Cablegate: Deregulation Deal Could End Dry Spell for Fuel

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





E. O. 12958: N/A
SUBJECT: Deregulation Deal Could End Dry Spell for Fuel


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

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.

Multinationals Demand Transparency

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.

Four to Five Week Delay in Delivery

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.


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.


© Scoop Media

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