US embassy cable - 05PARAMARIBO748

UNCLAS PARAMARIBO 000748 
 
SIPDIS 
 
 
SENSITIVE 
 
STATE FOR WHA/CAR 
 
E.O. 12958: N/A 
TAGS: ECON, EPET, ETRD, ENRG, PREL, NS, PROG 
SUBJECT: SURINAME FACES POSSIBLE GAS STATION STRIKE IN 
MIDST OF GROWING CONSUMER DISCONTENT 
 
REF: A PARAMARIBO 689 
 
     B PARAMARIBO 607 
     C 04 PARAMARIBO 044 
 
1.  (U) Summary: On Monday November 14 gas station 
operators throughout Suriname shut down all pumps in order 
to focus public attention on their demands for an increased 
share of the profit margin on the fixed price of gasoline. 
This strike comes at an inopportune time for the government 
as it faces a series of protests organized by the political 
opposition leader, Desi Bouterse (see reftel A) who is 
using the negative reaction to recent price increases (see 
reftel B) as a wedge issue to discredit and undermine the 
Venetiaan government. Realizing the political peril, 
Minister of Trade and Industry Siegfried Gilds called for 
an immediate end to the strike and demanded negotiations 
begin promptly between the oil companies and the station 
operators. After five days of talks the two sides do not 
seem to be in agreement, with the owners again threatening 
to close the pumps on Sunday evening. Unless the two sides 
find common ground quickly, the government will find itself 
again exposed not only to criticism by the political 
opposition but also from a public frustrated by a lack of 
gasoline. End summary. 
 
2.  (U) Since the doubling in the price of gas in 
September, the Association for Gas Station Holders (SSEB) 
has been complaining that they need an increase in their 
profit margins in order to remain economically viable. 
Currently the gas station holders earn 8 cents per liter or 
2.7 percent of the current pump price.  Out of these 
earnings they pay rent to the oil companies who own the 
stations and bear the operational costs for running them. 
According to Sirodjenie Janki, secretary of the SSEB, the 
oil companies have raised the rent on most of the stations 
by 40 percent this past year.  SSEB maintains that when the 
GOS increased the fuel price by 100 percent, the earnings 
of both the government and the oil companies were enhanced; 
yet the margin for the holders remained the same.  SSEB is 
now demanding that the margin for the holders be increased 
to 15 cents per liter or 5 percent of the current pump 
price. SSEB claims that the increase in fuel prices has led 
to a decrease in demand for gas by an average of 30 
percent; the oil companies state that this figure is closer 
to 20 percent.  The overall decrease in demand has 
concomitantly reduced the station operators' income. 
 
3. (SBU) The last major strike by gas station owners in 
December 2003 (see reftel C) occurred under a similar set 
of circumstances, where the oil companies needed to 
negotiate directly with station owners to arrive at an 
acceptable profit margin. The government at that time 
absorbed the cost of the increase of the owners' profit 
margin, averting an impasse but at the cost of reduced tax 
revenue. This solution if proffered today would have 
negative political consequences, in that it would undermine 
the government's argument for so dramatic an increase in 
the price of gas. According to some rumors, the government 
is eyeing a similar solution this time around if it can 
make it appear that the oil companies are actually 
absorbing the loss. 
 
4. (SBU) Embassy has learned that in the period prior to 
the general election when the price of gas was kept well 
below market price, government subsidies resulted in 
indebtedness to the oil companies of 28 million SRD (USD 
$9.65 million). At the current fixed price of 3 SRD per 
liter the government expects to be able to pay off the 
arrears by January. Although there has been some reduction 
in the consumption of gas, the price increase has also had 
an inflationary effect, with calls for salary increases; 
prices increase in consumer items; and higher fares for 
public transport. As the international price of gas drops, 
the government will come under increased pressure to 
readjust the price downward. 
 
5. (U) Comment: Driven more by its fear of the oligarchical 
power of the oil suppliers than by sound economic arguments 
to remove price controls on gas, the government is unlikely 
in the short term to allow market forces to set the price 
of gasoline. If the government were to do so it might avoid 
the constant political scrutiny it attracts each time 
adjustments in the price of fuel are required. End comment. 
 
BARNES 
 
 
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