DOMINICAN POLITICS #9 - CHAVEZ BRINGS GENEROUS

C O N F I D E N T I A L SECTION 01 OF 03 SANTO DOMINGO 006240

SIPDIS

STATE FOR WHA/CAR, WHA/EPSC, INL;
NSC FOR SHANNON AND MADISON;LABOR FOR ILAB;
USCINCSO ALSO FOR POLAD;TREASURY FOR OASIA-LCARTER
USDOC FOR 4322/ITA/MAC/WH/CARIBBEAN BASIN DIVISION
USDOC FOR 3134/ITA/USFCS/RD/WH; DHS FOR CIS-CARLOS ITURREGUI

E.O. 12958: DECL: 11/16/2014
TAGS: PREL ENRG EFIN DR
SUBJECT: DOMINICAN POLITICS #9 - CHAVEZ BRINGS GENEROUS
FINANCING DEAL TO DOMINICANS

REF: A. SANTO DOMINGO 4719


B. SANTO DOMINGO 6119

Classified By: DCM Lisa Kubiske. Reason: 1.4 (b) and (d).


1. (C) Summary. Venezuelan president Hugo Chavez made an
eight-hour visit to Santo Domingo on November 6, the main
event of which was the signature of a bilateral agreement
called the "Caracas Accord" to provide generous financing
terms for 25 percent of 50,000 barrels a day of Dominican
imports of Venezuelan petroleum. Fernandez effusively
greeted Chavez, but it is not yet clear whether Chavez will
gain any political leverage with the Dominican president.
The visit served Fernandez,s purposes in building up his
profile as a regional leader, giving him a chance to build up
the domestic politics, , and, above all, in securing the
USD 200 million or more in fuel payment relief that will help
make the IMF negotiations viable. End summary.


2. (SBU) Venezuelan president Hugo Chavez made an eight-hour
visit to Santo Domingo on November 6, during which he and
Dominican president Leonel Fernandez signed a bilateral
agreement called the "Caracas Accord" providing generous
financing terms for 25 percent of Dominican imports of
Venezuelan petroleum.
In addition, Fernandez and Chavez dedicated the Plaza Bolivar
in downtown Santo Domingo and Chavez presented the President
with a replica of Bolivar's sword.


3. (SBU) The petroleum financing deal, reported ref b,
provides badly needed financial support as the Dominican
Republic is negotiating terms for a renewed IMF standby.
Venezuela is providing 15-year financing with two years
grace, at an interest rate of 2 percent per annum --
concessions which are worth in the
neighborhood of USD 200 million in 2005. Since much
petroleum is used by electricity generators, the arrangement
may help reduce the power sector blackouts characteristic of
that mismanaged and undercapitalized sector.


4. (SBU) At the televised press conference in the
presidential palace Chavez spoke with apparently sorrowful
dignity about Venezuela's relations with the United States,
alleging U.S. interference at the time of the coup attempt.
He emphasized the extent of Venezuelan investment in the U.S.
petroleum sector and asserted that "due to agreements signed
by the previous government, Venezuela is in fact subsidizing
U.S. fuel consumption by several dollars per barrel." He
said that a new ambassador (Amb. Brownfield) had assured him
of U.S.
interest in improving relations. Chavez expressed hope that
with his re-election President Bush would constitute a "new
government."


5. (SBU) Fernandez responded by expressing his government's
congratulations on the re-election of the American president.
He continued in professorial style, noting that the world
had changed, with the Cold War years giving way to a new
order after the disappearance of the Soviet bloc and then
changing once again
as a result of the attacks of September 11, 2001. Both the
Dominican Republic and Venezuela deplored the loss of
innocent lives and would cooperate to stop terrorism. He
recalled his telephone conversation with Chavez on the day of
the attempted coup and their agreement to seek help from the
Carter Center. This sort of hemispheric cooperation, said
Fernandez, was essential to resolving problems. And then --
after all that as preamble -- he made the offer, much
reported by the press, to help mediate between the Venezuelan
and U.S.
governments if that would be helpful. (Fernandez was making
publicly the same offer twice made in private to the
Ambassador (reftels.))


6. (SBU) Chavez took the lectern again to express his desire
to use petroleum to assist the poor of the
hemisphere -- in Colombia, in the Dominican Republic, and in
Haiti, "where they don't even have the fuel for electricity
for hospitals." Venezuelan petroleum, he said, would serve
as a modern version of Bolivar's sword, to encourage
hemispheric unity. He concluded with a grin, saying that
ballplayers Sammy Sosa, Pedro Martinez, and other Dominicans
"can teach us how to defeat the Yankees." The assembled
dignitaries and press
laughed.

A Palace View
--------------


7. (C) On November 9 the Ambassador, DCM and EcoPol counselor
discussed the visit with presidential chief of staff Danilo
Medina. Medina said that the oil financing deal was vital to
Fernandez as he sought to re-establish financial stability.
(Medina and Technical Secretary Temistocles Montas had sought
much more generous terms but were eventually told that OPEC
obligations barred anything more than what the Dominicans
received.) Medina said we should have no doubt that the
Dominican Republic counts "100 percent, absolutely 100
percent" on its relationship with the United States. Talk
had been only of energy issues, including at the private
meeting of the presidents, Venezuelan oil minister and
development bank head, and Medina.


8. (SBU) Medina said the relation between the two dates back
to 1997-1998, when Chavez, as a candidate for the presidency,
asked to call on Fernandez and was received. Medinas said
Fernandez appreciated Chavez's concern for the disadvantaged
and his desire to improve social services. After leaving
office in 2000, Fernandez was an associate of the Carter
Center and in that role responded to the request of
Venezuelan industrialist Gustavo Cisneros to help organize a
dialogue between the private sector and the Chavez
administration.

Fernandez,s View of Chavez


9. (C) Another of our sources, long close to Fernandez and an
official in the first Fernandez administration, commented
recently that in fact, Fernandez "hates" Chavez and once
commented to our source that Chavez is a "madman." Our
source commented that Fernandez is obliged by financial
necessity to welcome Chavez. "Fernandez has felt desperate
to find ways to solve all the problems facing the Dominican
Republic," he said, "and he feels he is getting help from no
one." In our interlocutor,s view, the Venezuelan oil deal
keeps electricity flowing, helps close a financing gap in the
stand-by program, and provides some leverage against his
enemies in the political opposition regarding an approach to
the Dominican energy sector -- with little or no political
quid pro quo.


10. (C) This source,s report of negative feelings about
Chavez is consistent with Fernandez,s remarks to the
Ambassador and Senator Nelson (FL) back in August, to the
effect that Chavez lacks leadership skills to move implement
his agenda, lacks a plan for doing so, and "has transformed
nothing in Venezuela." Fernandez called Chavez "Fidel
without talent, but with oil." Fernandez said then that he
had told Chavez that he must govern for all Venezuelans, not
just for the poor, and he must reach out to business and the
economic elites. ( reftel) On the other hand, when we asked
Danilo Medina what Fernandez admires about Chavez, the reply
that Medina gave was "his social concern and social
programs."

Comment
- - - - - -


11. (C) For this visit, we believe Fernandez was using his
embrace of the Venezuelan president for several purposes: for
building himself up as regional leader; for domestic
politics, pleasing the aged in his party's base by likening
Chavez to Caamano, the military officer who supported
democratic restoration in 1965; and, above all, for the USD
200 million or more in fuel payment relief that will help
make the IMF negotiations viable. As for the longer-term
question of the Fernandez-Chavez relationship, there is as
yet no verdict regarding its nature and whether Chavez, gift
of oil will win him any appreciable degree of political
influence over Fernandez.


12. (U) Drafted by Michael Meigs, Lisa Kubiske.


13. (U) This report and others in the series can be
consulted on our SIPRNET site
http://www.state.sgov.gov/p/wha/santodomingo/ along with
extensive other material.
HERTELL