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Cablegate: Burma: Cyclone Driving Up Food and Fuel Prices

VZCZCXRO6168
RR RUEHCHI RUEHDT RUEHHM RUEHNH RUEHTRO
DE RUEHGO #0323/01 1270925
ZNR UUUUU ZZH
R 060925Z MAY 08
FM AMEMBASSY RANGOON
TO RUEHC/SECSTATE WASHDC 7489
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHGG/UN SECURITY COUNCIL COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 1846
RUEHBY/AMEMBASSY CANBERRA 1124
RUEHKA/AMEMBASSY DHAKA 4854
RUEHNE/AMEMBASSY NEW DELHI 4671
RUEHUL/AMEMBASSY SEOUL 8212
RUEHKO/AMEMBASSY TOKYO 5774
RUEHCN/AMCONSUL CHENGDU 1448
RUEHCHI/AMCONSUL CHIANG MAI 1550
RUEHCI/AMCONSUL KOLKATA 0306
RUEATRS/DEPT OF TREASURY WASHDC
RHHMUNA/CDR USPACOM HONOLULU HI
RUEHGV/USMISSION GENEVA 3642
RHEHNSC/NSC WASHDC
RUCNDT/USMISSION USUN NEW YORK 1526
RUEKJCS/SECDEF WASHDC
RUEHBS/USEU BRUSSELS
RUEKJCS/JOINT STAFF WASHDC

UNCLAS SECTION 01 OF 03 RANGOON 000323

SENSITIVE
SIPDIS

STATE FOR EAP/MLS, EEB/TPP/ABT/ATP - JANET SPECK
BANGKOK FOR USDA/FAS, ECON OFFICE, USAID
DEPT PLEASE PASS TO USAID - CHERYL JENNINGS
PACOM FOR FPA
TREASURY FOR OASIA:SCHUN

E.O. 12958:N/A
TAGS: EAGR EAID ETRD ECON PGOV PREL BM
SUBJECT: BURMA: CYCLONE DRIVING UP FOOD AND FUEL PRICES

Ref: Rangoon 310

RANGOON 00000323 001.2 OF 003


1. (SBU) Summary. Cyclone Nargis devastated parts of southern
Burma, including Rangoon and the Irrawaddy Delta. Trees and power
lines are down, many homes are inhabitable, potable water supplies
have been compromised or destroyed, and roads are blocked with
debris. In the aftermath of the storm, prices of food and fuel
skyrocketed due to increased demand and limited supply. While
government prices of gasoline and diesel remain the same at 2,500
kyats ($2.30) and 3,000 kyats ($2.70) a gallon respectively, black
market prices have increased by more than 50 percent. Food supplies
in Rangoon are limited, and prices of edible oil and rice increased
by 45 percent and 25 percent respectively. Market stalls and
supermarket shelves are quickly becoming bare, as the Burmese run
out to purchase as many commodities as they can afford. As long as
roads into Rangoon remain blocked and black market fuel prices
continue to skyrocket, prices of food and commodities will continue
to rise, leaving many Burmese in Rangoon unable to put food on the
table. End Summary.

Soaring Prices and Runs on Stores
---------------------------------

2. (SBU) Cyclone Nargis hit Burma on May 2 and 3, severely
affecting Irrawaddy Division, Rangoon Division, Bago Division, Mon
State, and Karen State. With 120 mile per hour winds when it
reached Rangoon, Cyclone Nargis leveled many villages and homes,
tore down trees and power lines, and devastated potable water
supplies (Reftel). Rangoon was hit hard; because of the downed
power lines, many now depend on generators for electricity. Prices
of fuel, including gasoline and diesel, jumped dramatically in the
wake of the storm. The GOB sets prices for gasoline and diesel at
2,500 kyats ($2.30) and 3,000 kyats ($2.70) a gallon respectively,
but limits the amount that one can purchase at one time. As result,
there is a thriving black market for fuel. Before the storm, the
black market price of gasoline was 5,200 kyat ($4.70) a gallon and
diesel cost 5,800 kyat ($5.20) a gallon. As of May 4, gasoline
prices jumped 54 percent to 8,000 kyat ($7.20) per gallon, while
diesel prices increased 72 percent to 10,000 kyat ($9.00) a gallon.
The fuel price increases immediately led to a dramatic jump in
transportation prices, with the cost of taxis, buses, and trucks for
shipment increasing up to 400 percent. Since many of the taxis and
buses are fueled by compressed natural gas, the supply of which has
been cut off, there are significantly fewer on the roads, which
further drives up prices.

3. (SBU) Many Burmese were unaware of Cyclone Nargis before it
hit, and thus were unprepared for the storm. Others believed that
the cyclone would just be a regular rainstorm and did not stock up
on basic commodities. Immediately after the storm, we observed many
people, both Burmese and foreigners, rushing to the markets and
supermarkets to purchase large supplies of food, particularly rice,
fruits, vegetables and cooking oil, and drinking water. Vendors
took advantage of the high demand, dramatically raising prices of
basic food supplies. According to Win Win Tint, General Manager of
City Mart, the most in-demand items are rice, cooking oil, and
potable water. Prices of these goods increased dramatically:
ehmata rice (25 percent broken rice, medium quality eaten by most
Burmese) prices rose from 24,000 kyat ($21.80) per bag (69 lbs) to
30,000 kyat ($27.27) per bag, soybean oil prices increased by 45
percent, from 4,500 kyat ($4.00)/2 liters to 6,500 kyat ($5.90)/2
liters, and drinking water prices increased 233 percent, from 300
kyat ($0.27)/liter to 1,000 kyat ($0.90)/liter. By May 5, many
stores' and market's shelves were bare, and vendors were unable to
predict when they could replenish their stocks, as the blocked roads
limited the transportation of goods throughout the city.

RANGOON 00000323 002.2 OF 003

--------------------------------------------- -------
Selected Commodity Prices, Rangoon
As of May 5, 2008
In Kyat
--------------------------------------------- -------
Good Pre-Storm Post-Storm Percent
Price Price Increase
--------------------------------------------- -------
Ehmata Rice 24000/bag 30000/bag 25
Peanut Oil 4500/viss 5000/viss 11
Soybean Oil 4500/viss 6500/viss 45
Palm Oil 3200/viss 4000/viss 25
Pork 6000/viss 8000/viss 33
Chicken 6000/viss 8000/viss 33
Duck Eggs 100/each 250/each 150
Chicken Eggs 120/each 300/each 150
Purified Water 300/liter 1000/liter 233
--------------------------------------------- -------
*1 viss=3.6 lbs or 1 viss=2 liters

4. (SBU) While many vendors admit that food prices are unusually
high because of the storm, they predict that prices will fall (but
not return to normal) in several days. Once the roads are open,
people will be able to deliver food to Rangoon, increasing the
supply of basic food commodities on the market and thus marginally
lowering prices. Additionally, Chris Kaye of World Food Program
told us that the Rangoon Regional Commander, who is in charge of
monitoring food prices in Rangoon Division, is closely monitoring
the situation and will take steps to keep prices from skyrocketing
out of control. However, as long as fuel prices and transportation
costs remain high, we expect that the prices of food and
agricultural commodities will remain higher than pre-storm levels.

5. (SBU) As supermarkets in Rangoon run out of basic supplies or
face the lack of electricity, they are closing their doors. City
Mart, which has eight stores throughout the city, only opened five
of them on May 5. The Dagon Center, one of Rangoon's largest
shopping malls, was also closed. The supermarket in Sein Gyi Ha
Mall in downtown Rangoon was open, despite lack of electricity. The
manager told us that the supermarket was trying to sell its
perishable goods, such as meat and dairy products, before they went
bad, although it did not lower prices on these products. He
admitted that if he could not sell them, he would likely put them
back in the refrigerator (which is not operational due to lack of
electricity) and would try to sell them tomorrow. As the power
shortage continues and there is lack of potable water, the quality
of the food sold in Rangoon and other parts of Burma will diminish,
which could lead to disease and other ailments when people consume
them.

Comment
-------

6. (SBU) Much of Rangoon's food supply is brought in from other
areas of Burma, and rising fuel and transportation costs will
continue to affect prices. As long as the roads into Rangoon remain
blocked by fallen trees or power lines, food supplies will remain
limited, shelves will be bare, and prices will remain high. So far,
the Burmese are dealing with the price gouging, and we have seen
limited looting around the city. However, the Burmese are angry
that the regime is not doing more to help them. The longer it takes
for the government to repair the power lines, remove the trees, and
restore supply lines, the more likely increasing desperation could
result in violence, looting, and political unrest.


RANGOON 00000323 003.2 OF 003


VILLAROSA

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