UNCLAS SECTION 01 OF 02 HARARE 002102

SIPDIS

NSC FOR SENIOR AFRICA DIRECTOR JFRAZER
LONDON FOR CGURNEY
PARIS FOR CNEARY
NAIROBI FOR PFLAUMER

E.O. 12958: N/A
TAGS: ECON EPET PGOV ZI
SUBJECT: FUEL SHORTAGE OR PANIC BUYING? -- FUEL QUEUES
RESULT REGARDLESS

REF: HARARE 01719


1. Summary. Various sources suggest that a nation-wide fuel
shortage is likely sooner rather than later (reftel). Even
with continued financial support from Libya regarding the
fuel itself, widely reported in recent press accounts, the
GOZ is facing huge pressures to produce forex to get the fuel
into the country through the port facilities in Beira. The
GOZ has reportedly closed a US $360 million deal with Libya
which will supply Zimbabwe with fuel for the next year, while
increasing Libya's stakes in various assets within Zimbabwe.
However, fuel stations throughout the country continue to
display "No Fuel" signs, and fuel queues continue to indicate
which stations actually have petrol available. End summary.


2. Fuel queues have been reported on and off throughout
Zimbabwe since the end of August. However, the queues have
now hit the country with a vengeance, as lines of motorists
throughout Harare currently spend anywhere from twenty
minutes to several hours waiting for fuel. According to
reports from Embassy personnel who have been driving outside
of Harare over the weekend, there is no diesel available
north of Harare. Some motorists have said that the petrol
station personnel indicate that there is plenty of fuel
available, and the state-controlled media dismisses the fuel
queues as the result of "hoarding" and "panic buying." It is
probable that many consumers are filling their tanks now,
while fuel is available, rather than depend upon the shaky
system which may not be able to guarantee availability next
week.

Prologue to Higher Prices?
--------------


3. Other motorists, however, state that fuel station
operators report that shortages are being engineered ahead of
a fuel price increase rumored to be up to 40% higher than
current prices. In previous situations when the GOZ wanted
to increase fuel prices, the country would experience a fuel
shortage with all the resultant uncertainties and anxieties,
after which the price would jump when fuel finally became
available. According to one source, motorists were so

relieved to actually get petrol that the price increase had
been absorbed without much protest.


4. There is certainly room, from a global perspective, for
the price of petroleum products to increase -- the current
price of fuel is Zim $73/liter for diesel, and Zim $76/liter
for blend gasoline (approximately US $.10 per liter/$.40 per
gallon for diesel, and approximately US $.11 per liter/$.44
per gallon for gasoline, at the parallel rate). There are
persistent reports of large-scale transport companies sending
their trucks across border points into Zimbabwe with their
gas gagues on "E" to fill their tanks up at the artificially
low price. However, despite the fact that fuel and energy
are the only two sectors not benefitting from price supports,
preferential price structures, or the ability to otherwise
earn forex, the GOZ appears reluctant to allow the price of
fuel to increase. Given the public uproar which occurred
when mass transit operators attempted to increase commuter
fares in May without the GOZ's approval, this reluctance may
be prudent.

Libya Wants Hard Cash
--------------


5. As noted in previous reports (see reftel), the Libyans
have expressed an increasing reluctance to continue providing
fuel unless the GOZ pays in forex. By contrast, local media
report that the Libyans are interested in increasing their
level of ownership in strategic assets, including a stake in
the parastatal National Oil Company of Zimbabwe (NOCZIM) and
its storage tanks. Regardless of their preferred currency,
Libya needs payment for oil in one fashion or another -- the
GOZ currently owes Libya approximately US $60 million for
fuel already delivered and consumed, and Libya is wary about
extending further credit. However, even if Libya were
prepared to provide oceans of fuel at a bargain price with
payment due sometime far into the future -- and there is no
indication that it is -- the logistics of delivering the fuel
to retailers and motorists remain problematic. One element
contributing to the sporadic availability of fuel is the
GOZ's inability to meet costs for docking space, port
charges, facility fees, and pumping costs, which must be paid
in forex. There are also reports that the storage facilities
within Zimbabwe are, on orders from the Libyan fuel owners,
only releasing fuel on a daily basis dependent upon the
amount of forex which NOCZIM can pay.
Comment
--------------


6. The fuel situation continues to deteriorate, and
uncertainty about the future is undoubtedly exacerbating the
shortages. There are conflicting reports about Libya's
intentions -- in some quarters, Libya is cast as the party
restricting the flow of fuel into the country, while in
others Libya is portrayed as wanting increased (and
presumably more choice) access to Zimbabwean assets. In
either case, Libya's influence on the GOZ will remain
significant for the foreseeable future. End comment.
SULLIVAN