CARGIL'S BUSINESS ACTIVITIES IN ERITREA

C O N F I D E N T I A L ASMARA 000356 SIPDIS DEPARTMENT FOR AF/E LONDON AND PARIS FOR AFRICA WATCHERS E.O. 12958: DECL: 07/14/2018 TAGS: ECON EAGR ER SUBJECT: CARGIL'S BUSINESS ACTIVITIES IN ERITREA Classified By: Ambassador Ronald K. McMullen for Reason 1.4 (d) ¶1. (SBU) Cargil's business activities are thriving in Eritrea, according to Redaegzy Gebremedhin (protect),the company's Eritrean representative. Cargil has operated in Eritrea since 1998, and sold 250,000 tons of grain, sugar, and other agricultural commodities to Eritrea in 2007. It is likely that Cargil's provision of 250,000 tons of commodities makes it the largest foreign commercial supplier of foodstuffs in Eritrea. Redaegzy expects high commodity prices to reduce the amount purchased in 2008 to around 180,000 tons. He added Cargil views Eritrea as a top-notch borrower and extended an unsecured $40 million line of credit to the Eritrean government to purchase its products, noting that Eritrea is the only African country for which Cargil has done this. ¶2. (SBU) Redaegzy said the Government of the State of Eritrea (GSE) declined Cargil's 2003 request to invest $25 million in a grain processing facility in the port of Massawa. While the reasons for declining are mostly unknown, Redaegzy speculated the GSE feared losing its complete control over economic activity. He added that if Cargil renewed its request, the GSE would likely be more favorable. SUGAR SMUGGLING TO SUDAN -------------- ¶3. (C) Redaegzy corroborated previous reports that Eritrea is a major source for sugar smuggled into Sudan. Although he did not specify the amounts, Redaegzy told Emboff Eritrea imports large quantities of sugar from Cargil, with certain Eritrean "business men," (generals and high ruling-party officials) smuggling most of it to Kassala, just across the Sudanese border. ¶4. (C) Other Embassy sources traveling near the Sudanese border report a circular flow of Sudanese sugar to Eritrea, and then back to Sudan. Apparently, some quantity of domestically produced sugar in Sudan is sold at below market price, while foreign imports, needed to meet all of Sudan's domestic demand, sell at the much higher market rate. This leads Sudanese merchants to export subsidized local sugar to Eritrea (near Tessenai),where it is then re-bagged and re-exported to Sudan as foreign sugar to be sold at the higher price. The source of much of this circular sugar trade is reportedly Sudanese sugar mill workers who are partially compensated in sugar. MCMULLEN