate 
the terms of the contract.  Turan emphasized that TPIC is 
ready to proceed and does not need to make money on the deal; 
what the company cannot do, however, is continue to deliver 
fuel to Iraq at a loss.  Ilgac told us that Turkish officials 
expected to meet their Iraq Transportation and Oil Ministry 
officials 18-20 February to discuss road transport issues and 
will raise the problems of rising trucker fees.  (Note:  ref 
d indicates that a date for the Turkey-Iraq talks has not 
been agreed and may not be possible until March.) 
 
 
6.  (SBU) Delta Petroleum, which had been delivering fuel to 
SOMO since the summer of 2003, stopped deliveries in December 
because it, too, was losing money.  Delta continues to send 
trucks to Iraq, but only to bring back fuel oil as part of 
the barter agreement for fuel sent to SOMO in 2003.  Delta 
President Asur said he has tried several times to renegotiate 
a deal with SOMO, but so far they have shown no interest.  He 
assumed that the U.S. contractor KBR was supplying enough 
fuel to Iraq to satisfy domestic demand.  (Note:  In addition 
to their soon dormant contracts with SOMO, both TPIC and 
Delta continue to sell fuel to KBR subcontractors.) 
Rail Through Syria 
7.  (SBU) The remaining option for TPIC at present is 
transport by rail via Syria, although this route has very 
limited capacity.  In late December, talks among railroad 
officials from Syria, Iraq and Turkey led to agreement to 
reduce fees for rail transport:  Iraq reduced its fees by 60 
percent; Syria by 25 percent.  Ilgac said the Syrian fees are 
still very high, but he expected the Syrian government to 
reduce the fees further.  Currently, TPIC is able to send 
only one train per week, carrying about 1,000 tons of 
kerosene.  Turan said TPIC would like to increase rail 
deliveries to 1,000 or even 3,000 tons per day. 
 
 
8.  (SBU) Turan and Ilgac said the biggest problem is on the 
Iraqi side.  Iraqi officials told Turan that basic 
improvements would cost about $28 million.  Ilgac said Iraq 
does not have enough working locomotives, has not come up 
with any of the 200 tanker cars it said it would make 
available for fuel deliveries, does not have adequate repair 
and maintenance facilities, and the condition of the tracks 
in Iraq is quite poor.  Turkey has offered to help Syria 
finance improvements and lend Iraq up to $20 million of 
railroad equipment in return for bartered oil and refined 
products, he added. 
 
 
Habur Gate 
 
 
9.  (SBU) Ilgac said that the government has taken important 
steps to improve the processing at the Habur Gate border with 
Iraq:  Customs had stationed additional personnel at Habur, 
Minister Tuzmen had personally intervened with other GOT 
agencies to increase the flow, and the project to modernize 
the facility would begin soon, although he did not know the 
exact date.  Ilgac said these measures have increased the 
traffic to about 3,000 vehicles per day, but said the 
government now considers the maximum capacity at the gate is 
about 3,200.  We asked whether this indicated that Turkey was 
no longer committed to increasing the flow to 3,700, as 
agreed in December.  Ilgac responded that it was not clear 
how to increase the levels much further.  In a bit of wishful 
thinking, Ilgac said he hoped the bottleneck at Habur will 
not be a problem much longer because of the construction of a 
second border crossing at Ovakoy (which will take a year to 
complete), increased deliveries by rail and increasing 
production from Iraqi refineries.  Comment:  Daily tracking 
reports from Habur indicate that despite more personnel there 
continue to be significant periods every day when little or 
no processing occurs.  And CPA Ambassador Jones noted (ref c) 
the Habur Gate facility was only being used to half its 
capacity. 
 
 
10.  (U) Baghdad Minimize considered. 
EDELMAN