US embassy cable - 02HARARE2102

UNCLAS SECTION 01 OF 02 HARARE 002102 
 
SIPDIS 
 
NSC FOR SENIOR AFRICA DIRECTOR JFRAZER 
LONDON FOR CGURNEY 
PARIS FOR CNEARY 
NAIROBI FOR PFLAUMER 
 
E.O. 12958: N/A 
TAGS: ECON, EPET, PGOV, ZI 
SUBJECT: FUEL SHORTAGE OR PANIC BUYING? -- FUEL QUEUES 
RESULT REGARDLESS 
 
REF: HARARE 01719 
 
1. Summary.  Various sources suggest that a nation-wide fuel 
shortage is likely sooner rather than later (reftel).  Even 
with continued financial support from Libya regarding the 
fuel itself, widely reported in recent press accounts, the 
GOZ is facing huge pressures to produce forex to get the fuel 
into the country through the port facilities in Beira.  The 
GOZ has reportedly closed a US $360 million deal with Libya 
which will supply Zimbabwe with fuel for the next year, while 
increasing Libya's stakes in various assets within Zimbabwe. 
However, fuel stations throughout the country continue to 
display "No Fuel" signs, and fuel queues continue to indicate 
which stations actually have petrol available. End summary. 
 
2. Fuel queues have been reported on and off throughout 
Zimbabwe since the end of August.  However, the queues have 
now hit the country with a vengeance, as lines of motorists 
throughout Harare currently spend anywhere from twenty 
minutes to several hours waiting for fuel.  According to 
reports from Embassy personnel who have been driving outside 
of Harare over the weekend, there is no diesel available 
north of Harare.   Some motorists have said that the petrol 
station personnel indicate that there is plenty of fuel 
available, and the state-controlled media dismisses the fuel 
queues as the result of "hoarding" and "panic buying."  It is 
probable that many consumers are filling their tanks now, 
while fuel is available, rather than depend upon the shaky 
system which may not be able to guarantee availability next 
week. 
 
Prologue to Higher Prices? 
-------------------------- 
 
3. Other motorists, however, state that fuel station 
operators report that shortages are being engineered ahead of 
a fuel price increase rumored to be up to 40% higher than 
current prices.  In previous situations when the GOZ wanted 
to increase fuel prices, the country would experience a fuel 
shortage with all the resultant uncertainties and anxieties, 
after which the price would jump when fuel finally became 
available.  According to one source, motorists were so 
relieved to actually get petrol that the price increase had 
been absorbed without much protest. 
 
4. There is certainly room, from a global perspective, for 
the price of petroleum products to increase -- the current 
price of fuel is Zim $73/liter for diesel, and Zim $76/liter 
for blend gasoline (approximately US $.10 per liter/$.40 per 
gallon for diesel, and approximately US $.11 per liter/$.44 
per gallon for gasoline, at the parallel rate).  There are 
persistent reports of large-scale transport companies sending 
their trucks across border points into Zimbabwe with their 
gas gagues on "E" to fill their tanks up at the artificially 
low price.  However, despite the fact that fuel and energy 
are the only two sectors not benefitting from price supports, 
preferential price structures, or the ability to otherwise 
earn forex, the GOZ appears reluctant to allow the price of 
fuel to increase.  Given the public uproar which occurred 
when mass transit operators attempted to increase commuter 
fares in May without the GOZ's approval, this reluctance may 
be prudent. 
 
Libya Wants Hard Cash 
--------------------- 
 
5. As noted in previous reports (see reftel), the Libyans 
have expressed an increasing reluctance to continue providing 
fuel unless the GOZ pays in forex. By contrast, local media 
report that the Libyans are interested in increasing their 
level of ownership in strategic assets, including a stake in 
the parastatal National Oil Company of Zimbabwe (NOCZIM) and 
its storage tanks.  Regardless of their preferred currency, 
Libya needs payment for oil in one fashion or another -- the 
GOZ currently owes Libya approximately US $60 million for 
fuel already delivered and consumed, and Libya is wary about 
extending further credit.  However, even if Libya were 
prepared to provide oceans of fuel at a bargain price with 
payment due sometime far into the future -- and there is no 
indication that it is -- the logistics of delivering the fuel 
to retailers and motorists remain problematic.  One element 
contributing to the sporadic availability of fuel is the 
GOZ's inability to meet costs for docking space, port 
charges, facility fees, and pumping costs, which must be paid 
in forex.  There are also reports that the storage facilities 
within Zimbabwe are, on orders from the Libyan fuel owners, 
only releasing fuel on a daily basis dependent upon the 
amount of forex which NOCZIM can pay. 
Comment 
------- 
 
6. The fuel situation continues to deteriorate, and 
uncertainty about the future is undoubtedly exacerbating the 
shortages.  There are conflicting reports about Libya's 
intentions -- in some quarters, Libya is cast as the party 
restricting the flow of fuel into the country, while in 
others Libya is portrayed as wanting increased (and 
presumably more choice) access to Zimbabwean assets. In 
either case, Libya's influence on the GOZ will remain 
significant for the foreseeable future.  End comment. 
SULLIVAN