Telegram 173 iraqrep to fco iraq effects of the recent crisis on reconstruction

LOLC LNCCDN 3791 ZILNAN 0745 RESTRICTED OO ABDHA ALGIE ALKHO AMMAN ANKAR ATHEN BAHRA BASRA OO BEBER BEIJI BEIRU BREEC BREMB BRNAT CAIRO CANBE OO COPEN DAMAS DOHAA DUBAI DUBLI GEDIS GEMIS GIBRA HELSI HOSEE ) OO ISLAM JEDDA JERUS KHART KUWAI LISBO LUAND LUXEM MADRI OO MOSCO MUSCA NYMIS PARIS RABAT RIYAD ROMEE SANAA SANTI OO STOCK TEAVI TEHRA THHAG TOKYO VIDEL VIENN VIMIS WASHI 0O WELLI FM IRAQR TO FCOLN 181708Z APR GRS 1288 RESTRICTED FM IRAQREP TO IMMEDIATE FCO TELNO 173 OF 181708Z APRIL 04 AND TO IMMEDIATE CABINET OFFICE INFO IMMEDIATE BRITISH OFFICE BAGHDAD, CANBERRA, CPA BASRA INFO IMMEDIATE DEFENCE COMMEN LONDON, DFID, EU POSTS INFO IMMEDIATE MIDDLE EAST POSTS INFO IMMEDIATE MODUK/MODUK NAVY/MODUK AIR/MODUK ARMY/MODUK PE INFO IMMEDIATE SECURITY COUNCIL POSTS, INFO IMMEDIATE WELLINGTON, CABINET OFFICE FOR PS/NO 10 SUBJECT: IRAQ: EFFECTS OF THE RECENT CRISIS ON RECONSTRUCTION SUMMARY 1. Problem of designing and executing post-conflict reconstruction in what effectively remains a conflict zone. Improving security is the key, which CPA are seeking to address. Probably less activity on the ground than CPA are prepared to admit, as aid agencies and contractors withdraw personnel to safer areas pending decisions to re-engage. Main foreign contractors operating at 50-75 percent staffing levels. Some NGOs well below that. US Government pressure to accelerate execution of projects under the USD18.4bn Supplemental. But projects will inevitably DECLASSIFIED 3. All figures are unreliable. Nor do CPA track projects from obligation of funds to start of execution (we have encouraged them to do so). The Russians are still operating at Doura, Baghdad South and Nasiriyya (the most important sites). Nash denied that PMO was delaying or halting the deployment of contractors to Iraq (as alleged by AMEC). Contractors were being cautious, but the prevailing mood was to "hunker down" and remain, while reviewing positions against their duty of care. Bearpark said no US or UK funded contractor had pulled out. His best estimate was that most were operating at 75 percent of full strength in country. There was no evidence that Bechtel or KBR were scaling back yet. Of the UK companies, see para 10 for Foster Wheeler. AMEC appear to be continuing deployment, but slowly. 4. USAID estimated that they were down to 50-60 percent of expatriate staff. This chimes with rumours we have been picking up (please protect) that USAID believe they are operating outside their rulebook and are trying quietly to draw down staff without making this obvious to the rest of the US government. Their key implementing partner in the governorates, and a channel for significant funding for democratisation and local development support, is RTI. Allegedly described on al-Jazeera as a "Zionist" organisation, RTI are reported to have received a specific and credible threat. They have drawn down on a 'temporary tactical basis' (mostly to Kuwait) 135 of their 190 staff in country. The remaining 55 are dispersed around Iraq, though appear to have retreated altogether from the south. This will have a significant impact on pursuing USAID activities. 5. Bearpark believed that the CPA was putting on a brave face but that the degree to which projects were being suspended was greater than being admitted. The Baghdad sewage project, for example, had been closed down (and the site now risked being looted). Electricity lines were down (with no prospect of redistribution from Basra to Baghdad any time soon). Bremer has rejected his advice to close the CPA office in Najaf. THE NEXT STAGE: IMPLEMENTING THE US SUPPLEMENTAL 6. Washington has directed that CPA accelerate implementation of projects under the USD 18.4bn Supplemental and specifically to ameliorate conditions in Fallujah. On paper, the current picture is as follows: DECLASSIFIED (i) establishing shifting security requirements and agreed security thresholds; (ii) isolating security costs from the 10 percent ceiling iegislated in the Supplemental for running costs; (iii) the inability of contracting and project management to move outside the Green Zone; (iv) the shortage of contracting and accounting personnel to process simultaneously hundreds of task orders; and (v) a failed logistical infrastructure 8. CPA are beginning to address these. While contractors are responsible for their own security, PMO have sought an immediate advance of USD 90mn from DOD or OMB to establish a security contract integrating the security efforts of all supplemental construction contractors, the Coalition and Iraqi security forces. This would provide information and advice to contractors and provide for a quick reaction force in emergencies. They have also sought a policy decision on isolating security costs from the 10 percent ceiling, funding for a logistical contract and agreement to draft in more project, budget and accounting personnel to ) handle the accelerated programme. State have drawn up post-transition plans for leaving in place around the country Government officials (Provincial Teams) and contractors (Reconstruction Construction Centres). 9. PMO's aim is to be in a position to implement once security conditions allow. Their worst fear is a budget loaded with money and no ability to deliver. Nash had been advising contractors to bring in a minimum number of staff needed to "establish a beachhead". PMO were creating incentives to subcontract to lower rather than from Baghdad. 10. Nash sought to pin much of the blame on government travel advice for delays. Foster Wheeler (prime PMO contractor to manage the USD 1.7bn oil sector) had told PMO that they were delaying deployment to Iraq in the light of our latest TA. As always, DECLASSIFIED until the picture is clearer on us military options RICHMOND ) YYYY ZILNAN 0745 NNNN ) DECLASSIFIED