ENERGY IN ERITREA: AN OFF AND ON PROPOSITION

C O N F I D E N T I A L ASMARA 000815 SIPDIS SIPDIS LONDON FOR AFRICA WATCHERS PARIS FOR AFRICA WATCHERS E.O. 12958: DECL: 10/05/2016 TAGS: PGOV ECON EPET ER SUBJECT: ENERGY IN ERITREA: AN OFF AND ON PROPOSITION Classified By: AMBASSADOR SCOTT H. DELISI FOR REASONS 1.4(b) and (d). ¶1. (U) Summary: The following cable provides a snapshot of the erratic energy situation in Eritrea from the spring to the present. Resulting from the GSE's strictly controlled economy, a limited supply of hard currency and an opaque and seemingly uncoordinated bureaucracy, uncertainties in power and energy availability will continue to plague end users in Asmara. End Summary. -------------- -------------- Power Ups and Downs Through the Spring and Summer -------------- -------------- ¶2. (C) On the first of April 2006, the Eritrean Electric Authority (EEA) announced scheduled, rolling power outages of six hours per day blaming a worldwide shortage of generator lubricant due to Hurricanes Katrina and Rita and the Asian tsunami of 2004. As is often the case with the government SIPDIS announcements, this information was partly true and partly false. A source in the petroleum industry explained that the major manufacturers of the lubricant are, in fact, in Indonesia and Louisiana. The natural disasters had resulted in a constriction of the supply and an increase in price. However, the shortage in lubricant was actually created when the EEA failed to renew the supply contract when it came due because of a shortage of hard currency. When they belatedly entered negotiations for a new contract, the price was beyond what they could immediately afford (as a result of the higher prices caused by the natural disasters) which resulted in delayed procurement until they could scrape together the money for the purchase. A decision apparently was made at the time to reduce power production due to the lubricant problem. However, even after the lubricant shipment arrived at the port of Massawa at the end of April, the EEA announced a new, more extensive schedule of rolling cuts for the month of May, ostensibly still due to the lack of lubricant. ¶3. (U) As the summer months progressed, power outages increased in duration and breadth. Citywide, there was no electricity from midnight to 7:00 AM. During the rest of the day, alternating sections of Asmara,s power grid were out for six to eight hours at a time. At first, the outages adhered to a schedule (published only in the local language version of the government newspaper). As June turned into July, the outages increased in duration and the published schedule became completely irrelevant. The third week of July encompassed the most severe shortages, with some sectors of the grid receiving no power for over 24 hours at a stretch. On July 26, rumors began to circulate that the power was going to be put back on 24 hours a day. With no official notice and without explanation, the electricity in Asmara returned to 24-hour the same day, and has been ever running continually ever since. -------------- Impact of Outages on Local Economy -------------- ¶4. (C) Post has heard rumors that thousands of dollars worth of damage may have been inflicted on the city,s power generation and transmission equipment, which are not built to withstand the power surges that normally occur when power is turned on and off. Although the cellular network was unaffected for several weeks after the initial power cuts in the spring, cellphones began to fail wholesale as the finite supply of diesel was increasingly cornered by an increasing number of standby generator owners. By June, the mobile phone network was simply shut down from midnight onwards and by July, the system was only operating about half of the time during daylight hours. The main server tracking individual phone records crashed repeatedly, and finally collapsed, costing the government-owned telephone company Eritel additional revenue. (Post heard a figure of $50,000). The landline telephone system also suffered increasingly from damaged transformers and alternating surges and outages. Towards the end of the outages, land lines were no longer dependable even when power was on in the surrounding grid. ¶5. (C) While statistics for businesses, particularly small, family-owned businesses, are not available in this closed environment, anecdotal reports indicate damage to Eritrea,s already suffocating business environment was severe. Examples of businesses known to Embassy employees that closed over the summer include an ice cream shop and four hair salons; enterprises that require a predictable and dependable electric supply. Post's medical officer reported a serious spike in food poisonings and illnesses in the spring related to poor food handling, as restaurants coped with the loss of refrigeration and freezers. Embassy operations were, on the whole, only minimally affected. For several days, however, the Embassy,s American Center, which is off-compound and has no backup generator, received no power until 2:00 PM, making it increasingly difficult to run internet and library services or keep offices going. -------------- COMMENT -------------- (C) According to the source in the petroleum industry, the GSE decided to cut the power in a deliberate attempt to save limited hard currency but unfortunately did not consult with any technical experts about the potential consequences of the decision. Only after incurring significant damage to the power generation and transmission equipment, and significant hard currency costs in any event, did the GSE reverse the decision and return to uninterrupted power. Whether it has the financial resources to continue a constant power supply for the foreseeable future is, however, uncertain. Unfortunately, the shortage of marine lubricant in country (the original, publicly provided reason for the outages) will also continue to present a problem in the months ahead as foreign currency reserves in Eritrea continue to dwindle. The concerns about power generation, coupled with the fuel shortages discussed septel, will ensure that Eritrea,s energy future remains highly uncertain for some time to come. DELISI