Identifier
Created
Classification
Origin
06NDJAMENA893
2006-06-29 08:43:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Ndjamena
Cable title:  

CHAD: DOES THE GOVERNMENT WANT THE WORLD BANK OUT

Tags:  EFIN ECON EAID EPET PREL PGOV KDEM KCRS CD 
pdf how-to read a cable
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RR RUEHWEB

DE RUEHNJ #0893/01 1800843
ZNR UUUUU ZZH
R 290843Z JUN 06
FM AMEMBASSY NDJAMENA
TO RUEHC/SECSTATE WASHDC 3991
INFO RUEHUJA/AMEMBASSY ABUJA 1191
RUEHDS/AMEMBASSY ADDIS ABABA 0806
RUEHBP/AMEMBASSY BAMAKO 0673
RUEHDK/AMEMBASSY DAKAR 1108
RUEHKH/AMEMBASSY KHARTOUM 0256
RUEHLO/AMEMBASSY LONDON 1458
RUEHNM/AMEMBASSY NIAMEY 2728
RUEHFR/AMEMBASSY PARIS 1852
RUEHYD/AMEMBASSY YAOUNDE 1250
RUEHNR/AMEMBASSY NAIROBI 0587
RUEHGV/USMISSION GENEVA 0749
RUCNDT/USMISSION USUN NEW YORK 0812
RUEHBS/USEU BRUSSELS
RUEATRS/DEPT OF TREASURY WASHINGTON DC
UNCLAS NDJAMENA 000893 

SIPDIS

SENSITIVE
SIPDIS

DEPT. FOR AF, AFC, EB, DRL, PRM, S/CRS
LONDON AND PARIS FOR AFRICA WATCHER
NAIROBI FOR OFDA'
TREASURY FOR OUSED

E.O. 12958: N/A
TAGS: EFIN ECON EAID EPET PREL PGOV KDEM KCRS CD
SUBJECT: CHAD: DOES THE GOVERNMENT WANT THE WORLD BANK OUT
OF OIL REVENUE MANAGEMENT?

REF: NDJAMENA 882

---------
SUMMARY:
---------

UNCLAS NDJAMENA 000893

SIPDIS

SENSITIVE
SIPDIS

DEPT. FOR AF, AFC, EB, DRL, PRM, S/CRS
LONDON AND PARIS FOR AFRICA WATCHER
NAIROBI FOR OFDA'
TREASURY FOR OUSED

E.O. 12958: N/A
TAGS: EFIN ECON EAID EPET PREL PGOV KDEM KCRS CD
SUBJECT: CHAD: DOES THE GOVERNMENT WANT THE WORLD BANK OUT
OF OIL REVENUE MANAGEMENT?

REF: NDJAMENA 882

--------------
SUMMARY:
--------------


1. (SBU) Tough talk in the Multi-Donor Mission's oil revenue
management working group seems to indicate a Government of
Chad desire to cut the World Bank out of the oil sector all
together. If the GOC shows continued inflexibility over the
World Bank's status as a senior creditor, it could be an
indicator that Chad does not, in fact, want to reach a global
agreement with the Bank on oil revenue management.
CitiBank's continuing as the holder of Chad's oil revenue
accounts also appears to be in jeopardy. END SUMMARY

--------------
IS THE PROBLEM CITIBANK ...
--------------


2. (SBU) Discussion on June 27 in the oil revenue management
working group of the World Bank/IMF-led Multi-Donor Mission
to Chad centered on the issue of Chad's off-shore accounts at
CitiBank in London. The CitiBank deposit facility was
established as a centerpiece of Chad's unique oil revenue
management scheme, and includes functions of escrow, transit,
and guarantee accounts. Most descriptions of the program
focus on the sequestering of royalty and dividend receipts
due to Chad in the account for transparent accounting and
internationally supervised distribution of the funds to
priority development spending, to the production region in
Chad, and to the Government. The account has another key
purpose, however: that of ensuring that the ABN Amro Bank and
World Bank loans financing the oil exploitation project are
properly serviced, without risking a change in Government of
Chad (GOC) willingness to pay.


3. (SBU) Talks earlier in the Multi-Donor Mission had called
for inclusion in the oil revenue management working group's
terms of reference a review of procedures for the transfer of

funds from the escrow account to the GOC's Treasury account.
The stated goal was to make recommendations on accelerating
transfer procedures, as well as to evaluate the adequacy of
CitiBank as the financial intermediary. A break-out group on
June 26 defined potential changes to be considered, ranging
from the benign (changing the day of the month for transfers)
to the draconian. Among the latter were demands to modify
CitiBank's account reporting requirements and constraints on
fund transfer request confirmation procedures (presumably
governed by UK banking regulation) to dumping CitiBank
altogether in favor of a French institution.

--------------
OR THE WORLD BANK?
--------------


4. (SBU) Exchanges in the June 27 full working group grew
increasingly heated as the proposals for modifying banking
procedures became more extreme. The World Bank's legal
counsel let pass those draft recommendations that would be
constrained by banking regulatory authorities, on deposit
protection or reporting requirement grounds. She later told
POL/ECON officer that the answer to such suggestions in
London would likely be a simple "No", and so not worth taking
up time in the initial phases of the search for a global
agreement on oil revenue management. As the subject shifted
to whether or not to keep the accounts at CitiBank at all,
the IMF Representative cautioned the GOC technicians to
carefully weigh the costs of shifting out of a bank in the UK
to one in France, simply to get bank statements in French.
He suggested that the fees alone involved in closing the



original account and opening a new custom-designed one were
large enough that Chad could obtain training in "Anglo-Saxon"
accounting and English Language lessons for several Chadian
account managers for less.


5. (SBU) Finally, the discussion came to the subject of the
CitiBank accounts' escrow and sequestration functions, and
the GOC's central problems with the fund transfer mechanisms
became clearer. Officials from the Ministry of Finance
stated that there could be no question of the World Bank
retaining unrestricted rights to freeze the accounts, as had
happened in the recent conflict over the GOC's modification
of the oil revenue management program's legal status. Less
explicitly stated was GOC unhappiness with one of the key
functions of the sequestration account: that of ensuring
unfettered servicing of the World Bank and ABN Amro loans
financing the oil exploitation project. The GOC team in the
working group proposed that the agreement establishing the
sequestration account should be reviewed, and specific
modifications made to "reinforce Chad's role in the
mechanism".

--------------
AUTOMATIC LOAN SERVICING
NON-NEGOTIABLE
--------------


6. (SBU) World Bank team members told POL/ECON officer that,
of all the changes to Chad's oil revenue management program
that the Banks might accept in the next two-three months of
discussions, allowing for GOC control over the servicing of
the Bank's loans to the oil project would not be considered.
Team members suggested that GOC insistence on this later in
the negotiations would be one potential indicator that Chad
was more interested in scuppering a potential deal than in
setting new terms for normal relations with the Bank.


7. (SBU) The team connected this issue to that of Chad's
establishing a national oil trading company that would take
over marketing of the share of production that generates
Chad's royalties. The team's oil sector specialist explained
that, under the current terms of Chad's concession contract
with the oil producer Consortium, Chad's royalties are
calculated as 12.5 percent of the average price/barrel from
the three producing fields covered under the World Bank's
arrangements over a given quarter, multiplied by the barrels
produced in that quarter. Chad now seeks to obtain its
royalties "in kind" -- by marketing itself 12.5 percent of
the production from the three fields in a given quarter, and
seeking to maximize revenues by obtaining a better sale price
on the international market than the Consortium manages to
get. Taking Chad's revenues as an in-kind share of
production puts the GOC's hand into the same till from which
the World Bank draws its loan servicing payments, whereas
current procedures allows the Bank to be paid before funds
are drawn off to the GOC's accounts. The Bank team suggested
this would be something that World Bank senior management
would not allow.

--------------
PERHAPS THEY DO NOT
WANT A DEAL ...
--------------


8. (SBU) World Bank team members wondered if the GOC's
enthusiasm for dismantling the receipts flow and division
procedures of the oil revenue management program revealed an
end-game strategy that aimed to in fact dismantle the World
Bank's engagement in the oil sector in Chad. If so, the
results of this negotiating strategy risked farther reaching
consequences -- that of not closing a global agreement on

Bank operations in Chad.
WALL