US embassy cable - 00HARARE5350

GOVERNMENT CONTINUES STOPGAP FUEL ACQUISITION IN ANTICIPATION OF POSSIBLE CABINET CONSIDERATION OF OIL INDUSTRY RESTRUCTURING

Identifier: 00HARARE5350
Wikileaks: View 00HARARE5350 at Wikileaks.org
Origin: Embassy Harare
Created: 2000-09-22 10:24:00
Classification: CONFIDENTIAL
Tags: EPET ENRG EIND PGOV AMGT ZI
Redacted: This cable was not redacted by Wikileaks.
This record is a partial extract of the original cable. The full text of the original cable is not available.



                           CONFIDENTIAL     PTO9626

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      ITC-01   LAB-01   L-00     VCE-00   AC-01    NSAE-00  OES-01   
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      DSCC-00  DRL-02   G-00     NFAT-00  SAS-00     /012W
                  ------------------888040  221024Z /38    
FM AMEMBASSY HARARE
TO SECSTATE WASHDC IMMEDIATE 7170
INFO NSC WASHDC IMMEDIATE
DEPTTREAS WASHDC
USDOC WASHDC
DEPT OF TRANS WASHDC
SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
C O N F I D E N T I A L HARARE 005350 
 
SIPDIS 
 
USDOC FOR 2037/ERIC HENDERSON 
 
TREASURY FOR ED BARBER AND GRACE SONE 
 
NSC FOR SENIOR AFRICA DIRECTOR GAYLE SMITH 
 
LONDON FOR GURNEY 
 
                       CONFIDENTIAL 
 
PAGE 02        HARARE  05350  221023Z 
PARIS FOR BISA WILLIAMS 
 
PASS USTR FOR ROSA WHITAKER 
 
E.O. 12958: DECL: 09/22/10 
TAGS: EPET, ENRG, EIND, PGOV, AMGT, ZI 
SUBJECT: GOVERNMENT CONTINUES STOPGAP FUEL ACQUISITION 
IN ANTICIPATION OF POSSIBLE CABINET CONSIDERATION OF OIL 
INDUSTRY RESTRUCTURING 
 
CLASSIFIED BY DCM EARL M. IRVING FOR REASONS 1.5 B/D. 
 
1. (SBU) ACCORDING TO PRESS REPORTING, THE GOVERNMENT OF 
ZIMBABWE SIGNED A ZIM$2.5 BILLION (APPROXIMATELY USD 50 
MILLION) LINE OF CREDIT WITH PRETRONAS, THE MALAYSIAN 
OIL COMPANY.  MOTOR FUELS WILL BE SUPPLIED TO THE 
COUNTRY OVERLAND, BY RAIL AND ROAD, BY ENGEN.  THE 
MALAYSIAN COMPANY, WHICH HAS AN 80 PERCENT STAKE IN 
ENGEN, WILL ACCEPT PAYMENT FOR THE PETROLEUM PRODUCTS IN 
LOCAL CURRENCY.  THE AGREEMENT WITH PETRONAS INVOLVES A 
SPLIT OF USD 25 MILLION FOR A 90-DAY REPAYMENT PERIOD 
AND ANOTHER USD 25 MILLION FOR 360 DAYS, ACCORDING TO 
THE PRESS.  ALTHOUGH THE MEDIA HERE BILLS THE DEAL AS "A 
LONG TERM SOLUTION TO THE PRESENT FUEL CRISIS," INDUSTRY 
SOURCES DESCRIBE THE ARRANGEMENT AS A STOPGAP THAT WILL 
KEEP THE COUNTRY IN PETROLEUM PRODUCTS FOR ANOTHER 
COUPLE OF MONTHS. 
 
2.  (C) A DELEGATION FROM THE IPG KUWAITI OIL COMPANY, 
WHICH HAS BEEN ZIMBABWE'S SOLE FUEL SUPPLIER FOR THE 
LAST SIX MONTHS, MET WITH PRESIDENT MUGABE SEPTEMBER 20, 
                       CONFIDENTIAL 
 
PAGE 03        HARARE  05350  221023Z 
AFTER WHICH THE COMPANY'S CHAIRMAN TOLD THE PRESS, "WE 
WILL CONTINUE TO SUPPLY FUEL TO ZIMBABWE AND THE 
CONTRACT SHOULD BE EXTENDED.  SHORTAGES OF FUEL WERE 
BECAUSE OF OUR FINANCIAL EXPOSURE."  MOHAMMAD F. AL- 
MOHAMMAD, THE KUWAITI EMBASSY'S ACTING DCM (PROTECT), 
TOLD US THAT THE TERMS FOR THE IPG CONTRACT WERE TOUGH: 
U.S. DOLLAR CASH PAYMENTS IN 30 DAYS WITH STEEP INTEREST 
AND PENALTY REQUIREMENTS.  IN RESPONSE TO OUR QUESTION 
OF WHERE THE MONEY TO PAY FOR THIS WOULD COME FROM OUR 
INTERLOCUTOR UNHESITATINGLY SAID, "QADHAFI, OF COURSE." 
ACCORDING TO THE PRESS, IPG IS "FINANCIALLY EXPOSED TO 
THE TUNE OF USD 80 MILLION."  OIL INDUSTRY SOURCES WAVE 
AWAY AS EMPTY IPG PROMISES TO INVEST IN THE PIPELINE 
FROM MOZAMBIQUE (OF WHICH IT HAS EXCLUSIVE USE) AND 
STORAGE FACILITIES AS PART OF ITS LONG TERM COMMITMENT 
TO ZIMBABWE. 
 
3.  (U) MEANWHILE, RETAIL FUEL SUPPLIES AROUND THE 
COUNTRY CONTINUE TO BE INADEQUATE.  GASOLINE 
AVAILABILITY AT SERVICE STATIONS IS SPOTTY, WHILE DIESEL 
IS EXTREMELY SCARCE, EVEN AT THE CENTRAL MECHANICAL 
EQUIPMENT DEPARTMENT GARAGES, WHICH FURNISH FUEL FOR 
ZIMBABWEAN GOVERNMENT VEHICLES AND THE DIPLOMATIC CORPS. 
EMBASSY OPERATIONS CONTINUE LARGELY UNAFFECTED THANKS TO 
OUR CONTRACT WITH CALTEX TO KEEP OUR FUEL STORAGE TANKS 
TOPPED OFF. 
 
4.  (C) MOBIL OIL'S AMCIT GENERAL MANAGER, THOMAS WALTER 
(PROTECT), TOLD US THAT HE AND OTHER PRIVATELY OWNED OIL 
COMPANY EXECUTIVES HAVE ENJOYED A GOOD WORKING 
RELATIONSHIP WITH NEW MINISTER OF MINES AND ENERGY, 
                       CONFIDENTIAL 
 
PAGE 04        HARARE  05350  221023Z 
SYDNEY SEKEREMAYI.  SEKEREMAYI'S POINT MAN ON THE FUEL 
CRISIS IS HIS PERMANENT SECRETARY, NICHOLAS KITIKITI, 
WHOM WALTER DESCRIBED AS BRIGHT AND ACTION-ORIENTED. 
KITIKITI HAS HELD CONSTRUCTIVE DISCUSSIONS WITH THE 
PRIVATE PETROLEUM PRODUCT RETAILERS, FROM WHICH HAS 
EMERGED A PLAN FOR POSSIBLE PRESENTATION TO CABINET 
SEPTEMBER 26 TO RESTRUCTURE THE OIL INDUSTRY IN 
ZIMBABWE.  ALTHOUGH WALTER DID NOT ENTER INTO SPECIFICS, 
WE IMAGINE IT WILL REMOVE THE NATIONAL OIL COMPANY OF 
ZIMBABWE'S MONOPOLY ON OIL PROCUREMENT.  THE MOBIL OIL 
EXECUTIVE SAID THAT, THE PRIVATE OIL COMPANIES WOULD BE 
WILLING TO TAKE A CHANCE AND BOOST SUPPLIES.  HE NOTED 
THAT THE LONG TERM GOAL WOULD BE TO MAKE THE NEW 
ARRANGEMENT "FINANCEABLE."  "WE ARE POSED FOR A 
BREAKTHROUGH," WALTER CONCLUDED. 
 
MCDONALD 
 
                       CONFIDENTIAL 
 
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