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• Transport Corridors
• The Syrian Corridor
• Syrian Ports: Current Congestion
• The Syrian Trucking Industry
• The Jordan Corridor
• The Saudi Arabian Corridor
• Aviation
• Fuels
• General Situation
• Distribution of fuel products Gasoline
• Sabotage
• An Environmental Concern
• UNJLC Activities
• Crude Production, Exports and Import
• Electrical Power

Transport Corridors

At present, there are seven main corridors for humanitarian and commercial cargos into Iraq: Jordan, using the Port of Aqaba through to the Karama/Trebil border; Syria, served by its own ports as well as Lebanese ports; Iraq’s own ports of Umm Qasr and Umm Zubayr on the Arabian Gulf; Turkey, utilising several Mediterranean ports as well as the overland route from Europe and Black Sea trade through the port of Samsun; Kuwait, with Shuwaikh Port and Shuaiba Port; Iran, mostly through Bander Khomeini; and Saudi Arabia’s Ar’ar border crossing point.

There are advantages and disadvantages with each of these corridors, and none is trouble-free.

Traffic through Iran into Iraq is now thought to be negligible. Saudi Arabia has emerged as an entry point only recently. Most trade from Saudi Arabia appeared, until recently, to pass through Kuwait, as evidenced by the large number of Saudi transit trucks in Kuwait.

The Syrian Corridor

The Syrian corridor has proved to be one of the most effective routes in recent months. Distances from its main ports to most key destinations in Iraq are generally less than that of its main competitor, Jordan. The fact that all ports utilised by this corridor are situated on the Mediterranean, with easy access from Europe and no need to transit the Suez Canal, further adds to its attractiveness.

The two main ports on this corridor are Tartous and Lattakia but Lebanese ports also provide significant capacity. Cargos enter Iraq through the main border crossing points of Tanf/Al-Waleed, near the Jordanian border, and Yarouberiyah, further north. Until relatively recently, Tanf/Al-Waleed was clearly the most important of these two; with many shipments now destined for Northern Iraq, Yarouberiyah is assuming more importance.

 Average daily traffic passing through these two border points, together, is estimated by industry sources at about 400 to 500 trucks. The majority of the cargoes are food, both from the international humanitarian community, and from Iraq’s own imports purchased directly from Syria and from international suppliers.

No excessive congestion or delays are reported on either side of the borders. Humanitarian agencies report efficient and problem-free access. The Government of Syria has enabled documentation for locally-purchased humanitarian goods to be completed at the borders by forwarders stationed there, thus expediting traffic. The corridor continues to be well served by an agreement reached with the Syrian Prime Minister through UNJLC and UN agencies in Damascus in early to mid-2003 whereby humanitarian cargoes are exempt from charges usually applied to transit goods, and the transit process was greatly simplified. These exemptions are still in force. For a Summary of Syrian Government Facilities click here.

However, the capacity of the corridor to handle much greater volumes is limited as local trucking capacity appears to be almost fully utilised. With the quick transit of goods and relatively low trucking costs, a modest increase in volumes is possible but the corridor may not be able to cope effectively with a much greater demand.

Syrian Ports: Current Congestion

Earlier this year, Syrian ports were reported to be congested with vessels having to wait several days for a berth, and container lines applying congestion charges of between US$50 and US$150 per twenty-foot equivalent unit (TEU).

The main causes of the congestion were the increased level of traffic destined for Iraq, exacerbated by the high level of used car imports, also for the Iraq market. The vehicles-intransit accumulated in the ports, taking up storage space. With the introduction of higher storage charges, many of these goods have now been moved, releasing space and allowing more effective functioning of the ports. Although the congestion has eased, the charges are still in place.

Of Syria’s two major ports, Lattakia is the main container terminal. It relies principally on ships’ gear for the offloading operation, with a floating crane used in case of gear failure. Most containers are de-stuffed within the limits of the port, causing congestion in the yard. Consideration is being given to moving Container Freight Station activities (which deals with de-stuffing containers and separating consolidated cargoes) to a separate yard some 10 km from the port.

Lattakia has seen a rapid increase in volumes this past year, up about 25% on 2003. The number of TEU’s handled has increased by 41% from 2002, with no new investment in infrastructure. However, the port will be investing in three gantry cranes for ship-to-shore operations, and four Chinese rubber-tyred gantry cranes. Productivity is therefore expected to increase dramatically.

Syria’s other major port, Tartous, deals mainly with noncontainerised goods, although the port does have some container-based activities. Ships are now berthed within a day of arrival so in essence there is no significant congestion.

The Syrian Trucking Industry

The market for land transport of cargoes to Iraq along the Syrian corridor is shared roughly evenly between the Syrian and the Iraqi trucking industries. Syrian trucks also provide a major part of the trucking capacity of Lebanon, so the Lebanese economy, and cargos originating from or passing through it to Iraq, play a large role in the utilisation of the Syrian trucking fleet.

Used trucks may not be imported into Syria for domestic use. There has been little fleet renewal over the past six to seven years with low freight rates and stagnation in the economy and volumes. Rates have increased by 40% to 50% in the past year, reflecting increased business, a more realistic return, and most likely high capacity utilisation.

Syria allows the highest payload in the region at 44 to 45 tonnes per truck, so most Syrian trucks are built to the highest capacity allowed by the chassis and tractor. For grain and break-bulk cargo, it is common to use a trucktrailer combination where the load is evenly distributed; containers are usually transported on a semi-trailer. As a result of this higher permitted payload per truck, the cost per tonne-kilometre is the lowest in the region.

The fleet is owned mostly by owner drivers with a number of smaller transport companies. Given this industry structure, the movement of goods is controlled by forwarders who hire vehicles for the jobs they are engaged for. In other countries, with a larger proportion of the fleet owned by transport companies, clients tend to go more directly to the transporters.

The Jordan Corridor

A Change of Advantage In early June, the Jordanian Government removed several important fiscal exemptions that had been extended to Iraqis trucks crossing into Jordan to collect cargoes for Iraq. These exemptions - in place since 2003 – are thought to have greatly facilitated the carrying capacity of the Jordan corridor.

Partly as a result of this action, but also as a result of delays experienced by Iraqi drivers, the number of Iraqi trucks entering Jordan decreased significantly in the second half of June and early July. At the same time, Jordanian truckers continue to be reluctant to service Iraq because of the security risk. This twin-effect of less Iraqi trucks and few Jordanian trucks greatly reduced the cargo capacity into Iraq, forcing the delay of many shipments.

It is understood that these exemptions may now have been restored at least in part, especially for humanitarian cargoes. At a meeting of the Jordanian Cabinet on July 6th, 2004, His Majesty King Abdullah instructed the government to facilitate the flow of humanitarian goods through Jordan and to reduce charges on goods destined for neighbouring countries, with particular emphasis on humanitarian food shipments. Industry sources maintain that the reduction of charges will apply to all traffic going into Iraq.

The main charges which have been applied are: (i) Pass Book for Iraqi drivers, JD10 per book; (ii) sealing charges JD2 per seal; (iii) Diesel support charges for Iraqi drivers, JD 80 per trip; (iv) monthly loading charges JD75 – JD150 per vehicle per month; and (v) departure tax, JD5 per departure.

It has not yet been confirmed that all these items have been removed.

The situation does not yet seem to have returned to the status quo ante and requires careful monitoring over the coming weeks. This is particularly important given the prominent role played by the Jordanian port of Aqaba in supplying Iraq.

For further discussion on the Jordanian corridor, particularly the Port of Aqaba, see UNJLC Bulletin 2 of 2004, July 9th, 2004, Section 1(a).

The Saudi Arabian Corridor

The Saudi Arabian corridor, when open, uses the Ar’ar crossing point between Iraq and Saudi Arabia. Cargo may be sourced from within Saudi Arabia itself, or the Kingdom’s Red Sea or Arabian Gulf ports. It seems to be presently used only for fuels cargos, and little used for humanitarian traffic. It does seem to close periodically with changes in the security situation.

The corridor may be a useful alternative in the case of severe congestion in other corridors or deterioration in the security situation that closes them down. However, distances involved are much greater than the Syrian and Jordanian corridors and the Saudi system more cumbersome. From major Red Sea ports to Baghdad is about 2000 km. From Arabian Gulf ports, it is about 1500 km. This compares to about 950 km from Tartous in Syria and 1182 km from Aqaba.

Aviation

Several scheduled civilian air services presently serve the cities of Baghdad, Basra and Erbil from Amman. Air-Serv (bookings through Jordan@airserv.org), fly into Baghdad between three and four times each day, with four flights Monday through Wednesday and three on other days. A number of the flights into Basra also serve Basra or Erbil, but not both provincial cities on the same day; the other flights serve only Baghdad.

Royal Jordanian operates two flights per day into Baghdad. The UN’s Humanitarian Air Services (UNHAS) will continue to operate into Iraq at least through to the end of July.

Air cargo capacity into Baghdad also seems to be wellestablished, with a number of regular flights from Bahrain and the UAE, and ready availability of cargo charters.

Fuels

General Situation

An approximate and very rough estimate of fuels availability by region is as follows:

Overall Availability, as a % of estimated demand

The North is well-served by imports from Turkey. Baghdad and the Centre benefit from the location of the Daura and Baiji refineries respectively. The Lower South has the Basra refinery. Anbar and the Upper South suffer more acutely from distribution problems, in part because of the security situation in those areas.

The new sovereign government of Iraq has implemented measures nationwide, but particularly in Baghdad, the Upper South and South regions, to better organise the distribution of gasoline and reduce queues at petrol stations. This involves vehicles with odd and evennumbered registration plates being allowed to fill up on alternate days. A severe penalty of ID2 million is applied to stations violating this rule. The measure has led to a noticeable reduction in the queues at petrol stations, but lines of 30 to 40 vehicles are still evident in the capital.

On a positive note, there appears to be no shortage of fuels – either Diesel or gasoline – on the main highway linking Jordan to Iraq. This highway also serves in part the Syrian corridor. Availability at the few stations on the route is good, with higher quality gasoline in stock. This is consistent to earlier reports about the resumption of production of higher octane gasoline by the Daura refinery.

Elsewhere, the situation is not as good. A noticeable shortage is apparent in Najaf and Kerbala. Very long queues persist at petrol stations, with a wait of between five and eight hours to have a vehicle refuelled. This is partly as a result of the security situation in the area, which discourages tanker drivers from servicing it. The situation in these cities is exacerbated by the presence of pilgrims to Shi’ite shrines. Up to 500,000 visitors may pass through these cities in a week, with the figure rising to more than 1.5 million on special occasions. This is turn increases the demand for fuel and other essential services.

Distribution of fuel products Gasoline

Shortages continue nationwide, with the situation more acute in Anbar and the South than in the North. An unofficial difference has emerged between the price at which gasoline is sold in government-owned petrol stations and privately-owned stations, with the private stations charging up to double the official price of ID20. This is particularly so in the governorates where monitoring and control of the prices by Ministry of Oil officials is much harder to implement. However, this price differential may not be entirely a bad thing as prices are artificially low and will need to rise to market levels if balance between supply and demand is to be restored.

Small household generators (as distinct from larger neighbourhood units that run on Diesel) continue to place a huge demand on gasoline supplies given the lack of stable power from the national grid. As an example, a relatively small town such as Hilla would have about 40,000 households; each household may require an average of ten litres of gasoline per day to operate a small generator. This translates into a daily demand of 400,000 litres per day, just for this town. Restoration of reliable power from the national grid would greatly reduce demand and shortages.

Diesel:
A large shortfall in Diesel supply continues with bulk quantities sold for ID25,000 per barrel. With the hot weather of summer, and the continued low level of power generation and distribution, it appears that much of the demand arises from household and neighbourhood generators to provide airconditioning and refrigeration. The increased level of economic activity in Iraq, with more trucks on the road, carrying more loads, may also be contributing to this, together with the seasonal needs of the harvesting season. It is unclear what effect the smuggling of Diesel to neighbouring countries is having, but it is thought to be continuing unabated.

Sabotage

Sabotage is affecting not only of the crude oil pipeline system vital for exports and Iraq’s refined products pipeline network but also the tanker distribution system. Oil products road tankers destined for the Al-Karkh depot at Al-Latifiya, south of Baghdad, are frequently attacked, causing casualties and fires at that location. In early July, a Saudi truck with a Sudanese driver, carrying imported refined products, was targeted, together with two Iraqi tankers, each of 36,000 litres. Other attacks have taken place elsewhere. This risk limits the movements of trucks and drivers, and exacerbates shortages.

Attacks on the road tanker system may be in part because the trucks present easy targets, and the main oil production, refining and distribution facilities are protected by a 14,000 man facilities protection service. However, this force cannot protect every inch of pipeline. Early July also saw attacks on the strategic crude pipeline in the area south of Kerbala, spilling huge quantities of crude oil onto the ground. In the same week, the refined products pipeline to the Al-Sadda depot near the Mussaiab power plant was attacked, as was a gas pipeline south of Kirkuk, feeding the gas turbine electricity power plants in the area. The sabotage is well-planned, with the clear intention to cut crude oil exports, disrupt the distribution of supplies, interrupt electrical power generation and generally sow chaos.

An Environmental Concern

A further concern of the effects of the sabotage relates to the environment. Hydrocarbons spilled into the soil have a long-lasting effect and may pose a health hazard to humans and animals. Iraq has a very shallow water table in its populated areas, in some places only 60 cm beneath the surface. Environmental damage as a result of toxins in spilled crude oil or refined products can therefore be carried far beyond the location of the sabotage or accident, possibly polluting wells, sources of irrigation water, and even drinking water.

UNJLC Activities

During early July, UNJLC facilitated, in co-ordination with the Oil Products Distribution Company in Baghdad, the provision of sufficient fuel to operate back-up generators for Basra’s water treatment plants.

The Lower South region, with Basra as its main population centre, has been plagued by a shortage of potable water as a result of long periods when electrical power from the national grid is unavailable, forcing the plants to rely on generator power.

Officials from the Ministry of Municipalities and Public Works responsible for the plants in Basra identified a need for 400,000 litres of Diesel fuel to power their generators; officials from the Ministry of Oil responded positively to a request from UNJLC for the fuel supplies, assisting in relieving the situation in Basra.

Crude Production, Exports and Import

Crude production is thought to have continued at levels in excess of 2 million barrels per day, with about 20% to 25% of that diverted to refineries for production of high-end fuels for local consumption.

Exports have not been materially affected by sabotage to pipelines as most exports originate from production in the southern fields, which are a relatively short distance from the export terminals in the Arabian Gulf. Most crude processed in the refineries originates from the northern fields, around Kirkuk. Nevertheless, sabotage to the Iraq- Turkey pipeline is holding back export capacity.

Iraq appears to be on track to boost crude production to 3 million barrels per day by the end of the year or shortly thereafter. Slow progress is being made on surface installations in the oilfields necessary to achieve this. Much will depend on the security situation and the ability of local contractors to complete their commitments on time.

Heavy Fuel Oil is also being exported through the Arabian Gulf from the port of Khor Zubayr, at a large discount on market prices. It is likely that at least part of this is being used as barter for imported refined products to make up the shortfall between local production and demand.

Electrical Power

The generation and distribution of electrical power is receiving an increased level of attention as the gap between supply and demand widens in the hottest part of the year. Electrical power has a major impact on the general welfare and mood of the population; lack of it has sparked civil unrest. It also affects the humanitarian situation as the fuels, water and sanitation infrastructure all require a stable power supply. Obtaining accurate metrics on electricity supply across Iraq has become more difficult since the authorities stopped publishing daily reports in May 2004, ostensibly for security reasons. UNJLC is endeavouring to obtain regular reporting. However, it is understood that peak power generated and imported into Iraq now exceeds 5000 MW, with average supply to normal consumers of 10 to 12 hours per day. Availability of electricity, in % of hours per day, is subjectively estimated as follows. Although imprecise, these estimates illustrate the relative situation regionally. Baghdad and the Centre are less well-off than other regions; only the North has good availability:

(North covers the governorates of Dahuk, Ninewa, Erbil and Sulaymania;Centre covers Tameem. Salah Ad-Deen and Diyala; Upper South comprisesBabil, Wassit, Qadissiya, Kerbala and Najaf; Lower South comprises Basra,Thi-Qar, Missan and Muthanna.)

Power available does not meet demand because generating capacity was targeted in the 1991 conflict, and the subsequent sanctions prevented Iraq from fully rebuilding its infrastructure; transmission and distribution systems continue to be affected by sabotage; and the post-war demand, with hundreds of thousands of new imported appliances, is much greater than prior to March 2003.

Poor availability of electrical power has both direct and indirect effects on Iraq’s logistics infrastructure. Ships cannot be offloaded without the power for cranes; power is required for operations at fuel and cargo depots; petrol stations pumps need power; refineries require steady power for optimum efficiency; without blackouts, people turn to small generators, increasing fuel demand when the lack of power is reducing fuel supply. These installations may use generators when mains power is not available, but this in turn increases demand for fuels. None of Iraq’s man refineries is fully independent of the national grid.

The importance of electricity generation to the fuels situation – and its effect on logistics capacity - cannot be overstated. Nationally, power is generated primarily by big power stations burning crude, HFO, or gas. These fuels are not directly used by the population. The supply of fuel to power stations is expected to be adequate for this year but periodic sabotage may reduce or stop completely this supply of fuel, reducing the contribution of affected power stations to the grid. Restoration of adequate capacity will both better utilise these fuels and, through reducing the need for household generators and making refineries more productive, increase supply of high-end fuels.

In coming weeks, UNJLC will focus further on power supply, particularly its effect on the logistics infrastructure.