DOMINICAN REPUBLIC AND VENEZUELAN OIL

C O N F I D E N T I A L SECTION 01 OF 02 SANTO DOMINGO 004916

SIPDIS

DEPT FOR WHA/CAR, WHA/EPSC EDUARDO J. MARTINEZ; EB/ENERGY;
DEPT PASS DEPARTMENT OF ENERGY; SOUTHCOM ALSO FOR POLAD

E.O. 12958: DECL: 08/25/2014
TAGS: EPET ENRG ECON PREL XK
SUBJECT: DOMINICAN REPUBLIC AND VENEZUELAN OIL

REF: A. SECSTATE 176535


B. SANTO DOMINGO 04719

Classified By: ECOPOL Counselor Michael Meigs for reasons 1.4 (b,d)


1. (U) This cable is an overview of the Dominican Republic's
petroleum sector in response to reftel A. Venezuela in 2003
supplied only 11 percent of total petroleum imports to the
Dominican Republic, a significant change from 2002 when
Venezuelan imports were nearly 55 percent of the total.
Other key suppliers include U.S. (28 percent),Mexico (18.4
percent),Colombia (11.4 percent) and Trinidad and Tobago (10
percent). (see chart at the end of cable)


2. (U) Petroleum and San Jose/Caracas Accords. Though the
supply of petroleum shifted to other sources, principally due
to Venezuelan supply shortages in 2003, the Dominican
Republic has long been a market for Venezuelan petroleum. It
used San Jose and Caracas Accord provisions in 2003-2004 to
finance high voltage tension lines and to purchase products
with which to improve sports facilities. Melania Bautista,
Undersecretary for International Cooperation in the Technical
Secretariat of the Presidency, gave specifics: USD 23.9

SIPDIS
million for transmission lines, USD 37.2 million for sports
facilities related to the 2003 Pan American Games and USD
400,000 for the purchase of micro-mini buses manufactured in
Venezuela. Three projects for transmission lines and traffic
signals have been scheduled for 2004, but have not yet been
approved. In a similar context, Miguel Cocco, new head of
Dominican customs, remarked in June 2004 that the Dominican
government did not have any success using San Jose Accord
credits from Mexico in the early 1980's because of the
difficulties working with the Mexican Foreign Trade Bank
(FOMEX).


3. (C) On August 6, President Leonel Fernandez commented to
embassy the Ambassador (ref b) that he had secured promises
from President Chavez of Venezuela of extremely favorable
terms for oil imports -- a credit line for purchases of
Venezuelan oil at half the world price, with no payments due
for six months and an offer of a USD 250 million loan.
Fernandez looks to use these terms to stabilize Dominican
finances and provide financing to the electric sector to deal
with chronic fuel shortages and payment problems.


4. (C) Despite the prospect of Dominican imports of low
priced Venezuelan crude, we do not expect President Fernandez
to make significant policy shifts with respect to Venezuela.
Fernandez is friendly with Chavez but does not share Chavez's
populist approach or Chavez's antagonism toward the United
States. Fernandez has twice told embassy officers that the
key reference points for the Dominican Republic are "New
York, Washington, Miami, and Madrid." Although short-term
relief thanks to Venezuelan oil concessions is welcome, the
Fernandez administration shows every sign of dealing
seriously with its financial imbalances and with the IMF, in
expectations of an economic turnaround over the next 12-24
months. Even with oil, Chavez will have relatively little
leverage as long as this scenario remains feasible.


5. (U) Following is a chart showing the Dominican Republic's
imports by source of 5.26 million barrels of refined and
unrefined petroleum in 2003.

Dominican Petroleum Imports, 2002-2003
- - - - -
Year 2002
2003
- - - - -
Volume (bbl) 50,090,123 47,421,453
- - - -
Cost (USD) 1,297,029,291 1,428,933,161
- - - - -
USD/bbl 25.89 30.13
- - - -
Percent of total imports (by volume) from:
- - - -
Venezuela 55 pct 11 pct
--------------
USA NA 28 pct
--------------
Mexico NA 18.4 pct
--------------
Colombia NA 11.4 pct
--------------
Trinidad-Tobago NA 10 pct
--------------

Dominican Petroleum Imports from Venezuela, 2003-2003
--------------
Year 2002 2003
--------------
Vol Crude (bbl) 7,699,348 1,798,997
--------------
Vol refined 19,663,538 3,460,965
--------------
Total bbl/day 74,966 14,410
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KUBISKE