US embassy cable - 03HARARE1156

UNCLAS SECTION 01 OF 02 HARARE 001156 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR AF/S 
NSC FOR SENIOR AFRICA DIRECTOR JFRAZER 
 
E. O. 12958: N/A 
TAGS: ECON, ETRD, EPET, ZI 
SUBJECT: Deregulation Deal Could End Dry Spell for Fuel 
Dealers 
 
SENSITIVE BUT UNCLASSIFIED -- NOT FOR INTERNET POSTING 
 
1. (SBU)  Summary:  Fuel continues to be very scarce 
throughout the country.  There are widespread rumors that 
multinationals will soon be allowed to import fuel and sell 
at a market price, but no formal approval has yet 
materialized.  This would eliminate the GOZ's fuel subsidy, 
currently over 60 percent, and perhaps triple a pump price 
that has already increased 6-fold since February.  Although 
importers are poised to move swiftly once the GOZ gives its 
permission, logistics indicate that "swift" might mean 4-5 
weeks.  The implications of an announced revival of a fuel 
import deal with Libya on this scenario are unclear.  End 
summary. 
 
2. (SBU)  Fuel is extremely hard to find on the local market 
due to the cash-strapped GOZ's inability to pay its subsidy. 
Queues have diminished in some areas, but only because so 
few shipments are coming to the stations that there is no 
use in queuing.  Although the "official" pump price 
continues at Z$450 (US $.19) per liter, one businessman 
reported that black-market fuel (the only kind available) is 
now going for about Z$3000 per liter (USS $1.27 per liter, 
or $5.08 per gallon).  Some reports indicate that even 
established stations are diverting large proportions of any 
shipments received to the black market in order to recover 
some of their operational costs.  Given the number of cars 
still on the roads, it is clear that some fuel is getting to 
certain consumers.  However, very little of it is coming 
through the stations to the average motorist. 
 
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Multinationals Demand Transparency 
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3. (SBU) A ChevronTexaco contact reports that the major oil 
companies are prepared to import fuel as soon as the GOZ 
allows them to sell fuel at a market price.  The contact is 
adamant that the oil companies will not move until they are 
assured (in writing) of several constants:  first, that they 
are given the authority to source forex on the parallel 
market, without which many multinationals cannot legally 
secure the necessary funds; second, that they are allowed to 
price the fuel at a viable price depending upon the parallel 
market cost of forex; and third, that the price structure is 
transparent and clearly published to the public.  The 
ChevronTexaco rep is keenly aware of the bad publicity 
multinationals will attract if fuel prices escalate; 
however, he hopes that publishing the cost of importing the 
fuel will deflect that public anger from his own company. 
Another businessman with excellent government contacts 
indicates that ongoing negotiations between the GOZ and 
multinationals may result in a pump price of around Z$1400. 
 
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Four to Five Week Delay in Delivery 
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4. (SBU)  Additionally, the ChevronTexaco source notes that 
if his company is to import even at the (reduced) rate of 
2.5 million liters per day, it will be forced to resort to 
pipeline movements and railcars, rather than depending 
solely on road shipments.  Since the National Oil Company of 
Zimbabwe (NOCZIM) controls the pipeline, this introduces 
additional delays.  For instance, if the pipeline is 
currently filled with diesel, the fuel will have to be 
cleared from the pipeline and stored somewhere, while the 
gasoline is lined up and pumped through.  Between shipping 
times, port delays, actual pumping, storing any fuel 
currently in the line, and delivering the fuel to the 
stations, he estimates that there is a 4-5 week delay in 
actually getting fuel to the pumps. 
 
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Comment 
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5. (SBU)  Multinational oil companies and independent 
dealers continue to be wary of "deals" with the GOZ -- they 
have been burnt before when acting in good faith, and will 
not act now without necessary safeguards and guarantees. 
The looked-for announcement allowing them to import and sell 
at market prices while bypassing NOCZIM, an important step 
in economic liberalization, may materialize as early as next 
week but is not yet a done-deal.  The GOZ will clearly not 
gain public support from steep price increases, and may have 
been reluctant to make such an announcement in the midst of 
the MDC's stayaway.  Such a significant increase will also 
boost inflation, another blow against the GOZ.  It is clear, 
however, that without taking this step, the GOZ has very 
little hope of returning fuel to the stations. 
 
Sullivan