US embassy cable - 02HARARE2246

UNCLAS HARARE 002246 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR AF/S 
NSC FOR SENIOR AFRICA DIRECTOR JFRAZER 
USDOC FOR 2037 DIEMOND 
PASS USTR ROSA WHITAKER 
TREASURY FOR ED BARBER AND C WILKINSON 
USAID FOR MARJORIE COPSON 
 
E. O. 12958: N/A 
TAGS: ECON, EPET, EFIN, ETRD, ZI 
SUBJECT:  ZIMBABWE'S FOREX/FUEL QUANDARY 
 
REF: HARARE 2102 
 
Sensitive but unclassified.  Protect accordingly. 
 
1. (U) Summary: Zimbabwe's fuel shortage has worsened. 
Each new Libyan demand for foreign exchange sets off an 
eleventh hour crisis, as the GoZ seeks to wean hard 
currency from a rapidly shrinking economy.  End Summary. 
 
Scapegoating Suppliers 
---------------------- 
2. (SBU) In a new twist since our last report (ref), the 
GoZ has sought to deflect attention from the forex 
squeeze by lashing out at both parastatal NOCZIM and 
private oil companies.  With angry commuters stranded 
last Thursday, Energy Ministry officials insisted 
publicly that downstream operators were hoarding fuel. 
In calmer moments, GoZ technocrats dismissed these 
charges for us, acknowledging that the GoZ had once again 
fallen short of forex. 
 
3. (SBU) Lines at the pumps disappeared abruptly over the 
weekend.  An end to the shortage?  On the contrary, an 
oil executive told us the Energy Ministry had ordered him 
to service only retail customers, leaving commercial 
clients in a lurch.  Normally, the firms sells 60 percent 
of its fuel on commercial markets.  He believed other 
downstreamers received similar instructions. 
 
Comment 
------- 
4. (U) On one hand, the GoZ's behavior is unremarkable. 
It invoked an implausible fable about hoarded reserves, 
falling back on its habitual bias against free markets. 
Then it diverted fuel from Zimbabwe's productive sector, 
a certain recipe for national impoverishment, but not 
surprising from a government that has frittered away one- 
third of its GDP. 
 
5. (U) On the other hand, the GoZ betrayed a perceptible 
touchiness over long gas lines, perhaps fearing the 
consequences and fall-out of a prolonged shortage.  If it 
wants to avert this recurring nightmare, the GoZ may one 
day have to reconcile policy with stubborn macroeconomic 
facts, namely that a) it lacks fuel because it lacks 
forex and b) it would ultimately raise forex by devaluing 
its currency and shoring up exports.  Not an option the 
government of Robert Mugabe would relish, but possibly 
more attractive than a nationwide standstill. 
 
Sullivan