US embassy cable - 02HARARE1719

C O N F I D E N T I A L SECTION 01 OF 02 HARARE 001719 
 
SIPDIS 
 
STATE FOR AF/S, AF/EX, HR/OE-MTRACY 
NSC FOR SENIOR AFRICA DIRECTOR JFRAZER 
USDOC FOR 2037 DIEMOND 
LONDON FOR CGURNEY 
PARIS FOR NEARY 
NAIROBI FOR PFLAUMER 
TREASURY FOR ED BARBER AND CWILKINSON 
 
E.O. 12958: DECL: 07/24/2012 
TAGS: ECON, EPET, ETRD, ZI 
SUBJECT: ZIMBABWE FACES FUEL SHORTAGES UNLESS NEW 
BENEFACTOR APPEARS 
 
REF: HARARE 01664 
 
Classified By: Labor officer Karen Bel. 
Reasons: 1.5 (B) and (D). 
 
1. (C) Summary.  Amid rumors of imminent fuel shortages 
reminiscent of those that occurred in 1998, a local economist 
estimates that Zimbabwe retains at best a one-month supply of 
oil should pipeline and tanker shipments be curtailed.  The 
southern and northern regions are serviced by different 
supply sources and each is threatened by discrete factors, 
both of which involve the lack of forex.  If both regions 
were to lose oil supplies simultaneously, however, the 
northern part would probably retain access to more fuel than 
the southern part due to reserves currently stocked in the 
local storage facilities.  For the moment, and in the absence 
of the GOZ discovering an outside lifeline, it seems to be a 
question of when -- not if -- the shortages set in.  End 
summary. 
 
2. (C) Laboff met with economist John Robertson on July 23 to 
sound out recurrent rumors of an imminent fuel shortage due 
to the chronic lack of forex.  Robertson confirmed that he 
has also heard the rumors, but he had no concrete information 
indicating that suppliers have yet withdrawn.  However, he 
confirmed that funding for both current major sources of fuel 
is in jeopardy, and stated that Zimbabwe is "not far off" 
from widespread shortages. 
 
3. (C) Currently, the northern part of the country is 
serviced via pipeline from Mozambique through an arrangement 
with Libya.  According to Robertson, the GOZ has been paying 
for Libyan fuel through the transfer of equity in and 
ownership of various Zimbabwean assets, including commercial 
farms, the pipeline itself, and an oil storage facility in 
Msasa.  (Note: Interestingly, an equity deal involving the 
same oil pipeline and Msasa storage facility was reportedly 
consummated with Kuwaiti sources for oil which was purchased 
last year.  End note.)  As stated in reftel, however, Finance 
Minister Simba Makoni reported that the Libyan Area Foreign 
Bank has limited its investments in Zimbabwe to purchases of 
shares in the Commercial Bank of Zimbabwe.  Regardless, 
Robertson reported that the Libyans are apparently tired of 
being offered equity or Zimbabwe dollars, and are 
increasingly insisting on payment in forex for their oil, due 
to their own operational and production costs. 
 
 4. (C) By contrast, the southern part of the country -- 
which for purposes of the oil distribution scheme includes 
Victoria Falls as well as Beitbridge, Bulawayo, and Chipinge 
-- is serviced by shipments from South African oil companies 
(Sassoil), with the funding reportedly provided by 
Zimbabwe-based businessman John Bredenkamp through a loan to 
Mugabe.  The fuel for this region is brought in via truck and 
rail.  Shortages have already been reported during the past 
few months, including a period of several days during which 
no fuel was available in the Bulawayo area.  This shortage 
was relieved when fuel from stocks in the northern part of 
the country was shipped in to Bulawayo via truck.  Funding 
for the southern region is allegedly endangered due to 
strained relations between Mugabe/the GOZ and Bredenkamp, who 
reportedly is unwilling to increase his financial exposure to 
the GOZ. (Note:  Robertson opined that some of the strain is 
due to Bredenkamp's perception that a close relationship with 
the GOZ is detrimental to his other business interests, which 
is in fact evidence that inclusion on the US sanctions list 
is effective.  End note.)  If Bredenkamp refuses to finance 
future purchases, the GOZ will once again be scrambling for 
enough forex to maintain shipments from South Africa.  Should 
this alternative source of fuel dry up, the shortage could be 
managed for a short period by trucking in fuel from the 
northern stocks.  However, the capacity of the pipeline is 
insufficient to provide fuel for the entire country, and if 
the southern source is cut off, the reserves of the country 
would rapidly be depleted. 
 
5. (C) According to Robertson, there seems to be little hope 
for new sources of funding for either the northern pipeline 
fuel source or the southern road/rail fuel source.  Both 
import schemes require large amounts of forex, which is in 
spectacularly short supply.  There are few forex-generating 
exports and even fewer forex-generating domestic businesses. 
The GOZ is facing increasing pressure to purchase and import 
food in addition to that provided through humanitarian aid 
programs, and further economic reverses are expected. 
Despite negotiations with the Libyans and other oil producing 
nations, no new sponsor has appeared on the horizon. 
Additionally, there appear to be no new sources for loans to 
the GOZ, as there are no repayment prospects for either new 
or existing loans. 
 
6. (C) Comment: Although the rumor that "when the pig comes 
through the pipeline, that's all there is" cannot be 
substantiated, there is little doubt that Zimbabwe is facing 
widespread fuel shortages within a month, should either 
source be cut off.  The financiers of both current sources of 
fuel are dissatisfied with the status quo. Unless some new 
source of forex, or new benefactor, appears on the scene, 
fuel shortages are not far away.  End comment. 
SULLIVAN