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Cablegate: Zimbabwe's Forex/Fuel Quandary

This record is a partial extract of the original cable. The full text of the original cable is not available.

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.

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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

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