ASSAB TRIP REPORT - LOCAL ECONOMY TANKING

C O N F I D E N T I A L SECTION 01 OF 02 ASMARA 000615

SIPDIS

SIPDIS

LONDON, PARIS FOR AFRICA WATCHERS,
PLEASE PASS TO USAID/AFR/AA AND AFR/EA

E.O. 12958: DECL: 07/11/2017
TAGS: PGOV PINR EAID ECON EFIS ER
SUBJECT: ASSAB TRIP REPORT - LOCAL ECONOMY TANKING

Classified By: CDA Jennifer A. McIntyre, for reasons 1.4 (b)
and (d).


1. (C) Summary. Between June 16 and June 18, 2007, FSN
members of post traveled to Assab, the second port city of
Eritrea. They found an economy that had virtually ground to
a halt and were told by local business owners that this was
due to governmental restrictions on trade and movement. They
also found a city that had been effectively turned into a
military installation, with few visible civilians and many
soldiers. End Summary.


2. (SBU) Note: All foreigners, including diplomats, are
required to apply for permits ten days in advance to travel
outside of Asmara. Requests for travel by diplomats to
presumably sensitive areas of the country, such as Assab, are
routinely ignored or denied by the Government of the State of
Eritrea (GSE),which prevents the U.S. staff from traveling
to and learning about certain areas of the country. Members
of the FSN staff, however, can usually travel freely to
places like Assab. End Note.

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BACKGROUND
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3. (U) Until the 1998 border war between Eritrea and
Ethiopia, the small city of Assab was the busiest port city
in the country. Ethiopia was its only client, but the volume
of goods shipped through Assab was greater than that of the
current leading port city of Massawa. Assab remains a major
point of contention between Eritrea and Ethiopia. Media
reports and blogs show that many members of the Ethiopian
public are offended that they "gave up" both of their port
cities to Eritrea when it became independent in 1993 and that
Ethiopia lost stature when it became landlocked. Eritreans
have often told Embassy officers that Ethiopia is looking for
an excuse to try to retake the city, especially because they
lost access to the port after the 1998 border war.


4. (C) Until recently, Assab supported a thriving fishing
industry that had been the lifeblood of the city since the
port closed to Ethiopian trade. Fishermen told the FSN staff
that, until recently, they would take their catch to Yemen
and Djibouti to trade for commodities such as diesel fuel and
various food commodities, which would be then brought back
and sold on the Assab market. This trade became the city's
primary source of diesel fuel, which was sold at a fraction
of the inflated government price. According to the
fishermen, the government allowed this informal trade to
continue without harassment until June 2007.

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GSE ECONOMIC INTERFERENCE ) UNCREATIVE DESTRUCTION
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5. (C) In early June 2007, the government banned all boat
travel to and from the Eritrean coast. The fishermen were
unable to go to sea to catch fish or travel abroad to trade,
which has led to shortages of non-local goods in Assab. The
sub-zone administrator escorted members of the FSN staff to
the coast where they were able to see numerous fishing
vessels simply sitting and not being used. (Note: The
Embassy employees were under strict instructions not to take
pictures of the idle fishing boats, as well as anything else
within Assab. End Note.) The fishermen mentioned to the
Embassy employees that they were used to being self-reliant
and had never required government assistance in the past as
they were the suppliers of necessary goods to their
community. They indicated deep dissatisfaction with the
government's policy because they are now jobless and worried
about becoming beggars. (Note: Many of the fishermen were
recipients of a USAID-sponsored micro-loan program managed by
the Ministry of National Development. They were supposed to
repay their loans with the proceeds of their fishing
revenues, but will now find it very difficult to do so. End
Note.) Another micro-loan client who owned a small truck
delivery service in Assab indicated to the Embassy employees
that diesel fuel had become scarce since the fishermen's
activities were restricted. He receives a quota of diesel
from the government, but it is much more expensive than the
black market fuel he used to buy and he is uncertain of the

ASMARA 00000615 002 OF 002


stability of the supply. Finally, the electricity in the
city is turned off between the hours of 10:00 pm and 7:30 am,
which the FSNs reported effectively shuts the city down and
makes it feel as if the city were under a curfew.


6. (C) The micro credit program administrator in Assab told
the FSNs that "In Assab and surrounding areas, businesses are
not prospering as we hoped. Most businesses are declining
dramatically. The only hope is if the port starts
operating." He also said of last year's harvest that "due to
desert locusts all the crops were destroyed. The Ministry of
Agriculture was informed ahead of time but failed to act in
due time." Of the local water situation, he said that "water
saved from the rain near the living areas is now dry. People
are drinking unsafe water and walking long distances to fetch
it." He noted that they were trying to use trucks to bring
the water in from nearly 30 kilometers away, but the shortage
of diesel fuel was making this method very difficult.

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FROM A PORT TO A FORT
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7. (C) The FSNs reported that when they entered Assab they
felt as though they were entering a large military camp.
Military personnel were very prevalent in the city. Most of
the local businesses were closed. The only businesses that
seemed to be doing well were bars catering to the soldiers;
very few civilians were patrons when our FSNs visited these
establishments. No other forms of entertainment exist in the
city. Embassy employees could not find any libraries,
theaters, internet cafes, or parks.


8. (C) Comment: The GSE's economic policies would defy logic,
if the goal were in fact, to promote national development as
the government-controlled news organs routinely proclaim.
However, the situation in Assab tracks well with a government
that is primarily concerned with controlling the movements of
its citizens and ensuring its military activities remain
opaque to the outside world. Post speculates that the GSE
restricts the activities of fishermen for two reasons: first,
to forestall possible assistance to young Eritreans serving
in national service trying to escape to Yemen or Djibouti,
and second to eliminate the fishermen's ability to obtain
hard currency in return for selling their products abroad,
private enterprise which cannot be tracked or taxed by the
GSE. However, by depriving the Eritrean population of both
external goods and a means of livelihood, the GSE continues
to squeeze a population already on the edge of economic
survival. End Comment.
MCINTYRE