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Cablegate: Lebanon: Severe Power Cuts and Increased Gas And

VZCZCXRO9943
RR RUEHAG RUEHBC RUEHDE RUEHDF RUEHIK RUEHKUK RUEHLZ RUEHROV
DE RUEHLB #0896/01 1680500
ZNR UUUUU ZZH
R 160500Z JUN 08 ZDK CTG NUMEROUS SVC MSG
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC 2268
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RHEHAAA/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 02 BEIRUT 000896

SENSITIVE

SIPDIS

STATE FOR NEA/ELA
STATE PASS USTR
TREASURY FOR MNUGENT AND SBLEIWEISS
USDOC FOR 4520/ITA/MAC/ONE
NSC FOR ABRAMS/SINGH/YERGER/DEMOPOLOUS

E.O. 12958: N/A
TAGS: ECON EFIN PREL PGOV LE
SUBJECT: LEBANON: SEVERE POWER CUTS AND INCREASED GAS AND
TRANSPORTATION PRICES HIT CITIZENS (ECONOMIC WEEK IN REVIEW, JUNE 9
- 15, 2008)

CONTENTS
--------

-- CONTROVERSY BETWEEN FINANCE MINISTRY AND POWER COMPANY LEAD TO
SEVERE POWER CUTS
-- GAS PRICES REACH RECORD HIGH, PUBLIC TRANSPORT FARES ALSO RISE
-- FINANCIAL INSTITUTE DISCUSSES PLANS FOR IPR TRAINING PROGRAM,
SEEKS U.S. ASSISTANCE
-- ARAB INVESTORS AWAIT 2009 ELECTIONS TO MOVE ON MEGA PROJECTS
-- GOL AND THE FOOD AND AGRICULTURAL ORGANIZATION LAUNCH THREE
PROJECTS VALUED AT OVER $6 MILLION
-- HOUSING PROJECT IN TYRE AIMS AT REDUCING FISHERMEN
IMMIGRATION
-- FITCH'S INFLATION VULNERABILTY INDEX RATES LEBANON AS SECOND MOST
VULNERABLE IN MENA REGION
-- LEBANON FALLS IN COUNTRY CONNECTIVITY SURVEY

CONTROVERSY BETWEEN FINANCE MINISTRY AND
POWER COMPANY LEAD TO SEVERE POWER CUTS
--------------------

1. (U) It is expected that power outages will be reduced in
frequency after Finance Minister Azour approved opening $140 million
Letters of Credit for fuel imports for national power utility
Electricite du Liban (EDL). Azour indicated that EDL is using power
cuts to put pressure on the GOL and Treasury to settle its fuel
bills as EDL suffers from chronic deficits. Azour believes poor
management and maintenance are causing power cuts.

2. (SBU) Meanwhile, EDL Chairman Kamal Hayek told us June 12 that
EDL had to impose severe power cuts that reached four hours in
Beirut and 9-12 hours in other regions daily as of last week because
of shortage in fuel and gasoil reserves. He said he warned Azour in
writing about the shortage in oil reserves two weeks ago and urged
the opening of L/Cs for oil imports. He rejected Azour's public
statements that increased power rationing was not due to shortage in
fuel/gasoil, but to problems in production and in programming oil
imports. Power cuts are expected to drop starting early next week
as fuel/gasoil tankers unload in storage tanks.

GAS PRICES REACH RECORD HIGH,
PUBLIC TRANSPORT FARES ALSO RISE
--------------------

3. (U) The Ministry of Energy and Water raised the prices of 20
liters of gasoline by slightly over one dollar on June 11, so that
the price of 95-octane is $21.2 per liter and the price of 98-octane
is $21.8 per liter. Private sector economic and business officials,
as well as member of the labor and agricultural sectors have
expressed their concerns on the effects of this rise on production
and how it will affect the most recent increase in the minimum wage.


4. (U) Even before the most recent hike in gas prices, the Ministry
of Transportation raised the fares of public transportation (buses
and shared cabs) by around 33 percent, effective from the first week
of June.

FINANCIAL INSTITUTE DISCUSSES PLANS
FOR IPR TRAINING PROGRAM, SEEKS U.S. ASSISTANCE
--------------------

5. (SBU) On June 12, Econ staff met with the head of the Financial
Institute, Lamia Moubayed, to discuss ways Post can assist in
implementing a one to two year training program at the Institute for
Customs officers on IPR enforcement. Working in collaboration with
the Brand Protection Group (BPG) -- an association of leading local,
regional, and international manufacturers and distributors aimed at
combating counterfeiting -- the Financial Institute hopes to use the
skills and experience of those that post has already sent on IPR
training, as well as bringing U.S. IPR experts to train local
officers and improve IPR enforcement. In addition, Moubayed made a
strong pitch for a U.S. expert to assist in engineering the program.


ARAB INVESTORS AWAIT 2009 ELECTIONS
TO MOVE ON MEGA PROJECTS
--------------------


BEIRUT 00000896 002 OF 002


6. (SBU) Arab investors are increasingly interested in real estate
projects in Lebanon because real estate is still under-valued,
General Manager of Lebanon's largest Islamic bank Arab Finance House
(AFH) Fouad Matraji told us June 10, noting that AFH has been
approached by several Arab investors for real estate development
projects in Greater Beirut. Matraji however noted that Arab
investors are holding back on mega projects, mostly in tourism
sector, until after the 2009 parliamentary elections, to see how
"Lebanon will re-shape" given recent developments in the region.

GOL AND THE FOOD AND AGRICULTURAL ORGANIZATION
LAUNCH THREE PROJECTS VALUED AT OVER $6 MILLION
--------------------

7. (U) According to the local press, the Food and Agricultural
Organization (FAO) announced on June 10 the launching of three
agricultural projects, valued at over $6 million, financed by the
GOL with funds from the August 2006 Stockholm Conference, organized
in the immediate aftermath of the 2006 July war. The projects will
be undertaken in collaboration with the Lebanese Ministries of
Agriculture and Environment and focus on flora and fauna, forestry
sector, and combating wildfires.

HOUSING PROJECT IN TYRE AIMS AT
REDUCING FISHERMEN IMMIGRATION
--------------------

8. (U) A housing project for 80 Christian fishermen from the
southern coastal city of Tyre was inaugurated on June 9. This
project was co-funded by the Spanish Government Development Agency,
local Christian/Shia NGO Association for the Development of Rural
Capacities (ADR), the Greek Catholic Archdiocese of Tyre, and the
fishermen. The total cost of the project is estimated at around
$2.8 million, and aims at encouraging young Christian fishermen to
stay in Tyre, thus reducing immigration from the area.

FITCH'S INFLATION VULNERABILTY INDEX RATES LEBANON
AS SECOND MOST VULNERABLE IN MENA REGION
--------------------

9. (U) Fitch Ratings' Inflation Vulnerability Index (IVI) ranked
Lebanon as the 29 most vulnerable economy to inflation shocks out of
73 emerging economies in Europe, the Middle East, Africa, Asia and
Latin America, and the second most vulnerable in the MENA region.
The index measures the extent to which a country's vulnerability to
inflation shocks could result in broader macroeconomic instability,
potentially damaging a country's creditworthiness.

LEBANON FALLS IN COUNTRY
CONNECTIVITY SURVEY
--------------------

10. (U) According to the 2008 Arab Advisor's Group Total Country
Connectivity Measure (TCCM), Lebanon ranked 10 among 19 countries,
down one place compared to the 2007 survey. The TCCM is the
aggregate of household mainlines penetration, cellular penetration,
and Internet users penetration in each country.

SISON

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