US embassy cable - 04SANAA1537

C O N F I D E N T I A L SECTION 01 OF 02 SANAA 001537 
 
SIPDIS 
 
E.O. 12958: DECL: 06/13/2014 
TAGS: PGOV, EPET, PHUM, KDEM, KMPI, YM, DOMESTIC POLITICS 
SUBJECT: PARLIAMENT CHALLENGES GOVERNMENT CORRUPTION 
 
 
Classified By: DCM Alan G. Misenheimer for Reasons 1.5 (b,d) 
 
1. (C) Summary and Comment: Over the course of several 
months, Members of Parliament (MPs) have conducted an 
investigation into government corruption regarding an oil 
deal that dates back to 1997.  The investigation was 
spearheaded by two members of the Oil and Resources 
Committee, one from the ruling General People's Congress 
party and one from the main opposition Islah party.  In the 
first action of its kind, these MPs rallied parliamentary 
support across party lines to try to hold the government to 
account.  Extensive press coverage of the scandal and the 
factual evidence of government corruption could assist in 
combating widespread corruption in Yemen.  However, a more 
likely result of the success of these efforts is Parliament's 
increased willingness and effectiveness in conducting 
oversight of the executive.  End Summary and Comment. 
 
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The Oil Deal 
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2. (C) In 1997, ROYG issued a Production Sharing Agreement 
(PSA) in Block 53 to a company named Dove Energy over other 
multinational companies such as Can-Oxy Petroleum.  Over 
concerns regarding Dove Energy's capability to operate the 
PSA, Parliament launched a preliminary inquiry into the sale 
in 1997-1998.  Opposition press articles from that time claim 
that the owners of Dove are the wife of the Yemen Ambassador 
to the UN and the daughter of the former Yemeni Ambassador to 
Lebanon.  (Note: Emboffs did several background checks on the 
company and found only address listings in the UK, little 
else on Dove.)  Ministry of Oil officials at that time 
reportedly justified the issuance of the PSA to Dove because 
25% of the Dove contract was to be given to the state owned 
Yemen Exploration and Production Company (YEPC), thus 
enhancing state revenue. 
 
3. (C) After hearing rumors that the YEPC sold sixty percent 
of its share to Gulf investors using the name Pacific in 
September 2003, Parliament began another investigation in 
late 2003.  The report from the Oil and Resources Committee 
concluded that: 1) the loss to the state treasury was ten 
million dollars a year for the next 18 years and 2) the sale 
was unconstitutional according to article 18 of the Yemen 
constitution which says that Parliament oversees "natural 
resources."  (Comment: In an era of declining oil revenue for 
the ROYG, this loss to the state revenue is significant.) 
Ministry of Oil justified the deal saying that the loss was 
overestimated and that the ROYG needed to attact Gulf 
investors.  Sanaa is rife with rumors surrounding 
al-Husseini, the Gulf investor behind all of this.  Several 
officials told pol/econoffs that al-Husseini paid off several 
high level ROYG officials (usually naming Prime Minister Ba 
Jammal and Oil Minister Ba Rabah specifically) to make this 
deal.  (Comment: Ba Rabah is widely viewed by western oil 
interests as among the most corrupt and ineffective of the 
Ministers.) 
 
4. (C) The oil committee called Prime Minister Ba Jammal 
repeatedly to answer questions.   Ba Jammal never agreed to 
show up, agruing that Parliament had no legal authority to 
call him.  On May 18, Parliament issued a two week notice to 
the ROYG to cancel the deal.  Three weeks later, the ROYG 
issued a statement that the sale would be cancelled in sixty 
days.  However, the exact details of the agreement to cancel 
are unclear. 
 
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Machinations in Parliament 
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5. (C) Because the scandal implicated high-level members of 
the ROYG, including Prime Minister Ba Jammal and Oil Minister 
Ba Rabah, many parliamentary and government leaders 
maneuvered to quash the scandal, including attempts to keep 
the discussion of the Committee report from Parliament's 
agenda.  At one point, the MPs even made 200 copies of their 
committee report themselves after they found parliamentary 
staff under pressure not to do so.  However, the two MPs 
leading the investigation -- Sakar Ahmed Abass al-Wajih from 
the GPC and Ali Hussein Ashal from Islah -- succeeded in 
keeping the issue on the table by rallying other MPs to fight 
corruption, including the creation of an informal multi-party 
reformist coalition interested in fighting corruption 
generally (including members of the ruling party). 
 
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Comment 
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6. (C) The success of the investigation showed MPs, the ROYG 
and citizens that Yemen's Parliament has more power in 
overseeing the executive than most realized or were willing 
to exercise, which should bode well for continued 
institutional democratic progress.  The upcoming MEPI-funded 
parliament program is particularly timely.  At the same time, 
the zeal engendered by this success may have negative effects 
on other natural resources deals, as evidenced by the recent 
announcement that U.S. Hunt Oil Company's extension on its 
Block 18 PSA will be reviewed by Parliament. End comment. 
HULL