Identifier
Created
Classification
Origin
04ROME818
2004-03-03 12:35:00
UNCLASSIFIED
Embassy Rome
Cable title:  

GEORGIAN FOOD PIPELINE CONCERNS

Tags:  EAID EAGR PREF GG WFP 
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UNCLAS ROME 000818 

SIPDIS


FROM U.S. MISSION IN ROME

TBLISI FOR AMBASSADOR MILES AND USAID DIRECTOR
STATE FOR AS/PRM DEWEY, PRM/P, IO/EDA BEHREND AND KOTOK,
EUR/CACEN HOAGLAND AND LU
USAID FOR A/AID, AA/DCHA WINTER, DCHA/FFP LANDIS
GENEVA FOR RMA AND NKYLOH/USAID
USDA/FAS FOR U/S PENN, CHAMBLISS, TILSWORTH

E.O. 12958: N/A
TAGS: EAID EAGR PREF GG WFP
SUBJECT: GEORGIAN FOOD PIPELINE CONCERNS

UNCLAS ROME 000818

SIPDIS


FROM U.S. MISSION IN ROME

TBLISI FOR AMBASSADOR MILES AND USAID DIRECTOR
STATE FOR AS/PRM DEWEY, PRM/P, IO/EDA BEHREND AND KOTOK,
EUR/CACEN HOAGLAND AND LU
USAID FOR A/AID, AA/DCHA WINTER, DCHA/FFP LANDIS
GENEVA FOR RMA AND NKYLOH/USAID
USDA/FAS FOR U/S PENN, CHAMBLISS, TILSWORTH

E.O. 12958: N/A
TAGS: EAID EAGR PREF GG WFP
SUBJECT: GEORGIAN FOOD PIPELINE CONCERNS


1. SUMMARY: WFP HAS PROVIDED A FUNDING PROPOSAL TO THE
US MISSION ROME THAT PROPOSES AN EXCEPTIONAL FOOD
DISTRIBUTION TO GEORGIAN HOUSEHOLDS SEVERELY AFFECTED
BY RISING WHEAT FLOUR AND BREAD PRICES. WITH THE PRICE
OF BREAD KEPT ARTIFICIALLY LOW AND THE SUPPLY OF
SMUGGLED FLOUR DWINDLING, A SHORTAGE OF FLOUR IS ALSO
LIKELY BECAUSE OF THE INFEASIBILITY OF COMMERCIAL
IMPORTATION. AN EARLY, ADDITIONAL CONTRIBUTION OF
COMMODITIES WOULD PROVIDE MAXIMUM EFFECT AT A CRITICAL
TIME FOR THE NEW GOVERNMENT OF GEORGIA (GOG). END
SUMMARY.


2. WORLD MARKET PRICES FOR WHEAT ARE UP. OF PARTICULAR
IMPORTANCE TO GEORGIA IS THAT WHEAT HARVESTS IN UKRAINE LAST
YEAR WERE PARTICULARLY BAD, AS WERE HARVESTS IN SOME OF THE
REGIONS OF RUSSIA, E.G., KRASNODARSKI KRAI, THAT
TRADITIONALLY EXPORT WHEAT TO GEORGIA. THUS FAR, THE GOG
HAS TAKEN INFORMAL BUT EFFECTIVE STEPS TO STABILIZE THE
PRICE OF BREAD. BAKERS HAVE BEEN ABLE TO DEAL WITH THIS
THROUGH USING SMUGGLED RUSSIAN AND TURKISH WHEAT FLOUR.


3. RECENTLY, RUSSIAN FLOUR HAS BECOME MORE EXPENSIVE BECAUSE
OF THE POOR HARVEST AND WORLD MARKET CONDITIONS. BECAUSE OF
RISING BREAD PRICES IN RUSSIA, THE RUSSIAN FEDERATION HAS
PLACED A 25 PERCENT EXPORT DUTY ON WHEAT AND, ACCORDING TO
US EMBASSY TBLISI, WHEAT FLOUR. REPORTS ALSO INDICATE THAT
OTHER, UNSPECIFIED RESTRICTIONS MAY ALSO APPLY TO THE
EXPORTATION OF WHEAT AND WHEAT FLOUR. THESE CONDITIONS ARE
LIKELY TO CAUSE PRICE INCREASES, AS IS THE GOG'S
INCREASINGLY EFFECTIVE ANTI-SMUGGLING CAMPAIGN.

4. THE LATEST ESTIMATE OF THE WHEAT BALANCE IN GEORGIA IS
THAT STOCKS RUN OUT IN MARCH. GEORGIAN GRAIN IMPORTERS ARE
RELUCTANT TO PURCHASE WHEAT BECAUSE OF THEIR FEAR THAT THE
DONOR COMMUNITY WILL PROVIDE THE SHORTFALL. THE MAIN
CONCERN IS THAT WITH THE PRICE OF BREAD KEPT ARTIFICIALLY
LOW AND THE SUPPLY OF SMUGGLED FLOUR DWINDLING, THERE IS A
RISK OF A CRISIS-LEVEL SHORTAGE OF FLOUR IN GEORGIA BECAUSE
OF THE INFEASIBILITY OF COMMERCIAL IMPORTATION.


5. ANECDOTAL INFORMATION FROM THE LOCAL MARKETS INDICATES
THAT WHEAT FLOUR COMING FROM TURKEY -- PRESUMABLY SMUGGLED
TO AVOID VAT AND IMPORT DUTIES -- SEEMS TO BE REPLACING
RUSSIAN WHEAT FLOUR AND MAY AVERT A MAJOR CRISIS IN FLOUR
AVAILABILITY. NEVERTHELESS, BECAUSE TURKISH FLOUR IS MORE
EXPENSIVE THAN RUSSIAN FLOUR, IT IS COMMERCIAL INACCESSIBLE
TO THE POOR.


6. WFP HAS AROUND 7500 METRIC TONS OF STOCK IN GEORGIA THAT
IT CAN BORROW FROM AGAINST A PLEDGE TO ENABLE AN IMMEDIATE
RESPONSE. WFP ANTICIPATES PROVIDING 350 GRAMS PER DAY FOR
60 DAYS FOR ABOUT 370,000 VULNERABLE PEOPLE, ABOUT 8 PERCENT
OF THE POPULATION, FOR 2 MONTHS. THE RECENT CONTRIBUTION
FROM THE EUROPEAN UNION PLUS AN ADDITIONAL CONTRIBUTION OF
5,000 METRIC TONS OF WHEAT FLOUR FROM USAID/FFP TOGETHER
WOULD PROVIDE MAXIMUM BENEFIT AT THIS EARLY, CRITICAL TIME
FOR THE NEW GOG.


7. COMMENTS: PER WFP, THE POOREST GEORGIANS ARE LIKELY TO
EXPERIENCE SIGNIFICANT HARDSHIP WITHOUT AN ADDITIONAL 5,000
METRIC TON FFP/USAID CONTRIBUTION. US MISSION ROME AND
USAID MISSION TBLISI SUPPORT WFP'S REQUEST. HALL

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2004ROME00818 - Classification: UNCLASSIFIED