Bulletin 4 2004 UNJLC Iraq

(a) Volumes into Iraq: An Estimate

An estimated average of 50,000 tonnes of dry goods are transported into Iraq every day through the various corridors by road and by sea. Air freighted general cargo is estimated in the region of 100 tonnes per day. These figures excludes any fuel or direct military transport.

The southern corridors, with the ports of Umm Qasr, Khor Al-Zubayr and the smaller Shatt Al-Arab ports, as well as Kuwait with the ports of Shuwaikh and Shuaiba, carry an estimated 40% of total volumes. The balance comes through Jordan, via the Karama/Trebil border served mainly by the port of Aqaba; Syria, through Tanf/Al-Waleed and Al-Yaroubiyeh/Rabiah borders, served by the ports of Tartous, Lattakia, Beirut and other Lebanese ports;  Turkey through Zakho borders at Harbur Gate; and from Iran through the Khosravi borders. Of these, Syria and Jordan are by far the most important. Little traffic apart from fuels seems to come through Saudi Arabia.

(b) Food

Approximately half of the volumes imported into Iraq are food, in bulk, bags and cartons. The Iraqi Government is increasing its own imports of food.

(c) Cars

One of the most prominent items transported into Iraq in the past year has been cars, mainly used vehicles from Europe and elsewhere. There has been a dedicated service carrying used cars from Korea, both transhipped in the UAE and discharged in Aqaba.

Monthly volumes are estimated at around 50,000 units. Syria is the most important corridor for cars with at least 40% of the market. Used cars have in the recent past caused congestion in the ports of Aqaba, Tartous and Lattakia. This has lead to delays for ships with other cargos waiting to berth and the imposition of congestion surcharges. Few, if any, used vehicles are now entering from Kuwait.

(d) Transportation cost

Market rates for transportation to and within Iraq have increased by about 50% since the beginning of the year. The market is defined as the area where rates are affected by demand from Iraq, namely Jordan, Syria, Lebanon and Iraq itself. Estimated average transportation cost per tonne is US$30 to US$40. Total turnover in the Iraqi trucking market is therefore between US$1.5 and US$2 million per day. As such, Iraqis now pay in excess of US$500,000 more per day for imports, compared with the beginning of the year.  This is contributing to increased prices within Iraq.

(e) Capacity

There is a general shortage of trucking capacity, especially as vehicles often have had to wait for days at borders and trucks experience significant delays in Jordan's port of Aqaba whilst waiting to load containers. Quicker turnaround in the ports and reduced waiting time at the borders would significantly increase available capacity without it being necessary to increase the number of trucks on the road.
 
A significant quantity of goods are stored in several ports in the region, particularly those on the Mediterranean and Red Sea, for transportation into Iraq. This is partially due to contracts signed at lower rates not being honoured by the contractors. It applies particularly to oil-for-food programme goods and larger contracts.

(f) Security and Politics

The security situation has also affected the turnaround of the vehicles. A more secure environment would lead to quicker turnaround and greater capacity.

Transloading of goods from trucks from neighbouring countries to Iraqi trucks at the Iraqi borders is becoming more common, as attacks on foreign trucks make it most difficult for them to enter Iraq. For political reasons, goods from Iran are almost always transloaded at the borders, with no Iranian trucks entering Iraq. Kuwaiti vehicles, or those bearing Kuwaiti licence plates, seldom venture beyond Basra.

2. Aviation

(a) Passenger Services

Commercial air passenger services are provided to Baghdad by Royal Jordanian Airlines from Amman, with a service for eligible members of the humanitarian community and Coalition personnel available through Air Serv International. UN Humanitarian Air Services (UNHAS) has temporarily suspended operations.

Royal Jordanian offers flights twice daily between Amman and Baghdad.  An economy class seat is $405 and $800 return. There is no special rate for UN or NGO staff.  Contact numbers for Royal Jordanian are +962-6-567 8321 (reservations) and +962-6-566 3525 and 585 5285 (sales).

Air Serv, a not-for-profit NGO, offers flights twice daily between Amman and Baghdad. It also flies to Erbil and Basra several times a week, all via Baghdad. These services are unavailable to the general public. The estimated schedule is available on their website. A single ticket between Amman and Baghdad for UN staff is US$660.

NGOs and UN agencies wishing to avail themselves of this service must first sign a protocol with Air Serv. NGOs must produce a copy of their letter of registration with the Iraqi Ministry of Planning and Development Cooperation. There is also a priority order of organizations in the event of limited space.

Air Serv may be contracted on Amman +962-79-694 1365 or Kuwait 965-914 4269. A copy of the Air Serv protocol for NGO's may be posted on the UNJLC website in August.

(b) Airfreight

Air cargo capacity into Baghdad from the Arabian Gulf is becoming well-established. A number of regular flights operate into Iraq, mainly Baghdad, from Bahrain and the UAE. Cargo charters are readily available from the UAE with a very active charter market offering predominantly Russian built planes operated by crews from former CIS countries. 

It is estimated that on average 100 tonnes of goods are air freighted from the UAE into Iraq every day.  Most goods carried are for the major contractors undertaking projects.

Royal Jordanian does not fly cargo on its service from Amman but Air Serv does seem to offer a cargo service from Amman. A number of larger cargo flights operate direct to Iraq from Europe.

DHL offers a daily airfreight service into Iraq from its regional hub in Bahrain.  Other carriers offer less frequent flights, mostly out of the United Arab Emirates.  DAS has recently commenced a weekly service, Daalo has had a service but this is now temporarily suspended. 

Most major contractors and other customers use freight forwarders to transport their goods into Iraq as the process can be cumbersome and requires skilled facilitation.  Freight forwarders deal with authorities and air carriers, sometimes through air charter brokers.

There are also frequent charter flights from other parts of the world into Iraqi airports.  For example, Menlo is understood to fly a Boeing 747 or Ilyushin cargo freighter out of Germany into Baghdad on a weekly basis. Facilities in Syria do not allow for the handling of large volumes, whereas Beirut airport has a greater capacity.

The largest forwarders, Panalpina, Eagle, Barwil and Inchcape, have several flights weekly, mostly carrying transhipped goods originating in the US and relayed through European hubs.  Cargo originating from the Arab region is estimated at only 10-15% of the total. The above-mentioned forwarders and DHL all have facilities to handle, store and clear goods into Iraq at Baghdad Airport.

Charter rates for Antonov aircraft carrying approximately 12 tonnes are about US$16,000, plus landing fees. The rate for larger Ilyushin aircraft carrying approximately 40 tonnes is $33,000 for the air capacity alone, with an additional cost for carrying the goods.

From July 1st, 2004, landing fees have been levied in Iraq. These are currently about US$1,500 for an average size cargo plane.

Owing to the high cost of air freight into Iraq, some freight forwarders fly their goods into neighbouring countries, primarily Jordan and Kuwait, and then truck the goods into Iraq. One forwarder carries two to three truckloads  daily of good airfreighted into Kuwait into Iraq.

⁽¹⁾Each truckload contains an average of 70 cubic metres and may weigh up to 25 tons.

3. Fuels

(a) Fuel products distribution

Gasoline: Availability of gasoline continues to be generally better in the northern governorates of Mosul, Erbil, Sulaymaniya, Dahuk and Kirkuk compared to the central south and lower south. Significant shortfalls persist particularly in Baghdad and Najaf. 

Iraq continues to rely on imports to meet its fuel needs, with gasoline imported via the small southern port of Khor Al-Zubayr, through Turkey and Syria, and also from Saudi Arabia. The Saudi imports seem to be continuing despite attacks.

At the retail level, the system whereby vehicles with odd and even numbered registration plates may refuel only on alternate days is having a positive impact on the orderliness of the distribution system. Some government-owned fuel stations in Baghdad, Hilla, Najaf and Diwaniya are selling gasoline at ID50 per liter, 150% above the official price of ID20. No long queues were apparent at these outlets. In one way, this is a welcome change as it is a start in the inevitable process of official fuel prices rising to a more realistic market level, sufficient to at least cover the cost of production and rationalize demand. Nevertheless, even at this still greatly subsidized price, it is clear that local people cannot afford to buy gasoline freely. The lack of queues, however, suggests that there is no acute general shortage. 

Gasoline market prices, compared to the official price, in selected locations, are as follows, in Iraqi dinars   with the black market premium:

Diesel: Availability of Diesel is less than that of gasoline owing to high demand from the transportation sector, neighbourhood generators in almost every part of the main cities and towns to compensate for the still unreliable national grid supply, and back-up generators for small industries, water treatment plants and other activities.

Long delays in Diesel refuelling are evident countrywide. For example, in the centre-south, it can take at least four hours to refuel trucks and buses. Demand in Hilla, Najaf and Diwaniya continues to be very high with the needs of diesel-driven water pumps and agricultural machinery used for the planting of rice and corn.

Although no firm figures are available, smuggling of Diesel to various neighbouring countries - driven by the huge price differential between Iraq - is acknowledged as a major drain on resources. The situation is such that the Minister of Oil met with the owners of private fuels stations, warning them against the improper use of the fuel products and affirming that all the supplied quantities should be distributed domestically to the end users.

Diesel market prices, compared to the official price, in selected locations, are as follows, in Iraqi dinars with the black market premium:

Kerosene: As kerosene is used primarily for home heating and sometimes for cooking and lighting, demand in July is at the lowest part of its cycle for the year. The product is therefore the widely available for current needs almost countrywide. We are unaware of any significant current shortfalls. However, it will be necessary for the authorities to establish adequate stockpiles for winter, otherwise they may be forced into an expensive import programme to meet the high seasonal needs then.

Kerosene market prices, compared to the official price, in selected locations, are as follows, in Iraqi dinars with the black market premium:

⁽²⁾One US$ equals about 1450 Iraqi dinars, or 100 Iraqi Dinars is the equivalent of about 7 US cents.

LPG: Cooking gas remains in high demand with Iraq's two main gas processing plants - one at Kirkuk, the other in the south near Basra - and the refineries unable to meet domestic requirements. Accurate figure are unavailable but it is believed that not more than 50 % of national demand is met by the local industry. Imports are at a low level and do not fill the gap. This is reflected in the market price of gas bottles, being about four times the official retail price.

(b) Security and Sabotage

The strategy used by saboteurs seems to have shifted away from attacking pipelines to targeting road tankers carrying fuel. Few major incidents were recorded against strategic pipelines during July, but tankers are now being attacked regularly - and drivers in some case kidnapped or killed - in many areas on the country. The area of Latifiya, south Baghdad, where a main depot in located, has been particularly vulnerable with a large number of attacks against both Iraqi and Saudi fuel convoys. The section of road between Mahmodiya and Haswa, south of Baghdad, is also reported to be extremely dangerous.

It is unclear whether this new concentration on road tankers is part of a deliberate plan by the attackers, or a result of better pipeline security, or a combination of both.

According to Ministry of Oil officials, the security measures taken to protect the pipelines have been reviewed and an intention expressed to use helicopters to patrol both crude and product pipelines.

(c) Crude Exports and Oil Terminals

The country's main export outlet, Mina Al-Basra Oil Terminal (MABOT), suffered several interruptions in May and June with sabotage to the 42" crude pipeline feeding to this terminal. The last recorded major sabotage was mid June with crude oil flowing in earnest again by the end of that month. There was no major interruption in July.

More stable flow rates are reported through the terminal recently, estimated at 75,000 bbl/hour, resulting in crude oil exports of about 1.8 million bbl/day.

Crude exports are also understood to be continuing through Iraq's second and smaller offshore Arabian Gulf outlet at Khor Amayah.

The prospect of resuming Iraqi crude exports through Lebanon via Syria has been raised in high level discussions between the respective governments. These exports would use a pipeline cut in April 2003.

In the shorter term, a barter deal has been signed with Syria to expand the existing arrangement where Iraqi crude oil will be provided in return for Syrian gasoline, Diesel and LPG supplies.

(d) Imports of Refined Products, Exports of HFO

The Khor Al-Zubayr Oil Terminal (KAZOT), situated several kilometers north of Umm Qasr, and south of the commercial port of Khor Al-Zubayr is now being used more extensively than in recent months to import LPG, gasoline and Diesel, and to export heavy fuel oil (HFO). This latter product represents about half of the production of refineries and cannot be fully utilized within Iraq.

With the shallow channel to KAZOT, vessels loading are limited to relatively small cargos of around 5000 tonnes. Vessels are berthed according to their nomination number from the State Oil Marketing Organisation in Baghdad.

Crude oil and perhaps HFO are also exported in lesser quantities to neighbouring countries in return for light products. Despite the kidnapping of a number of road tanker drivers operating trucks from Saudi Arabia, imports of fuel from Saudi Arabia appear to be continuing.

(e) Upstream Development

After the handover of projects from the US Army Corps of Engineers Gulf Region Division to the newly-established Projects and Contracting Office (PCO), US engineering and oilfield services firms KBR and Parsons are involved in major projects in the south and north respectively to rehabilitate and upgrade Iraq's upstream sector. These projects include the rehabilitation of gas-oil separation plants (GOSP's) in the north. According to Parsons, this project is expected to commence in August and will increase production capacity by 100,000 bbl/day before the end of the year. The rehabilitation of these plants will also increase the domestic production of LPG.

5. Electrical Power

The levels of generation of electrical power in Iraq have finally exceeded 5000 MW.  This is considerably less than the target set by the former occupation authorities of 6000 MW by July 1st, 2004, but clearly indicates that improvements are being made.  Demand is estimated at approximately 7500 MW and may increase to nearer 8000 MW in August with the increased demands of summer. This represents a supply shortfall of 2500 to 3000 MW (about 35%). Demand is being driven by the purchase of air-conditioning units and other consumer electrical goods and is not adequately constrained by metering and billing.

It should be noted, however, that demand during last summer was high - certainly over 6000 MW - but generation levels until September 2003 were in the range of 3000 to 3500 MW for a supply shortfall of up to 50%. Therefore, the situation during this summer should be marginally better than that of 2003. The increase in demand is maintaining the supply shortfall in absolute Megawatt-hour terms, but the situation is relatively better.

Moreover, most of the damage to the transmission network caused by looting and sabotage immediately after the conflict has been repaired.  In particular, Basra was reconnected to the national grid in April by two 400kV transmission lines.  The restoration of the network provides greater resilience and will mitigate the effects of failures of specific generation facilities by improving the capability of the Ministry of Electricity to power move around the country.  Furthermore, the stability of the network has been improved, making blackouts less likely.  It requires two days or longer to recover from blackouts, where power is lost completely from the network. This can have significant adverse humanitarian effects.

While there is a shortfall between supply and demand, deliberate 'load-shedding' (or 'rolling black-outs') operations are necessary.  The national policy on the allocation of electrical power, to which all relevant parties agreed, requires that critical infrastructure is not subject to load-shedding and should receive a continuous supply, 24 hours a day.  These facilities include hospitals, primary water and sewage treatment facilities, prisons, and buildings critical to daily governmental operations.  Although technical faults may periodically cut supply to such a facility, if sub-station operators adhere to the rules then such facilities should be unaffected by the variable gap between the demand and supply of electrical power.

The effects, therefore, of the shortfall in generation should not be humanitarian in nature but rather of discomfiture to the general population and economic harm as some businesses are unable to function.

The Ministry of Electricity and CPA had hoped to reach peak generating capacity of 6000 MW or more by undertaking a major programme of repairs, thorough rehabilitation and installation of new generation.  Contrary to popular perception, a great amount of work has taken place since October 2003.  For several reasons, this programme has not so far been successful at reaching its targets:

• Starting too late: installing new generation is not a fast process.  In normal situation, without the challenges faced in Iraq, it typically requires four to six months to install a 40 MW generator and at least nine months to install a 150 MW generator. 
• Adverse security environment: international cont-ractors working on electricity projects have often had to restrict their movements in response to threats.  Furthermore, the security situation has delayed the importation of materials necessary for electricity projects.  The net result is that projects have been taking considerably longer than originally planned.
• Disruption of fuel supplies: with most of Iraq's generation capacity relying on heavy fuel oil, crude oil, Diesel or natural gas, sabotage of oil and gas pipelines has periodically reduced or stopped the supply of fuel to power stations, thus impacting negatively on their output. Lack of fuel is likely to be the major constraint on the growth of generation during the next few years.
• Difficulty in procuring replacement parts: Iraq is totally dependent on its aging and poorly maintained power stations.  To increase both the output and reliability of these power stations, the Ministry and CPA commenced a process to procure parts and materials.  This process took longer than expected, partly because of the obsolescence of the technology.

However, work continues.  Funding is more than adequate and the situation going into autumn should improve steadily

ABOUT UNJLC: UNJLC is an inter-agency facility reporting to the Humanitarian Coordinator for Iraq and generally to the Inter Agency Standing Committee. Its mandate is to coordinate and optimise logistics capabilities of humanitarian organisations in large scale emergencies. UNJLC operates under the custodianship of WFP that is responsible for the administrative and financial management of the unit. UNJLC is funded from voluntary contributions that are channelled through WFP. The UNJLC project document for Iraq can be viewed at the UNJLC website (www.unjlc.org).