Identifier
Created
Classification
Origin
08BEIRUT1428
2008-10-02 13:01:00
CONFIDENTIAL
Embassy Beirut
Cable title:  

LEBANON: POLITICAL WILL MEANS USG'S CASH TRANSFER

Tags:  PGOV ECON EFIN ENRG ECPS LE 
pdf how-to read a cable
VZCZCXRO7016
PP RUEHAG RUEHBC RUEHDE RUEHKUK RUEHROV
DE RUEHLB #1428/01 2761301
ZNY CCCCC ZZH
P 021301Z OCT 08
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC PRIORITY 3200
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUCNDT/USMISSION USUN NEW YORK 2993
RHEHAAA/NSC WASHDC
C O N F I D E N T I A L SECTION 01 OF 02 BEIRUT 001428 

SIPDIS

DEPT FOR NEA/FO, NEA/ELA
ALSO FOR EEB/FO DSULLIVAN, EEB/ODF DEMARCELLUS
USUN FOR KHALILZAD/WOLFF/SCHEDLBAUER
NSC FOR ABRAMS/RAMCHAND/YERGER/MCDERMOTT
STATE PASS TO USAID FOR LAUDATO/BEVER/SCOTT
COMMERCE FOR ITA LOUSTAUNAU, SAMS, AND WIEGLER

E.O. 12958: DECL: 10/01/2018
TAGS: PGOV ECON EFIN ENRG ECPS LE
SUBJECT: LEBANON: POLITICAL WILL MEANS USG'S CASH TRANSFER
CONDITIONS ARE ACHIEVABLE

REF: A. BEIRUT 1199

B. BEIRUT 1337

C. BEIRUT 1359

D. LEBANON SITREP 9/12/08

Classified By: Charge d'Affaires a.i. William Grant for reasons 1.4 (b)
and (d).

SUMMARY
----------

C O N F I D E N T I A L SECTION 01 OF 02 BEIRUT 001428

SIPDIS

DEPT FOR NEA/FO, NEA/ELA
ALSO FOR EEB/FO DSULLIVAN, EEB/ODF DEMARCELLUS
USUN FOR KHALILZAD/WOLFF/SCHEDLBAUER
NSC FOR ABRAMS/RAMCHAND/YERGER/MCDERMOTT
STATE PASS TO USAID FOR LAUDATO/BEVER/SCOTT
COMMERCE FOR ITA LOUSTAUNAU, SAMS, AND WIEGLER

E.O. 12958: DECL: 10/01/2018
TAGS: PGOV ECON EFIN ENRG ECPS LE
SUBJECT: LEBANON: POLITICAL WILL MEANS USG'S CASH TRANSFER
CONDITIONS ARE ACHIEVABLE

REF: A. BEIRUT 1199

B. BEIRUT 1337

C. BEIRUT 1359

D. LEBANON SITREP 9/12/08

Classified By: Charge d'Affaires a.i. William Grant for reasons 1.4 (b)
and (d).

SUMMARY
--------------


1. (C) There are clear signs that the political will exists
in Lebanon, perhaps for the first time in years, to carry out
needed structural reforms in the telecommunications and
electricity sectors. The relevant ministries are working
hard to make the privatization of mobile telecom networks and
a restructuring of electricity tariffs a reality before the
end of the current government's term in spring 2009. There
is an impressive level of agreement between key ministers who
are political rivals. The Ministers of Energy and Telecoms
are both from the opposition, yet are working closely with
March 14 Finance Minister Chatah and with Prime Minister
Siniora to accomplish their goals before the end of their
short mandates. Despite the inherent political difficulties
involved in pushing through the reforms, and the colorful
personality quirks of the Minister of Energy, indications
from all the major players in Lebanon, as well as from the
IMF, are that both reforms are achievable in the coming
months.


2. (SBU) Post reiterates our previous recommendation to
maintain the telecom privatization as a condition for
disbursement of the 75 million dollar tranche of the cash
transfer funds pledged by the USG at Paris III, as well as
our earlier proposal to replace the condition for release of
the other remaining tranche (50 million dollars) with a
restructuring of the electricity tariff. A proposed draft of
the tariff restructure condition is in paragraph 9 below.
End summary.

TELECOM PRIVATIZATION ON THE RIGHT TRACK

--------------


3. (SBU) Since taking office in July, Minister of
Telecommunications Gebran Bassil has been fervent in his
efforts to prepare for privatization of the two mobile phone
companies, consulting with all the relevant bureaucratic
entities and working to build political consensus in the
cabinet. Ziad Hayek, Secretary-General of Lebanon's Higher
Council for Privatization (HCP,) told EconOff he was
impressed with Bassil. "He is using modern management
techniques to set a course and achieve a goal," said Hayek,
who believes there is an excellent chance the privatization
will happen as a result of the Minister's efforts. Kamal
Shehadi, Chairman of the Telecom Regulatory Authority (TRA),
told EconOff the political will for privatization was there,
and said he was working with Bassil and Hayek on putting
together the Request for Application for the telecom license
sale.


4. (SBU) Bassil told the Ambassador September 15 that he
wants the sale to go through as soon as possible (Ref C),
though he worries that holding the license auction too close
to the spring 2009 election season would be complicated. He
said he had extracted a promise from Parliament Speaker Nabih
Berri that Berri would push through the necessary legislation
for the privatization within 25-30 days. Even if the auction
cannot happen before the elections, Bassil said he would have
all the paperwork done and political consensus reached so
that it could happen immediately following them. (Comment:
Securing Berri's blessing was a coup for Bassil, as Shehadi
had anticipated that Berri would be an obstacle to completing
the privatization. Bassil's membership in the opposition
bloc with Berri may allow him more political maneuverability
than a majority minister might have as he works toward
completing the license sale. End comment.)

ENERGY MINISTER IS CONTROVERSIAL...
--------------


5. (C) Since his arrival, Energy Minister Alain Tabourian, a

BEIRUT 00001428 002 OF 002


Harvard-educated businessman, has arguably been the most
talked-about figure in the cabinet. Politicians as well as
bureaucrats all seem to have a Tabourian story. In his
conversation with EconOff, HCP's Ziad Hayek called Tabourian,
"a geek who surfs the internet" and later referred to him
repeatedly as "incompetent" and "an idiot." Hayek said that
during his first meeting with Tabourian to discuss
privatization in the electricity sector, the Minister spoke
for three hours about what a bad idea telecom privatization
was. (Note: Tabourian was Telecom Minister for three months
during the caretaker government of PM Mikati in 2005. End
note.) Tabourian himself told DCM (Ref A) about his clashes
with PM Siniora over the drafting of the ministerial
statement, and he later publicly protested Siniora's
treatment of him during a visit to Egypt in August, then
boycotted Siniora's visit to Iraq.


6. (C) At the Ambassador's September 11 iftar (Ref D),
fellow opposition minister Elie Skaff complained that
Tabourian was "frantic," and other politicians present
criticized his adversarial manner and his lack of mastery of
his portfolio. Even those who like him admit that he is
challenging to work with. The head of state power utility
Electricite du Liban (EDL),Kamal Hayek, said Tabourian is a
"good man," but expressed frustration that the minister had
not moved more decisively in procuring electricity and
natural gas from abroad. During a September 26 meeting with
Acting USAID Director and EconOff, Tabourian spoke
passionately, and angrily, about the results of years of
mismanagement of the electricity sector. He carefully
presented a step-by-step plan for reform of the sector, but
when asked how he would go about implementing it, or how he
would fund it, he had no answers. "There is no time," he
said.

...BUT STILL WANTS ELECTRICITY TARIFFS RESTRUCTURED
--------------


7. (SBU) While Tabourian may not have an elaborate plan for
revamping electricity plants or working with the private
sector to create more production capacity, he has taken on
the restructuring of EDL's rate tariffs with enthusiasm. He
told the Embassy that he was working closely with Finance
Minister Chatah, and would have a new plan to send to Finance
Ministry very soon. For his part, Chatah (Ref B) has told
the Embassy that he and the Prime Minister are fully on
board, and hope to have the new tariffs in place by the end
of 2008.

IMF ON THE SAME PAGE
--------------


8. (SBU) IMF Middle East and Central Asia Division Chief
Domenico Fanizza told EconOff September 30 that he and his
visiting IMF team were pleasantly surprised by the GOL's
willingness to take on reform, even with a short time
horizon. He said the IMF would likely include some sort of
progress related to the telecom privatization (the issuance
of a Request for Application) as well as the restructuring of
the electricity tariffs, as conditions in an upcoming
Emergency Post-Conflict Assistance Agreement (EPCA),to be
announced during the Annual World Bank/IMF meetings in
Washington October 10-13.

POST RECOMMENDATION
--------------


9. (SBU) Post recommends that we move forward with the final
two conditions for our Paris III cash transfer disbursements
as follows:

-- Reform of the electricity tariff structure in a manner
that increases revenues and rationalizes consumption
(replacing gas excise tax condition -- 50 million dollars);
-- Sale of the licenses for the two mobile phone companies
through a transparent process (unchanged -- 75 million
dollars).
GRANT