Identifier
Created
Classification
Origin
07DAKAR2268
2007-11-19 14:33:00
CONFIDENTIAL
Embassy Dakar
Cable title:  

NOT MUCH RESOURCE NATIONALISM IN SENEGAL

Tags:  EPET ECON EINV PGOV SN 
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VZCZCXRO0031
PP RUEHPA
DE RUEHDK #2268 3231433
ZNY CCCCC ZZH
P 191433Z NOV 07
FM AMEMBASSY DAKAR
TO RUEHC/SECSTATE WASHDC PRIORITY 9621
INFO RUEHZK/ECOWAS COLLECTIVE PRIORITY
C O N F I D E N T I A L DAKAR 002268 

SIPDIS

SIPDIS

STATE FOR EEB/ESC/IEC/EPC:BGG, AF/EPS, AND AF/W

E.O. 12958: DECL: 11/10/2017
TAGS: EPET ECON EINV PGOV SN
SUBJECT: NOT MUCH RESOURCE NATIONALISM IN SENEGAL

REF: STATE 150999

Classified By: CDA a.i. Jay T. Smith for reason 1.4 (b) and (d)

C O N F I D E N T I A L DAKAR 002268

SIPDIS

SIPDIS

STATE FOR EEB/ESC/IEC/EPC:BGG, AF/EPS, AND AF/W

E.O. 12958: DECL: 11/10/2017
TAGS: EPET ECON EINV PGOV SN
SUBJECT: NOT MUCH RESOURCE NATIONALISM IN SENEGAL

REF: STATE 150999

Classified By: CDA a.i. Jay T. Smith for reason 1.4 (b) and (d)


1. (C) SUMMARY: Resource nationalism is not a significant
issue in Senegal at this time and the GOS has not attempted
to directly manage the exploitation of the country's
potential oil, gas, or mining reserves. The government's
history to date is to negotiate exploitation rights with a
wide range of mostly private international partners, although
in an opaque, and perhaps non-competitive manner. Post
recommends a USG policy that advocates in favor of
transparency and open tenders for such contracts. END
SUMMARY.

THE GOS RELIES ON INTERNATIONAL PARTNERS
--------------

2. (SBU) Resource nationalism is not a significant issue in
Senegal at this time. In fact, the current trend is for the
GOS to divest as a partner in the mining sector. The
government does not participate directly in oil or natural
gas exploration or exploitation. Senegal does not currently
produce oil, although there are active exploration efforts,
mostly off-shore. Historically, exploration blocks have been
offered internationally by auction. One U.S. firm is active
in the sector. Additionally, a U.S. firm's on-shore
concession is producing a small amount of natural gas and
there are a few additional efforts underway by international
firms looking for natural gas reserves.


3. (U) In the past year, the GOS has negotiated a number of
contracts with private companies to begin or expand mining
operations. In each of these cases, the GOS has secured
significant payments and royalties but has not imposed itself
in the production or marketing of the minerals. Examples
include:

-- a new concession for iron ore deposits to the Indian firm
Mittal Steel Company, which will reportedly invest more than
USD 2 billion in the effort;

-- Australia's mineral sands exploiter, Mineral Deposits Ltd.
(MDL) negotiated rights to what it expects will be seven
percent of the world's zircon output by 2009 from new
concessions in Senegal. MDL also holds rights for gold
mining concessions; and

-- an agreement in principle with the Indian firm IFFCO to
take majority control of Senegal's phosphates extraction and
production company, ICS. This is a case of the GOS divesting
itself of its majority stake in the company.

PRIVATE AND OPAQUE
--------------

4. (SBU) One negative trend for the GOS's handling of the
exploitation of its natural resources is the lack of openness
in the deal-making and the opaque nature of the deals.
Another concern is an apparent effort by the GOS to require
renegotiation of existing contracts or to abrogate one
contract in favor of a new partner. In the case of Mittal,
the GOS did not open up this potentially significant iron ore
deposit to an international tender, and rather negotiated
directly with Mittal. The South African Firm Kumba Iron Ore
claims that the deal with Mittal impinges on its existing
contract with the GOS. In the case of ICS, the GOS claims to
have held discussions with a number of potential investors,
but has clearly given IFFCO, a key existing shareholder, the
priority. For MDL, the deal is apparently a GOS-mandated
renewal and expansion of an existing contract, although with
more favorable terms for the government.

THE USG SHOULD PUSH FOR SUNSHINE
--------------

5. (C) Even without clear cases of resource nationalism,
Post recommends a USG policy that promotes open and fair
tenders, and the public release of the terms of contracts to
the extent possible without harming a private operator. The
goal is to both improve opportunities for U.S. firms and to
assure that the government and people of Senegal are gaining
the best value possible from the country's resources.
SMITH