CHAD:NEW OIL LAW PROMULGATED

C O N F I D E N T I A L NDJAMENA 000039 SIPDIS SIPDIS LONDON AND PARIS FOR AFRICA WATCHERS E.O. 12958: DECL: 01/12/2015 TAGS: PREL EFIN ENRG EPET PGOV CD SUBJECT: CHAD:NEW OIL LAW PROMULGATED Classified By: (05) N'DJAMENA 1875 (NOTAL) ¶1. (SBU) Summary: President Deby promulgated the amended oil revenue management law on January 11, reportedly after being shown a letter from the World Bank to Citibank requesting Citibank to block transfers to Chad's account. We understand Chad's options to include foregoing oil revenues for the 3-4 months necessary for World Bank loans to be paid back with oil revenues; alternatively, it could seek to have the oil law amended again so that oil royalties are deposited directly in the GOC Treasury. Esso is uncomfortably in the middle of the situation, and is concerned that the GOC may take actions in haste which would both spell the end of the oil college's oversight and which would precipitate the departure of the World Bank from Chad. The hoped-for test case for transparent oil revenue management is rapidly fraying. End summary. Shock and anger from GOC -------------- ¶2. (C) President Deby signed the amended petroleum revenue management law (reftel) on Wednesday, January 11, thereby bringing the law into force. Esso Country Director Ron Royal was called to see the Minister of Petroleum later the same day to discuss the World Bank (WB) letter to Citibank (dated January 6) requesting Citibank to block transfers to Chad's account. Esso representatives reported that the Minister of Petroleum was "shocked" at the WB's actions. The Minister informed them that the President was furious, and had signed the law immediately after seeing the letter from the WB. The Minister of Petroleum asked Esso if it would be able to advance them royalties (Esso reported to Emboff that they refused). During the same meeting, the Minister intimated that Equatorial Guinea might be able to provide a loan to pay off the WB loans. In a meeting in a similar vein between the Minister of Finance and the local IMF Representative, Minister Tolli told IMF rep Wayne Camard that the WB action was "a stab in the back." The Council of Ministers is meeting January 12 and the Minister of Plan is expected to release a communique denouncing the recent WB steps. Comment: next steps -------------- ¶3. (SBU) Our contacts stress that the GOC's anger is based not only on the fact that the account is blocked, but also that the WB apparently failed to notify them of the action until five days after the fact. We understand that the GOC has essentially three options: they can allow the bank to be paid back with oil revenues for the approximately USD 60 - 100 million that the WB is owed. (Comment: we understand that royalties from the escrow account will continue to flow to outstanding IDA and IBRD debts. End comment.) This would take approximately 3-4 months at current royalty rates of USD 25 million a month. Alternatively, the GOC could immediately move to amend the Chadian law which states that the oil royalties must be deposited in the Citibank account and direct that they be deposited directly to the GOC treasury. (Esso, in fact, is concerned that the GOC will direct them to deposit the royalties directly into the GOC Treasury even without a change in the law). According to Esso, this step might precipitate litigation by the World Bank and embroil the parties in protracted legal proceedings. Or finally, the GOC could tell the World Bank that they are ready to enter into serious negotiations. Given the bruised feelings on the part of the GOC, this last option seems remote at this point. ¶4. (SBU) Esso is seeking to stress its neutral position vis a vis the dispute between the WB and the GOC, as it is not a signatory to the agreement. Nonetheless, it is uncomfortably in the middle of the matter, and is very concerned that the GOC may take actions in haste which would both spell the end of the college's oversight and which would precipitate the departure of the World Bank from Chad. The hoped-for test case for transparent oil revenue management is rapidly fraying. End summary. WALL