US embassy cable - 04SANTODOMINGO6240

C O N F I D E N T I A L SECTION 01 OF 03 SANTO DOMINGO 006240 
 
SIPDIS 
 
STATE FOR WHA/CAR, WHA/EPSC, INL; 
NSC FOR SHANNON AND MADISON;LABOR FOR ILAB; 
USCINCSO ALSO FOR POLAD;TREASURY FOR OASIA-LCARTER 
USDOC FOR 4322/ITA/MAC/WH/CARIBBEAN BASIN DIVISION 
USDOC FOR 3134/ITA/USFCS/RD/WH; DHS FOR CIS-CARLOS ITURREGUI 
 
E.O. 12958: DECL: 11/16/2014 
TAGS: PREL, ENRG, EFIN, DR 
SUBJECT: DOMINICAN POLITICS #9 - CHAVEZ BRINGS GENEROUS 
FINANCING DEAL TO DOMINICANS 
 
REF: A. SANTO DOMINGO 4719 
 
     B. SANTO DOMINGO 6119 
 
Classified By: DCM Lisa Kubiske.  Reason: 1.4 (b) and (d). 
 
1.  (C)  Summary.  Venezuelan president Hugo Chavez made an 
eight-hour visit to Santo Domingo on November 6, the main 
event of which was the signature of a bilateral agreement 
called the "Caracas Accord" to provide generous  financing 
terms for 25 percent of 50,000 barrels a day of Dominican 
imports of Venezuelan petroleum.  Fernandez effusively 
greeted Chavez, but it is not yet clear whether Chavez will 
gain any political leverage with the Dominican president. 
The visit served Fernandez,s purposes in building up his 
profile as a regional leader, giving him a chance to build up 
the  domestic politics,  , and, above all, in securing the 
USD 200 million or more in fuel payment relief that will help 
make the IMF negotiations viable.  End summary. 
 
2. (SBU) Venezuelan president Hugo Chavez made an eight-hour 
visit to Santo  Domingo on November 6, during which he and 
Dominican president Leonel Fernandez  signed a bilateral 
agreement called the "Caracas Accord" providing generous 
financing terms for 25 percent of Dominican imports of 
Venezuelan petroleum. 
In addition, Fernandez and Chavez dedicated the Plaza Bolivar 
in downtown Santo  Domingo and Chavez presented the President 
with a replica of Bolivar's sword. 
 
3. (SBU)  The petroleum financing deal, reported ref b, 
provides badly needed  financial support as the Dominican 
Republic is negotiating terms for a renewed  IMF standby. 
Venezuela is providing 15-year financing with two years 
grace, at  an interest rate of 2 percent per annum -- 
concessions which are worth in the 
neighborhood of USD 200 million in 2005.  Since much 
petroleum is used by electricity generators, the arrangement 
may help reduce the power sector blackouts characteristic of 
that mismanaged and undercapitalized sector. 
 
4.   (SBU) At the televised press conference in the 
presidential palace Chavez  spoke with apparently sorrowful 
dignity about Venezuela's relations with the United States, 
alleging U.S. interference at the time of the coup attempt. 
He emphasized the extent of Venezuelan investment in the U.S. 
petroleum sector and  asserted that "due to agreements signed 
by the previous government, Venezuela is in fact subsidizing 
U.S. fuel consumption by several dollars per barrel."   He 
said that a new ambassador (Amb. Brownfield) had assured him 
of U.S. 
interest in improving relations.  Chavez expressed hope that 
with his re-election President Bush would constitute a "new 
government." 
 
5. (SBU) Fernandez responded by expressing his government's 
congratulations on the re-election of the American president. 
 He continued in professorial style, noting that the world 
had changed, with the Cold War years giving way to a new 
order after the disappearance of the Soviet bloc and then 
changing once again 
as a result of the attacks of September 11, 2001.  Both the 
Dominican Republic and Venezuela deplored the loss of 
innocent lives and would cooperate to stop terrorism. He 
recalled his telephone conversation with Chavez on the day of 
the attempted coup and their agreement to seek help from the 
Carter Center.  This sort of hemispheric cooperation, said 
Fernandez, was essential to resolving problems.  And then -- 
after all that as preamble -- he made the offer, much 
reported by the press, to help mediate between the Venezuelan 
and U.S. 
governments if that would be helpful.  (Fernandez was making 
publicly the same offer twice made in private to the 
Ambassador (reftels.)) 
 
6. (SBU) Chavez took the lectern again to express his desire 
to use petroleum to assist the poor of the 
hemisphere -- in Colombia, in the Dominican Republic, and in 
Haiti, "where they don't even have the fuel for electricity 
for hospitals."  Venezuelan petroleum, he said, would serve 
as a modern version of Bolivar's sword, to encourage 
hemispheric unity.  He concluded with a grin, saying that 
ballplayers Sammy Sosa, Pedro Martinez, and other Dominicans 
"can teach us how to defeat the Yankees."  The assembled 
dignitaries and press 
laughed. 
 
A Palace View 
------------------ 
 
7. (C) On November 9 the Ambassador, DCM and EcoPol counselor 
discussed the visit with presidential chief of staff Danilo 
Medina.  Medina said that the oil financing deal was vital to 
Fernandez as he sought to re-establish financial stability. 
(Medina and Technical Secretary Temistocles Montas had sought 
much more generous terms but were eventually told that OPEC 
obligations barred anything more than what the Dominicans 
received.)  Medina said we should have no doubt that the 
Dominican Republic counts "100 percent, absolutely 100 
percent" on its relationship with the United States.  Talk 
had been only of energy issues, including at the private 
meeting of the presidents, Venezuelan oil minister and 
development bank head, and Medina. 
 
8. (SBU)  Medina said the relation between the two dates back 
to 1997-1998, when Chavez, as a candidate for the presidency, 
asked to call on Fernandez and was received.  Medinas said 
Fernandez appreciated Chavez's concern for the disadvantaged 
and his desire to improve social services.  After leaving 
office in 2000, Fernandez was an associate of the Carter 
Center and in that role responded to the request of 
Venezuelan industrialist Gustavo Cisneros to help organize a 
dialogue between the private sector and the Chavez 
administration. 
 
Fernandez,s View of Chavez 
 
9. (C) Another of our sources, long close to Fernandez and an 
official in the first Fernandez administration, commented 
recently that in fact,  Fernandez "hates" Chavez and once 
commented to our source that Chavez is a "madman."  Our 
source commented that Fernandez is obliged by financial 
necessity to welcome Chavez.  "Fernandez has felt desperate 
to find ways to solve all the problems facing the Dominican 
Republic," he said, "and he feels he is getting help from no 
one."  In our interlocutor,s view, the Venezuelan oil deal 
keeps electricity flowing, helps close a financing gap in the 
stand-by program, and provides some leverage against his 
enemies in the political opposition regarding an approach to 
the Dominican energy sector -- with little or no political 
quid pro quo. 
 
10.  (C)  This source,s report of negative feelings about 
Chavez is consistent with  Fernandez,s remarks to the 
Ambassador and Senator Nelson (FL) back in August, to the 
effect  that Chavez lacks leadership skills to move implement 
his agenda, lacks a plan for doing so, and "has transformed 
nothing in Venezuela."  Fernandez called Chavez "Fidel 
without talent, but with oil."  Fernandez said then that he 
had told Chavez that he must govern for all Venezuelans, not 
just for the poor, and he must  reach out to business and the 
economic elites.  ( reftel)  On the other hand, when we asked 
Danilo Medina what Fernandez admires about Chavez, the reply 
that Medina gave was  "his social concern and social 
programs." 
 
Comment 
- - - - - - 
 
11. (C)  For this visit, we believe Fernandez was using his 
embrace of the Venezuelan president for several purposes: for 
building himself up as regional leader; for domestic 
politics, pleasing the aged in his party's base by likening 
Chavez to Caamano, the military officer who supported 
democratic  restoration in 1965; and, above all, for the USD 
200 million or more in fuel payment relief that will help 
make the IMF negotiations viable.  As for the longer-term 
question of the Fernandez-Chavez relationship, there is as 
yet no verdict regarding its nature and whether Chavez, gift 
of oil will win him any appreciable degree of political 
influence over Fernandez. 
 
12. (U) Drafted by Michael Meigs, Lisa Kubiske. 
 
13.  (U) This report and others in the series can be 
consulted on our SIPRNET site 
http://www.state.sgov.gov/p/wha/santodomingo/     along with 
extensive other material. 
HERTELL