US embassy cable - 04SANTODOMINGO4916

C O N F I D E N T I A L SECTION 01 OF 02 SANTO DOMINGO 004916 
 
SIPDIS 
 
DEPT FOR WHA/CAR, WHA/EPSC EDUARDO J. MARTINEZ; EB/ENERGY; 
DEPT PASS DEPARTMENT OF ENERGY; SOUTHCOM ALSO FOR POLAD 
 
E.O. 12958: DECL: 08/25/2014 
TAGS: EPET, ENRG, ECON, PREL, XK 
SUBJECT: DOMINICAN REPUBLIC AND VENEZUELAN OIL 
 
REF: A. SECSTATE 176535 
 
     B. SANTO DOMINGO 04719 
 
Classified By: ECOPOL Counselor Michael Meigs for reasons 1.4 (b,d) 
 
1. (U)  This cable is an overview of the Dominican Republic's 
petroleum sector in response to reftel A.  Venezuela in 2003 
supplied only 11 percent of total petroleum imports to the 
Dominican Republic, a significant change from 2002 when 
Venezuelan imports were nearly 55 percent of the total. 
Other key suppliers include U.S. (28 percent), Mexico (18.4 
percent), Colombia (11.4 percent) and Trinidad and Tobago (10 
percent). (see chart at the end of cable) 
 
2. (U)  Petroleum and San Jose/Caracas Accords. Though the 
supply of petroleum shifted to other sources, principally due 
to Venezuelan supply shortages in 2003, the Dominican 
Republic has long been a market for Venezuelan petroleum.  It 
used San Jose and Caracas Accord provisions in 2003-2004 to 
finance high voltage tension lines and to purchase products 
with which to improve sports facilities.  Melania Bautista, 
Undersecretary for International Cooperation in the Technical 
Secretariat of the Presidency, gave specifics: USD 23.9 
 
SIPDIS 
million for transmission lines, USD 37.2 million for sports 
facilities related to the 2003 Pan American Games and USD 
400,000 for the purchase of micro-mini buses manufactured in 
Venezuela.  Three projects for transmission lines and traffic 
signals have been scheduled for 2004, but have not yet been 
approved.  In a similar context, Miguel Cocco, new head of 
Dominican customs, remarked in June 2004 that the Dominican 
government did not have any success using San Jose Accord 
credits from Mexico in the early 1980's because of the 
difficulties working with the Mexican Foreign Trade Bank 
(FOMEX). 
 
3. (C)  On August 6, President Leonel Fernandez commented to 
embassy the Ambassador (ref b) that he had secured promises 
from President Chavez of Venezuela of extremely favorable 
terms for oil imports -- a credit line for purchases of 
Venezuelan oil at half the world price, with no payments due 
for six months and an offer of a USD 250 million loan. 
Fernandez looks to use these terms to stabilize Dominican 
finances and provide financing to the electric sector to deal 
with chronic fuel shortages and payment problems. 
 
4. (C)  Despite the prospect of Dominican imports of low 
priced Venezuelan crude, we do not expect President Fernandez 
to make significant policy shifts with respect to Venezuela. 
Fernandez is friendly with Chavez but does not share Chavez's 
populist approach or Chavez's antagonism toward the United 
States.  Fernandez has twice told embassy officers that the 
key reference points for the Dominican Republic are "New 
York, Washington, Miami, and Madrid."  Although short-term 
relief thanks to Venezuelan oil concessions is welcome, the 
Fernandez administration shows every sign of dealing 
seriously with its financial imbalances and with the IMF, in 
expectations of an economic turnaround over the next 12-24 
months.  Even with oil, Chavez will have relatively little 
leverage as long as this scenario remains feasible. 
 
5. (U) Following is a chart showing the Dominican Republic's 
imports by source of 5.26 million barrels of refined and 
unrefined petroleum in 2003. 
 
Dominican Petroleum Imports, 2002-2003 
- - - - - 
Year                        2002 
2003 
- - - - - 
Volume (bbl)           50,090,123                 47,421,453 
- - - - 
Cost (USD)             1,297,029,291            1,428,933,161 
- - - - - 
USD/bbl                  25.89                          30.13 
- - - - 
Percent of total imports (by volume) from: 
- - - - 
Venezuela           55 pct                     11 pct 
------------------------------------------ 
USA                  NA                           28 pct 
----------------------------------------- 
Mexico             NA                           18.4 pct 
---------------------------------------- 
Colombia           NA                          11.4 pct 
---------------------------------------- 
Trinidad-Tobago      NA                   10 pct 
--------------------------------------- 
 
Dominican Petroleum Imports from Venezuela, 2003-2003 
--------------------------------------- 
Year          2002                    2003 
--------------------------------------- 
Vol Crude  (bbl)    7,699,348                 1,798,997 
-------------------------------------- 
Vol refined        19,663,538              3,460,965 
----------------------------------- 
Total bbl/day          74,966                    14,410 
----------------------------------- 
KUBISKE