HAITI: PETROCARIBE IMPLEMENTATION STALLED

C O N F I D E N T I A L SECTION 01 OF 02 PORT AU PRINCE 001205

SIPDIS

SIPDIS

STATE FOR WHA/CAR
WHA/EPSC FOR FAITH CORNEILLE, ED MARTINEZ
EB/IFD
STATE PASS TO USAID FOR LAC/CAR
TREASURY FOR JEFFERY LEVINE
COMMERCE FOR SCOTT SMITH

E.O. 12958: DECL: 07/07/2016
TAGS: ENRG EPET ECON EAID HA
SUBJECT: HAITI: PETROCARIBE IMPLEMENTATION STALLED

REF: PAP 803

Classified By: Ambassador Janet A. Sanderson for reason 1.4 (b) and (d)
.


1. (C) Summary: The 100,000 barrels of petroleum, from the
initial PetroCaribe shipment to Haiti on May 14, remain in
storage facilities at the port and have not been put on the
market. To date, no second PetroCaribe transport ship has
been scheduled to arrive. Edouard Baussan (President Rene
Preval's PetroCaribe confidant and vice-President of Haiti's
only domestic oil company, Dinasa) told the Ambassador that
PetroCaribe will not solve Haiti's petroleum problems -- like
the high price of fuel -- and that the government would use
only the interest on the loan from Venezuela for social
projects. He said the three international oil companies in
Haiti feel uninformed about Haiti's PetroCaribe plan and are
wary of how PetroCaribe will affect their operations. Post
suspects the PetroCaribe agreement was political showmanship
for Preval's inauguration day, and that Haiti may not move
forward to implement the program. End Summary.

PetroCaribe: Dead or Stalled?
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2. (C) Ambassador met June 2 with Edouard Baussan (President
Rene Preval's PetroCaribe confidant and vice-President of
Haiti's only domestic oil company, Dinasa) to discuss Haiti's
progress with the Venezuelan energy initiative, PetroCaribe.
Preval designated Baussan, and by extension Dinasa, to manage
the stock of PetroCaribe fuel on behalf of the national
electricity company (Electricite d,Haiti -- EDH),the
"state-owned" oil company. Baussan opened the meeting by
explaining the problems Haiti faces as the price of fuel
rises: in a country with little infrastructure and
malfunctioning institutions, the economy is not equipped to
deal with a steep rise in the cost of fuel. He admitted that
PetroCaribe will not solve the problem of high fuel prices in
a tight world market, but said it would give the government
access to much-needed cash.


3. (C) According to Baussan the first PetroCaribe shipment
remains in the storage tanks at the Varreux Port because
distribution channels have yet to be established. To date,
no second PetroCaribe transport ship has been scheduled to
arrive. Baussan said Preval's government initially thought
that the PetroCaribe agreement would allow for more
flexibility to resolve stipulations in the agreement that
Haiti is not prepared to handle, like transport and
insurance. However, the government has realized that
Venezuela will not give Haiti any special consideration.
Baussan also pointed out that the GOH is wary of disturbing
the distribution of fuel by the four oil companies, including
Dinasa, given the inconsistent and unreliable history of
PetroCaribe in other Caribbean nations. The "industry ship,"
the fuel tanker shared by all four oil companies in Haiti,
has continued to arrive on its regular schedule and meets
Haiti's relatively small petroleum demand.

Haiti's Initial PetroCaribe Plan
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4. (C) Baussan discussed the new government's plans for the
PetroCaribe funds, though he had no details beyond the
initial planning stages. Based on the PetroCaribe agreement
(in which the GOH pays for 60 percent of the fuel up front
and pays for the additional 40 percent over a 25 year span
with a one to two percent interest rate),Baussan estimated
the GOH would save USD 100 million per year from the delayed
payments. He stressed that PetroCaribe is not a subsidy
program and that the funds earned from the donated fuel
cannot be consumed, but instead must be put into a trust
fund, for later re-payment to Venezuela. The interest earned
on the amount would be used for social projects in Haiti.


5. (C) Baussan commented that Haiti consumes about 11,000
barrels of gasoline per day, 6,000 of which he estimated
would come from PetroCaribe channels. When asked how the
international oil companies in Haiti -- Chevron, ExxonMobil,
and Total -- have responded, Baussan said that the government
has not communicated its plan to them. Reportedly, the newly
appointed Minister of Economy and Finance Daniel Dorsainville
has been too busy to brief the international oil companies.
(Note: Separately, the Ambassador met with representatives of
ExxonMobil and Texaco. Both companies were concerned and
curious about how Preval planned to implement PetroCaribe.
However, neither company felt especially threatened by the
agreement, and they have not modified their operations in
Haiti. End note.)

Falling Fuel Prices and Increase in Electricity not Related
to PetroCaribe
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6. (U) Since Preval's inauguration, Port-au-Prince has
experienced an increase in electricity supply. In early July
the price of petroleum, which had risen by nine percent since
late April, decreased by ten percent. Though Haitians are
inclined to thank Venezuela for both improvements, neither
are related to PetroCaribe. EDH has been supplying
electricity from the hydro-electric damn, Peligue, and the
reduced price of fuel is due to a drop in the world market
price.


7. (C) Comment: Baussan is the third Haitian close to Preval
-- including the former Minister of Finance Henry Bazin
(reftel) and Gabriel Varret, [should be Verret] Preval's economic advisor -- to
give Post the impression that Preval is not well-versed in
the PetroCaribe agreement and not seriously concerned with
its requirements. All three have also said that the GOH does
not have a plan for implementation. Both Haitian and
Venezuelan governments reportedly ignored key articles in the
interest of time for the ceremonial signing on May 15.
PetroCaribe seems stalled indefinitely, and it is possible
that Haiti will not move forward with the agreement. The
first and so far only ship, which was a minor victory for
Venezuela's Caribbean campaign and a tangible sign from
Preval to his constituents that he will bring change, may
mark both the beginning and the end of PetroCaribe in Haiti.
SANDERSON

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