This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS ROME 000973
SIPDIS
SENSITIVE
FROM U.S. MISSION TO THE UN AGENCIES IN ROME
STATE FOR NEA/IR AMBASSADOR RAPHEL, IO A/S HOLMES, IO/EDA
USDA/FAS FOR U/S PENN, ETERPSTRA, MCHAMBLISS, RTILSWORTH AND
LSCHATZ
USAID FOR AA/DCHA WINTER, AA/ANE, DCHA/OFDA, D/DCHA/FFP
LANDIS
JOINT STAFF FOR JE/J4/J5
NSC FOR JDWORKEN
E.O. 12958: N/A
TAGS: EAID EAGR AORC IZ WFP IRAQI FREEDOM
SUBJECT: IRAQ: WFP WARNS OF POSSIBLE BREAKS IN FOOD PIPELINE
UNLESS COORDINATION ON CONTRACTS IMPROVES QUICKLY
Sensitive but unclassified -- please handle accordingly.
1. (SBU) Summary: During February 26 meetings in Rome
with the Coordinator for Iraq Reconstruction, Ambassador
Robin L. Raphel, officials of the World Food Program (WFP)
warned that difficulties in the management and coordination
of food contracts and deliveries with authorities in
Baghdad, if not corrected rapidly, could result in breaks in
the pipeline of essential food commodities in the months
ahead. They said that, under current conditions, it was
very difficult to ensure that a 3-month buffer stock of food
would be on hand when sovereignty is transferred at the end
of June. WFP officials insisted that, with appropriate
support and cooperation from the Iraqi Ministry of Trade
(MOT) and the Coalition Provisional Authority (CPA), WFP is
capable of meeting food delivery targets, and they
reaffirmed their commitment to ensuring food security in
Iraq during the current transition phase. They explained,
however, that slow release of funds, delays and apparent
irregularities in contract specifications, contradictory
instructions from MOT and CPA, and other obstacles have made
it very difficult for WFP to do its job under the terms of
the January 2004 MOT-CPA-WFP Memorandum of Understanding
(MOU). On February 27, Ambassador Raphel raised these
issues with Iraqi Trade Minister Ali Allawi, who was in Rome
on other business. She and the U.S. Mission also arranged
for WFP officials to discuss their concerns directly with
the Minister that day. Mission recommends that WFP and CPA
officials meet at the earliest opportunity to discuss ways
to improve coordination and cooperation, so that food
insecurity does not further complicate the situation in Iraq
during the crucial political transition later this year.
After this message was drafted, WFP Country Director Torben
Due traveled to Baghdad for 24 hours for extensive meetings
with CPA, MOT, and Ambassador Raphel. Due succeeded in
working through some of the issues described below. End
summary.
2. (U) In a day-long series of meetings at WFP on February
26, Ambassador Raphel discussed food pipeline, contracts,
procurement and transport issues in Iraq with Executive
Director James Morris, Deputy Executive Director
(Operations) Jean-Jacques Graisse, Middle East Regional
Director Khaled Adly, Iraq Country Director Torben Due, Iraq
Regional Operations Manager Amer Daoudi and other WFP staff.
Andrea Farsakh (NEA/IR), Deborah Linde (IO/EDA) and Willem
Brakel (Alternate Permrep, U.S. Mission) accompanied. The
discussions with senior officials took place at WFP
Headquarters. Detailed conversations at the operational
level were held at WFP's special Iraq Logistics Unit located
in a separate facility in the south of Rome.
--------------------------------------------- ------
BACKGROUND: WFP-MOT-CPA MEMORANDUM OF UNDERSTANDING
--------------------------------------------- ------
3. (U) In the latter part of 2003, CPA and MOT made a
specific request for WFP to provide support to Iraq's public
distribution system (PDS) for food staples from 22 November
2003 through June 2004. On 7-8 January 2004, WFP, MOT and
CPA signed an MOU that spelled out the terms of WFP's
involvement and the responsibilities of each party. The
parties agreed to carry out the following activities (only
highlights of each article presented here):
(1) Capacity Building and Training: WFP to provide
training and support for MOT staff on procurement,
transport and pipeline functions, with a view to MOT
reassuming full responsibility for PDS management upon
termination of the MOU.
(2) Procurement of Buffer Stocks and Shortfall
Commodities: MOT to provide WFP with detailed
commodity specifications for each commodity in the PDS
food basket within one week of the effective date of
the MOU. WFP to procure, according to its own rules
and regulations, commodities as requested by CPA,
initially $110 million worth. Additional WFP
procurement to follow as agreed by all parties until 31
March 2004, after which procurement becomes the
responsibility of MOT.
(3) Renegotiation of Contracts Amended under SCR 1483:
CPA to authorize WFP to further renegotiate terms of
delivery of food contracts renegotiated under this
resolution. Except for quantities already afloat, WFP
to approach suppliers to propose renegotiation of
delivery terms from CIF 18 Governorates to FOB loading
port, and to revise prices to reflect current costs.
(4) Shipping and Overland Transportation: WFP to
deliver to Iraq all the commodities it procures under
the new and renegotiated contracts. WFP to arrange
delivery of commodities under new contracts to one of
three designated hubs (Baghdad, Mosul, Umm Qasr). WFP
to maintain offices in Jordan, Turkey, Syria and Kuwait
to monitor deliveries. WFP responsibility for
shipments to end upon delivery at the hub and
certification of shipment by an independent surveyor,
after which title passes to MOT. MOT to ensure that no
trucks carrying WFP shipments are diverted. MOT to
ensure that truck offloading times at hubs do not
exceed 48 hours and to assume responsibility for
demurrage charges thereafter.
(5) Pipeline Data: MOT to provide an updated monthly
allocation plan by commodity for each hub, taking into
account needs and stock levels. MOT also to provide a
weekly countrywide stock report per commodity, and a
monthly stock report for each hub and for PDS stocks in
each governorate.
(6) Other PDS Management, Coordination and Capacity
Issues: MOT to commit appropriate resources to manage
the PDS and to staff the Baghdad Coordination Center;
to provide accurate local and national inventory
monitoring systems; and to ensure adequate storage
space and handling capacity. CPA to establish and
manage the Coordination Center; to assign liaison
staff; and to provide MOT with communications
capability.
(7) Financing: The goods and services to be provided
by WFP were costed as follows:
Direct Operational Costs $844,191,000
Direct Support Costs $26,622,000
Indirect Support Costs (4.5%) $39,187,000
Total WFP Costs $910,000,000
CPA is to fund the cost of commodities under Article
(2), external and overland transport, direct support
costs (with some exceptions) and indirect support
costs.
4. (U) The MOU is effective from the date of signature
until 30 June 2004, and, with respect to commodities
procured or renegotiated still en route, until the date of
delivery. WFP undertook to assist in the supply of the
following commodities: wheat, rice, pulses, vegetable ghee,
sugar, tea, milk, salt, infant formula, weaning cereal,
olive oil, as well as soap, detergent, sodium silicate and
sodium sulfate.
---------------------------------------------
WFP'S PROGRESS AND CONCERNS AS OF 26 FEBRUARY
---------------------------------------------
5. (SBU) In their discussions with Ambassador Raphel on
26 February, WPF officials reaffirmed their commitment to
assisting in procuring and delivering commodities for Iraq
under the terms of the MOU. They cited WFP's longstanding,
close working relationship with Washington as a key factor,
in addition to WFP's global food security mandate. The WFP
officials expressed concern, however, that current working
relationships on the ground are hampering WFP's efforts in
Iraq. They are concerned about confused lines of authority
and conflicting or uncoordinated instructions from CPA and
MOT. WFP staff feel that some in Baghdad are actively
trying to impede and hamper WFP's work. They warned that,
if the situation is not corrected within the coming 1-2
weeks, there will be no buffer stock and there is a serious
risk of an interruption in the food pipeline. One official
said, "we're losing time." Another added "this cannot
continue," pointing out that it takes 3-4 months between the
initial tendering and final delivery in Iraq. Many of WFP's
comments were linked to issues or perceived shortcomings
regarding the implementation of various articles of the MOU.
For the sake of clarity, we present WFP's key points in
paras 6-14 below as they are sequenced in the agreement.
Capacity Building and Training
------------------------------
6. (SBU) WFP currently has four Iraqi women from MOT
working in its Iraq Logistics Unit in Rome. WFP officials
recognized the importance of training, but they pointed out
that involving Iraqi nationals directly in procurement and
tendering operations poses potential conflict-of-interest
problems. They suggested it might be more useful to involve
Iraqi trainees in procurement operations for other countries
or regions, so that the trainees can observe WFP's
procedures without running afoul of the auditors. They
noted, however, that some Iraqis expressed resentment over
their perceived isolation, which they saw as a sign of
mistrust, when in fact it is standard operating procedure
for WFP. One WFP official conceded that the relationship
between WFP and MOT had deteriorated to the extent that not
much capacity building was feasible.
Procurement of Buffer Stocks and Shortfall Commodities
--------------------------------------------- ---------
7. (SBU) WFP staff called attention to what they consider
serious delays and other problems with the contract
specifications provided by CPA/MOT. They said that, as of
26 February, wheat specifications had not yet been
finalized. In their view, the initial specifications WFP
received for rice at the end of January were so stringent as
to be "virtually impossible." At a February 25 coordination
meeting in Amman, WFP was provisionally informed of new
specifications for rice; but to WFP staff it appears that
only U.S. suppliers can meet the new specifications -- at a
cost up to 80% higher than Southeast Asian suppliers.
Speaking more generally, WFP officials defended WFP's
procurement procedures, which include secure firewalls
around the tendering process. They argued that WFP's
procedures were approved by the Executive Board and
procurement operations are rigorously audited. They
maintained that publishing details of prices and quantities
on recently awarded contracts -- as some parties and
suppliers have called for in the name of transparency -- is
not appropriate for the international markets in which WFP
is operating, as this gives too much of an advantage to
suppliers.
8. (U) According to WFP, the agency has finalized 210
contracts for 1,357,636 MT, as of February 27. Another 47
contracts for 851,886 MT are termed "ongoing." These and
other figures are reported to MOT and CPA in a weekly email
containing detailed spreadsheets that is sent out every
Friday afternoon.
Renegotiated Contracts
----------------------
9. (U) WFP interlocutors reported that, as of February 27,
WFP had renegotiated 409 contracts for 2,769,768 MT of
commodities. They estimated that the renegotiated Oil-for-
Food contracts will be sufficient to meet requirements until
May.
Shipping and Overland Transportation
------------------------------------
10. (SBU) The WFP Regional Operations Manager expressed
concern about port congestion and MOT's limited capacity for
offloading vessels. Several vessels carrying Australian
bulk wheat are already experiencing significant delays due
to offloading constraints and inspection/certification
delays. On 26 February there were 2 vessels at Umm Qasr
waiting since 5 and 6 February, respectively, for inspection
and sampling. One vessel was still waiting for
berthing/discharging at Umm Qasr since arriving at Dubai
Roads for inspection on 6 February. Four additional wheat-
laden vessels are due to arrive at Umm Qasr in March.
Similar problems could arise at Aqaba. The WFP official
pointed out that, in addition to contributing to possible
pipeline problems, such delays waste scarce resources when
MOT is required to pay high demurrage charges.
11. (SBU) WFP also is concerned by recent instructions
from CPA to convert some delivery contracts from free on
board (FOB) to cost, insurance and freight (CIF). Such a
change would put WFP in a precarious position of having to
depend on third parties to certify delivery of shipments
that it cannot confirm directly. This opens up liability
issues or could cast doubt on WFP's reliability in the
market if it cannot pay promptly after delivery. With
regard to this particular instruction from CPA, WFP staff
also expressed concern about the haphazard, ad-hoc nature of
the communication, which came in the form of an improvised
letter on hotel stationary.
Pipeline Data
-------------
12. (SBU) WFP staff said they have not been receiving
regular data on inventories, and what numbers they do
receive are unreliable and subject to sudden, large and
unexplained stock adjustments. They maintained that, in
this environment, it was difficult to plan deliveries
rationally and effectively. WFP officials also reported
that they were not receiving vital information on arrivals
of food and non-food cargo likely to impact port or storage
availability for PDS commodities. Meanwhile, on a more
positive note, WFP reported progress on a baseline food
security assessment that identifies areas of concentration
of vulnerable populations within governorates.
Other PDS Management, Coordination and Capacity Issues
--------------------------------------------- ---------
13. (SBU) According to WFP officials, the Baghdad
Coordination Center lacks experienced staff and has not been
able to do much in the way of coordination to support and
facilitate logistics operations. What, they asked, is the
Center's added value? They suggested a re-thinking of the
Center's terms of reference. WFP staff also complained
about the peremptory tone of some communications received
from CPA, which they found insulting as professionals.
Financing
---------
14. (SBU) WFP officials told Ambassador Raphel that funds
for WFP's food procurement activities for Iraq had been slow
to arrive. The first tranche of $110 million was received
in mid January. The second tranche of $350 million was
announced in late January, but was not received by WFP until
February 24. The remaining $531 million will be needed soon
if WFP is to complete all necessary procurement by March 31.
Looking Ahead
-------------
15. (SBU) In conclusion, Graisse and his colleagues
reiterated that WFP is anxious to do the job well, and do it
right. They maintained that they could do this if obstacles
were not thrown in their way. They said they were worried
there will be finger-pointing at WFP at the end of the day -
- and indeed it has already begun, according to one WFP
official. Graisse noted that "we are burning our bridges
with the new administration," which could limit WFP's future
work in Iraq. (Under the UN Strategic Plan for Iraq, WFP
has been selected as the Task Manager of the Food Security
Cluster. Among the safety net activities is a school
feeding project that, in its March-May 2004 pilot phase,
will cover over 800,000 school children in 10 governorates,
to be extended to 2 million children in its September 2004 -
May 2005 expansion phase.) The WFP officials said it was
important to improve communication with Baghdad, and wanted
an opportunity for discussions first with CPA.
------------------------------------
U.S. RESPONSE AND FOLLOW-UP MEETINGS
------------------------------------
16. (SBU) Ambassador Raphel responded to WFP officials
that Iraq's food pipeline is a key priority for Washington.
She said she would take up the concerns expressed by WFP
with the appropriate officials in Baghdad (where she would
be going the first week of March). She said that it might
be appropriate to refine the scope of the Coordination
Center, and perhaps concentrate first on the essential food
contracts to ensure a 3-month buffer stock by July. She
said she also would speak directly to Trade Minister Ali
Allawi (coincidentally in Rome on other business and whom
she would be meeting the next morning), to inform him of the
situation.
17. (SBU) Minister Allawi reacted positively to Ambassador
Raphel's suggestion of a direct meeting between the Minister
and WFP representatives. U.S. Mission therefore arranged
for Allawi to meet WFP officials Graisse, Due, and Daoudi
for an hour on the afternoon of 27 February. Alternate
Permrep also attended. Graisse told Allawi that WFP wanted
to do its job of delivering food under the MOU, but needed
clear, consistent marching orders to do so. He warned of
potential pipeline breaks. The Minister replied, "I give
orders, but nobody marches." He said he had set up a DG-
level committee headed by his deputy to manage food and
related contracts, and that he had heard complaints about
WFP regarding tendering snafus, quality problems, delayed
letters of credit, lack of updated information on contracts,
and WFP's alleged tendency to deal with CPA instead of MOT.
The WFP officials had convincing rebuttals to all of these
allegations, which they sought to demonstrate were either
erroneous or based on circumstances outside of WFP's
control.
18. (SBU) As the discussion turned to major recent WFP
contracts, it was evident that Allawi had not been briefed
by his staff and that he had not received clear information
on the processes WFP was following. The Minister and
Graisse agreed that WFP would hand-deliver to the former at
his hotel its latest weekly pipeline update, and that
Operations Manager Daoudi would remain on standby to answer
any questions the Minister might have before he departed
Rome the following morning. WFP contacts were grateful for
the opportunity to clear up misunderstandings and set the
record straight; but one of them subsequently pointed out
that the Minister never called back for further information.
19. (SBU) Finally, on 1 March, Lee Schatz (Office of the
Administrator, USDA/FAS) transited Rome in returning to
Washington from a CPA-MOT-WFP coordination meeting in Amman.
U.S. Mission arranged for him to meet with Daoudi and three
other colleagues at WFP, which allowed a fuller exchange
that covered many of the issues described above and provided
further clarification.
--------------------
U.S. MISSION COMMENT
--------------------
20. (SBU) WFP has been a outstanding USG partner in
meeting emergency food needs and achieving U.S. humanitarian
objectives in crisis areas around the globe. This
relationship has intensified in the past 12 years since WFP
has had an American Executive Director. It is large part
due to the special relationship between the USG and WFP that
the latter has responded positively to our request to assist
in addressing Iraq's food needs. This is an operation that
lies outside WFP's usual mandate and is fraught with
political and physical risks for the organization and its
staff. We have the highest confidence in the
professionalism and integrity of WFP operations, and in Rome
enjoy a close working relationship with WFP at the highest
levels. There are inevitable frictions in a tense post-
conflict situation, but we are convinced that these can be
resolved through frank communication. We urge that WFP and
CPA officials arrange to meet at the earliest opportunity to
resolve any questions regarding WFP food procurement and
deliveries to Iraq, and specifically to agree on priorities
and a game plan to deal with an increasingly reluctant MOT.
(This subsequently occurred March 3-4, as reported in
Baghdad 0045.) U.S. Mission stands ready to use its
personal contacts and influence with WFP to facilitate
contacts and address any unresolved questions.
21. (U) Ambassador Raphel cleared this cable.
22. (U) Minimize considered.
HALL
NNNN
2004ROME00973 - Classification: UNCLASSIFIED