Cablegate: Goz Backslides On Fuel Importation Restrictions

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R 021247Z AUG 07
FM AMEMBASSY HARARE
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INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
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RHEHAAA/NSC WASHDC
RUEHBS/USEU BRUSSELS
RUCNDT/USMISSION USUN NEW YORK 1889

UNCLAS SECTION 01 OF 02 HARARE 000687

SIPDIS

SIPDIS

AF/S FOR S.HILL
ADDIS ABABA FOR USAU
ADDIS ABABA FOR ACSS
STATE PASS TO USAID FOR E.LOKEN AND L.DOBBINS
NSC FOR SENIOR AFRICA DIRECTOR B.PITTMAN

E.O. 12958: N/A
TAGS: PREL PGOV ECON ASEC EPET ZI
SUBJECT: GOZ BACKSLIDES ON FUEL IMPORTATION RESTRICTIONS

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Summary
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1. The Government of Zimbabwe, which two weeks ago announced
an end to the use of fuel coupons for the purchase of
imported fuel, and which last week in a diplomatic note
stated that all fuel importation and distribution would be
through the National Oil Company of Zimbabwe (NOCZIM), has
reversed course and will allow private companies to continue
importing and supplying fuel, according to Chevron
representatives. Those eligible to purchase fuel from
private companies include diplomatic missions, NGOs,
companies buying in bulk, and holders of Foreign Currency
Accounts (FCAs). Private individuals, many of whom were
using coupons purchased in the diaspora, will have to
purchase from NOCZIM. NOCZIM's inability to meet demand will
inevitably result in hardship and a skyrocketing black
market. End Summary.

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Fuel Restrictions Part of Price Control Policy
---------------------------------------------

2. In June, the GOZ first announced a two-week phase out of
the use of Direct Fuel Import, coupons paid for offshore and
used to purchase fuel within Zimbabwe. The government
subsequently, through public notice and diplomatic notes,
stated that diplomatic missions, NGOs, and donor-funded
programs could continue to use their coupons until exhausted.
All fuel importation and distribution in the future would be
done by NOCZIM. The result of these pronouncements was long
fuel queues as individuals attempted to use their coupons or
buy the limited quantities available of NOCZIM
price-controlled fuel, and concern in the diplomatic, NGO,
and donor communities.

3. According to Chevron (owner of Caltex which supplies the
U.S. Embassy) representatives, the announced government fuel
policies were intended, in conjunction with price controls,
to reduce inflation. The GOZ believed that 1) fuel purchased
from importers was finding its way to the black market and 2)
individuals, many in the diaspora, were using forex to trade
in fuel by buying coupons, purchasing fuel, selling it on the
black market, and using proceeds to begin the cycle anew.
Chevron told us that as of June, there were 52 registered
fuel companies in Zimbabwe; many were selling most of their
fuel to traders rather than end users.

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GOZ Backslide
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4. Chevron told us that the GOZ's intention to use NOCZIM
exclusively understandably alarmed business interests. A
number of these approached ministries responsible for them,
e.g. the Ministry of Mines, and threatened to shut down.
Ministries then relayed these concerns to the Price Control
Commission, which now appears to have ultimate authority on
pricing issues. Concerns were also expressed through
intermediaries to President Mugabe.

5. The Price Control Commission retreated. On July 27, it
informed international oil companies Chevron, BP, and Total,
as well as local companies Comoil and Redan, that they would
be allowed to import and distribute bulk quantities of at
least 40,000 liters to concerns possessing their own storage

HARARE 00000687 002 OF 002

facilities and pumps. On July 29, the GOZ announced that
holders of FCAs could use coupons to purchase from direct
fuel importers. Direct fuel importers will pay US 2 cents
per liter to the GOZ. The GOZ believes, according to
Chevron, that these measures, plus the deregistration of all
but the aforementioned companies, will permit authorities to
monitor purchases and prevent trading or diversion of fuel to
the black market.

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Average Zimbabwean Still Hit Hard
---------------------------------

6. Continuing to be hit hard will be average driving
Zimbabweans with no FCAs. NOCZIM allocates fuel first to
ministries, government employees, and parastatals. The
ordinary consumer is at the end of the chain, and there is
insufficient supply to meet demand. Until now, many
individuals received coupons paid for in the diaspora by
relatives. This will now be unlawful. Chevron
representatives told us the GOZ had expressed concern to them
about money from the diaspora being used to trade, thereby
creating inflation possibly aimed at regime change.

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Comment
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7. The offshore purchase of fuel coupons has been an
important source of fuel for many ordinary Zimbabweans.
Without broad access to coupons, we can expect increasingly
long queues to buy heavily subsidized--but scarce--fuel from
NOCZIM, and despite GOZ efforts to eliminate it, a thriving
black market controlled by Zimbabweans who have creatively
"made a plan." It would not be surprising to see the GOZ
relax the restriction on offshore coupon sales in the near
future, once the GOZ calculates the harm its new policy does
to its electoral prospects when traditional ZANU-PF
supporters in rural areas can no longer find transportation
to visit their relatives in urban areas or get there
vegetables to market.
DHANANI

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