PARLIAMENT CHALLENGES GOVERNMENT CORRUPTION

C O N F I D E N T I A L SECTION 01 OF 02 SANAA 001537

SIPDIS

E.O. 12958: DECL: 06/13/2014
TAGS: PGOV EPET PHUM KDEM KMPI YM DOMESTIC POLITICS
SUBJECT: PARLIAMENT CHALLENGES GOVERNMENT CORRUPTION


Classified By: DCM Alan G. Misenheimer for Reasons 1.5 (b,d)


1. (C) Summary and Comment: Over the course of several
months, Members of Parliament (MPs) have conducted an
investigation into government corruption regarding an oil
deal that dates back to 1997. The investigation was
spearheaded by two members of the Oil and Resources
Committee, one from the ruling General People's Congress
party and one from the main opposition Islah party. In the
first action of its kind, these MPs rallied parliamentary
support across party lines to try to hold the government to
account. Extensive press coverage of the scandal and the
factual evidence of government corruption could assist in
combating widespread corruption in Yemen. However, a more
likely result of the success of these efforts is Parliament's
increased willingness and effectiveness in conducting
oversight of the executive. End Summary and Comment.

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The Oil Deal
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2. (C) In 1997, ROYG issued a Production Sharing Agreement
(PSA) in Block 53 to a company named Dove Energy over other
multinational companies such as Can-Oxy Petroleum. Over
concerns regarding Dove Energy's capability to operate the
PSA, Parliament launched a preliminary inquiry into the sale
in 1997-1998. Opposition press articles from that time claim
that the owners of Dove are the wife of the Yemen Ambassador
to the UN and the daughter of the former Yemeni Ambassador to
Lebanon. (Note: Emboffs did several background checks on the
company and found only address listings in the UK, little
else on Dove.) Ministry of Oil officials at that time
reportedly justified the issuance of the PSA to Dove because
25% of the Dove contract was to be given to the state owned
Yemen Exploration and Production Company (YEPC),thus
enhancing state revenue.


3. (C) After hearing rumors that the YEPC sold sixty percent
of its share to Gulf investors using the name Pacific in
September 2003, Parliament began another investigation in
late 2003. The report from the Oil and Resources Committee
concluded that: 1) the loss to the state treasury was ten
million dollars a year for the next 18 years and 2) the sale
was unconstitutional according to article 18 of the Yemen
constitution which says that Parliament oversees "natural
resources." (Comment: In an era of declining oil revenue for
the ROYG, this loss to the state revenue is significant.)
Ministry of Oil justified the deal saying that the loss was
overestimated and that the ROYG needed to attact Gulf
investors. Sanaa is rife with rumors surrounding
al-Husseini, the Gulf investor behind all of this. Several
officials told pol/econoffs that al-Husseini paid off several
high level ROYG officials (usually naming Prime Minister Ba
Jammal and Oil Minister Ba Rabah specifically) to make this
deal. (Comment: Ba Rabah is widely viewed by western oil
interests as among the most corrupt and ineffective of the
Ministers.)


4. (C) The oil committee called Prime Minister Ba Jammal
repeatedly to answer questions. Ba Jammal never agreed to
show up, agruing that Parliament had no legal authority to
call him. On May 18, Parliament issued a two week notice to
the ROYG to cancel the deal. Three weeks later, the ROYG
issued a statement that the sale would be cancelled in sixty
days. However, the exact details of the agreement to cancel
are unclear.

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Machinations in Parliament
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5. (C) Because the scandal implicated high-level members of
the ROYG, including Prime Minister Ba Jammal and Oil Minister
Ba Rabah, many parliamentary and government leaders
maneuvered to quash the scandal, including attempts to keep
the discussion of the Committee report from Parliament's
agenda. At one point, the MPs even made 200 copies of their
committee report themselves after they found parliamentary
staff under pressure not to do so. However, the two MPs
leading the investigation -- Sakar Ahmed Abass al-Wajih from
the GPC and Ali Hussein Ashal from Islah -- succeeded in
keeping the issue on the table by rallying other MPs to fight
corruption, including the creation of an informal multi-party
reformist coalition interested in fighting corruption
generally (including members of the ruling party).

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Comment
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6. (C) The success of the investigation showed MPs, the ROYG
and citizens that Yemen's Parliament has more power in
overseeing the executive than most realized or were willing
to exercise, which should bode well for continued
institutional democratic progress. The upcoming MEPI-funded
parliament program is particularly timely. At the same time,
the zeal engendered by this success may have negative effects
on other natural resources deals, as evidenced by the recent
announcement that U.S. Hunt Oil Company's extension on its
Block 18 PSA will be reviewed by Parliament. End comment.
HULL