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Cablegate: Goz Triples Fuel Price - Again

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

UNCLAS HARARE 001710

SIPDIS

STATE FOR AF/S
NSC FOR SENIOR AFRICA DIRECTOR JFRAZER
USDOC FOR 2037 DIEMOND
TREASURY FOR OREN WYCHE-SHAW
PASS USTR FLORIZELLE LISER
STATE PASS USAID FOR MARJORIE COPSON

E. O. 12958: N/A
TAGS: ECON EPET EINV ZI
SUBJECT: GOZ triples fuel price - again

1. Summary: The GOZ has raised the controlled price of
leaded fuel from Z$ 450 to 1,170/liter. Not enough to
reawaken Zimbabwe's somnolent gas stations, but it does
partly formalize GOZ recognition of the falling
Zimdollar. End Summary.

A 17-fold increase since February
---------------------------------
2. In nominal terms, the fuel price has risen from Z$69
to 1,170/liter since February. However, the former price
reflected a large subsidy and a Zimdollar 4-times more
valuable. Fuel at Z$69/liter was also a relic of Libya's
discontinued oil donations. Since the new price converts
at US$.21/liter, well shy of a US$.40/liter international
price, it is too low to meaningfully reactivate the
retail fuel market. (The GOZ also hiked the controlled
diesel price from Z$250 to 1,060/liter.)

3. Multinational oil companies are pleased the GOZ is
again moving in the right direction. Firms are
crunching numbers to find a creative way to sell some
fuel at new prices, but it won't be easy. The Zimdollar
would have to appreciate from a current Z$5600 to perhaps
Z$4000/US$1, or be offered at the official rate of
Z$824:US$1. Alternatively, gas stations might be able to
restrict customers to cash sales. (Due to a shortage,
Zimdollar banknotes are worth at least 25 percent above
face value.)

4. At the same time, the GOZ remains opposed to market-
driven pump prices. On August 26, police shut down
indigenous player Comoil for selling fuel at
Z$1,700/liter. Comoil belongs to ZANU-PF insider and
Politburo-member Savior Kaukuwere. Speculation is rife
that competing ZANU-PF fuel interests triggered the
clampdown, fodder for flashy front-page coverage in the
GOZ's Herald. During the fuel crisis, various indigenous
groups have taken over business from multinational oil
companies. Now they vie against one another.

Comment
-------
5. Any time the GOZ owns up to a weaker Zimdollar (the
official rate is one-sixth of today's exchange), we are
encouraged. For a government that denies any part in the
economy's steep economic decline, the freefalling
currency is sensitive territory. On the other hand, the
GOZ forever chases, but never catches, real-world prices
for its currency and many controlled products. Because
producers want to make money - not lose less - on each
sale, the GOZ expends political capital but leaves
problems unresolved. The only sensible answer is market-
determined pricing.

Sullivan

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