ERITREA TEMPORARILY AVOIDS FUEL CRISIS

C O N F I D E N T I A L SECTION 01 OF 02 ASMARA 000362

SIPDIS

DEPARTMENT FOR AF/E,
LONDON AND PARIS FOR AFRICA WATCHERS

E.O. 12958: DECL: 07/17/2018
TAGS: ECON PGOV PREL ENRG PINR ASEC ER
SUBJECT: ERITREA TEMPORARILY AVOIDS FUEL CRISIS

REF: A. ASMARA 258

B. ASMARA 338

C. ASMARA 300

Classified By: Ambassador Ronald K. McMullen for Reason 1.4 (d)


1. (C) Summary: Eritrea managed to avoid an electricity
supply disaster in June by finding a new supplier of
generator lubricant. An unknown supplier is sending a barge
to restock Eritrea's depleted automotive and aviation fuel
supplies. Embassy Asmara will receive its diesel fuel the
week of July 21. End Summary

MUCH NEEDED FUEL IMPORTS
--------------

2. (C) Total's Managing Director in Eritrea Mohammed Gbepo
(strictly protect) told Emboff that a fuel shipment
containing unknown quantities of automotive gasoline,
automotive diesel, kerosene, and jet fuel will arrive in the
port of Massawa during the week of July 21 from an
unspecified country (possibly Saudi Arabia). Gbepo will
receive notification a few days before the barge arrives.
The fuel will be unloaded into Total's six storage tanks and
allocated to customers according to the Petroleum Corporation
of Eritrea's (PCE) instructions.


3. (C) Gbepo said Total's fuel stocks in Massawa are
"empty," which means water must be pumped into the tank to
extract additional fuel. After the water is pumped in, the
fuel rises to the top and can be safely removed for use.
Total's facility in Massawa has six operational tanks with
five and one-half million gallons of capacity. Each "empty"
tank has approximately 13,000 gallons remaining. There are
three additional inoperative tanks that would raise total
capacity to seven and three-quarter million gallons, but a $4
million investment is required to make them functional.
Total asked the GSE to allow a $.002 (1/5 of a cent) price
increase per liter to recover the investment over 15 years,
an offer the Eritrean government declined.

DIESEL FUEL - ON THE WAY, BUT WHO GETS IT?
--------------

4. (C) Total's diesel stocks at their facility in Massawa
are depleted, meaning water must be pumped into the tanks to
separate accumulated sludge in the tanks from the fuel.
Gbepo said for the last several weeks the Petroleum
Corporation of Eritrea told him to collect fully loaded fuel
delivery trucks in Massawa and deliver the fuel to customers.
This fuel was not offloaded at the port and came from an
unknown source. Gbepo believes the Eritreans may have an
unknown fuel reserve in Assab, while other information
available at post indicates the fuel may have been trucked
from Sudan. (Note: It's unlikely the fuel came from the
strategic reserve in Nefasit, since it is located half-way up
the escarpment from Asmara. If needed in Asmara, it would
have been sent directly from Nefasit. End Note.)


5. (C) UN and other international organizations have not
received their diesel allocations since April (ref A),
forcing them to park their diesel fleets and rent gasoline
powered cars for operations in Asmara. (Note: gasoline is
available commercially. End Note.) The heads of some UN
agencies told Emboffs that if diesel deliveries are not
resumed by the first week of August they will have to
consider drastic reductions in staffing and operations.

EMBASSY ASMARA WILL RECEIVE ITS DIESEL SHIPMENT
-------------- --

6. (C) Despite Total's diesel stocks being mostly depleted,
Gbepo was certain the Embassy would receive its 4,500 gallon
order next week. (Note: Foreign missions and the UN
combined consume about 10% of Eritrea's diesel imports. End
Note).

ELECTRICITY - ONE BULLET DODGED, ANOTHER COMING
-------------- --

7. (C) The retracted announcement of planned electricity
outages in June (ref B) was due to a shortage of lubricant
rather than the heavy fuel oil powering the generators.
Gbepo said the generators use about 10 barrels of lubricant

ASMARA 00000362 002 OF 002


per day. Tamoil, the Libyan-owned alternate fuel
distribution company in Eritrea, could not meet the PCE's
supply demands. Total picked up the contract and will
provide a shipment of 400 barrels (five to six weeks supply)
of lubricant, which will arrive during the week of July 21.
(Note: Tamoil was originally awarded the contract despite
Total winning the tender, by order of President Isaias.
Gbepo believes Tamoil was given the contract as a reward for
an unspecified favor by the Libyan government to the GSE.
End Note.) Due to a supply disruption from a Dubai refinery,
all new lubricant orders will be sent from France, requiring
six to eight weeks before shipments arrive. According to
Gbepo, the PCE must order another shipment immediately to
avoid running out again in early September. When he relayed
this information to an unnamed Eritrean government official,
he was told callously that if the order was not received by
then "the country will not die."


8. (C) During President Isaias' recent visit to Iran, he
asked the Iranians for a gift of heavy fuel oil to power the
main electrical generators, according to Gbepo. Gbepo said
Eritrea's generators will not run on Iran's formulation of
heavy fuel oil. Eritrea's generators were produced in South
Korea and require fuel refined in Kuwait, Saudi Arabia,
Sudan, or one of several East Asian countries. If Iranian
heavy fuel oil were put into Eritrea's generators, the
generators would cease functioning in about 1 month.


9. (C) According to Gbepo, Total had about 100,000 gallons
of heavy fuel oil remaining in June until the GSE ordered him
to distribute 50,000 to the Eritrean Electric Corporation
(EEC). The EEC normally purchases its fuel directly from the
PCE, not Total. Gbepo said Total normally distributes
100,000 gallons of heavy fuel oil per month to various
customers.

AVIATION FUEL
--------------

10. (C) The Eritrean government ordered Total to halt
converting aviation fuel to kerosene (ref C),and some
aviation supplies exist. Egypt Air, which was told in May
that it could no longer refuel its aircraft in Asmara, is now
able to purchase just enough fuel to make the return flight
to Cairo fully loaded. VIP planes landing in Asmara can also
be refueled, but only with the permission of President Isaias.


11. (C) Comment: The Eritreans managed to stave off
disaster by finding an unknown willing fuel supplier who will
overlook their previous repayment problems. Crisis
management seems to be the normal operating mode of Eritrea's
economic gurus. September is the next time Eritrea is likely
to confront dire fuel shortages. End Comment.
MCMULLEN