GAZA ELECTRICITY CURTAILED AS EU SUSPENDS

C O N F I D E N T I A L JERUSALEM 001735

SIPDIS

SIPDIS

NEA FOR FRONT OFFICE; NEA/IPA FOR SHAMPAINE/BELGRADE; NSC
FOR ABRAMS/SINGH; TREASURY FOR
HARRIS/LOEFFLER/NUGENT/HIRSON; BRUSSELS FOR LERNER

E.O. 12958: DECL: 08/19/2017
TAGS: EFIN EAID ENRG KWBG PTER IS
SUBJECT: GAZA ELECTRICITY CURTAILED AS EU SUSPENDS
ASSISTANCE, FEARING HAMAS INTERFERENCE

REF: JERUSALEM 1574

Classified By: Acting Principal Officer Thomas Duffy for reasons 1.4 b,


1. (C) Summary. A security threat against Nahal Oz transfer
station and increased HAMAS interference in the collection
and distribution of utility revenues has led the EU - at the
urging of the Palestinian Authority (PA) - to suspend its
financial support for fuel shipments into Gaza, resulting in
shutdown of the power plant that supplies approximately
thirty-five percent of Gaza's electricity. EU officials
publicly claim to be conducting a review of the overall
program to ensure that HAMAS does not benefit from its fuel
payments, and security at the transfer point can be
guaranteed. PA officials privately say that they are using
the power outage to increase pressure on HAMAS and to keep
HAMAS from gaining access to additional sources of revenue.
End Summary.


2. (SBU) Nahal Oz transfer station (where fuel supplies from
Israel cross into Gaza) was closed on Thursday, August 16,
following the reported discovery of a tunnel dug under the
crossing. The fuel crossing was re-opened on Sunday, August
19, but fuel for the Gaza Generating Company's power plant
was not delivered, after the EU told the Israeli fuel
supplier that it would not finance the shipment. According
to PA Ministry of Finance Officials, the plant - which
provides Gaza with about thirty-five percent of its
electricity needs - shut down completely at 11:00 AM on
Sunday. Given the continued supply of power from ISRAEL and
Egypt, PA officials expect increased interruptions in service
- but not a complete blackout - in Gaza until the plant is
back on-line.


3. (C) The EU has publicly stated that it is conducting a
"review" of the procedures in place to ensure that the fuel
is transferred safely, and does not benefit HAMAS. The head
of the EU's Temporary International Mechanism (TIM) told
Econchief that EU concerns "had not been completely
clarified" and a deal would likely not be reached until at
least Tuesday, August 21. The EU has publicly tied this
review into the security breach, but has noted that it needs
to "know where the taxpayers' money is going." The EU was
surprised that fuel reserves were as low as they were at the
plant, instead expecting the plant to run at least through
Sunday, August 19.


4. (C) PA Prime Minister Salam Fayyad told the Consul General
on August 19 that, after detecting an increase in HAMAS'
collection of utility bills, he encouraged the EU to stop
paying for fuel deliveries. In a Monday, August 20 meeting
with Senator Levin, Fayyad said that HAMAS had taken over the
Gaza electricity distribution company several weeks ago and
was now misusing collected funds.


5. (C) Gaza City Mayor Majid Abu Ramadan told ConGen Officers
that HAMAS arrested the head of Gaza's electricity
distribution company a month ago, along with a number of
other staff, and replaced him with a HAMAS official. While
Abu Ramadan maintained that all previous financial
arrangements remained in place to prevent HAMAS from gaining
access to utility payments, Ministry of Finance DG Mazen
Jadallah told Econchief that while electricity usage (and
revenue collections) had increased, the amount transferred to
the central accounts had remained flat. "There are enough
signs that someone is taking advantage." The head of the
PA's Petroleum Authority told EconFSN that HAMAS had taken
"effective control" of the utility company's accounts and
financial authorities.


6. (U) PA Information Minister Riad al-Malki said HAMAS was
"fully responsible" for the electricity shortage, according
to press reports, and claimed that HAMAS had "occupied" the
electricity company and stolen its money.
DUFFY