CONGRESS REJECTS PRESIDENT'S PETROLEUM BILL

UNCLAS QUITO 001424 SIPDIS SENSITIVE SIPDIS DEPT FOR WHA/EPSC FAITH CORNEILLE TREASURY FOR SGOOCH E.O. 12958: N/A TAGS: EPET ECON PGOV EC SUBJECT: CONGRESS REJECTS PRESIDENT'S PETROLEUM BILL REFTEL: QUITO 1422 ¶1. (SBU) Summary: The Correa administration's bill to sanction trafficking in contraband petroleum and its derivatives was rejected June 19 by Congress on the grounds that it was too broad, the penalties were too heavy, it referred to more than one issue, and certain parts of it were unconstitutional. Congress returned the law to the President suggesting revisions. End Summary. ¶2. (U) The Correa administration presented Congress with a measure to stop the rampant illegal trade in petroleum derivatives. Because derivatives are highly subsidized in Ecuador, contraband derivatives are often smuggled to Peru and Colombia. The issue is also problematic in the marine sector, where fishing boats sell contraband subsidized diesel at sea. ¶3. (SBU) The bill would have allowed the Ministry of Energy, the Director for Hydrocarbons, or a designated party to essentially fine and suspend operations of anyone they determined was permitting trafficking, intending to traffic, or actually trafficking in contraband petroleum or its derivatives. It specifically denied recourse to an injunction ("recurso amparo") or administrative review for those sanctioned. A U.S. oil company expressed concern that the bill provided for fines and payment of damages for unspecified contract violations, which they feared could be used against them or other foreign oil companies. Fines for many violations could have reached up to approximately USD 500,000. ¶4. (SBU) COMMENT: This is the third measure that Correa has supported that has been rejected or substantially modified by Congress in the past two weeks (see reftel on the Santa Elena province proposal, septel on the banking law). While the version Correa presented was not acceptable to Congress, it also contained provisions to promote the development of natural gas fields. Congress might also support more limited measures to combat contraband. A new, more focused law could gain passage. END COMMENT. JEWELL