SARG PREPARES TO DISTRIBUTE DIESEL RATION CARDS

C O N F I D E N T I A L DAMASCUS 000240 SIPDIS SIPDIS STATE FOR NEA/ELA; NSC FOR SINGH/GAVITO E.O. 12958: DECL: 04/08/2018 TAGS: ENRG EPET ETRD PGOV SY SUBJECT: SARG PREPARES TO DISTRIBUTE DIESEL RATION CARDS REF: A. DAMASCUS 234 ¶B. 07 DAMASCUS 949 Classified By: A/DCM Timothy J. Pounds for reasons 1.4(b,d) -------------- SUMMARY -------------- ¶1. (SBU) The SARG announced this week that diesel ration cards will be distributed to all Syrian households from April 12-27. The coupons will allow families to purchase 1000 liters of diesel at a substantial discount, although the discounted price is still expected to be 20-25 percent higher than the current subsidized price. Any purchases after the initial 1000 liters will be at closer-to-market prices. Facing the prospect of market-priced diesel, Syria's farmers are worried that any increase in fixed agricultural prices will not be sufficient to cover their production costs. Most Syrians interpret the ration card distribution as the strongest indication yet that the SARG will soon stop subsidizing diesel, with some speculation that it could occur as early as mid-May. End summary. -------------- THE PLAN AND ITS IMPACT -------------- ¶2. (SBU) On April 7, the SARG announced that diesel (mazout) ration cards will be distributed throughout the country for a 15-day period commencing on April 12. The coupons will be issued to the heads of Syria's estimated 5.5 million families and will entitle each family, regardless of household size or income, to purchase 1000 liters of diesel at discounted price. According to the announcement, the discounted price will be set at a future date in conjunction with an increase in fixed prices for staple goods. After this date, all diesel purchases beyond the first 1000 liters will be at market, or close to market, prices. Locals project the new discounted diesel price will be 9-10 Syrian Pounds (SP)/liter, a 20-25 percent increase over the current subsidized price of 7.4 SP/liter. ¶3. (SBU) In Syria, diesel is the primary fuel for heating, commercial transportation, irrigation and residential generators. Post estimates that the average Syrian household consumes 500 liters of mazout per month per heating stove in winter, with the average home owning two stoves. During warmer months, Syrian families use diesel to fuel hot water heaters and generators, when electrical power outages are common. The greatest consumers of diesel, and thus those 
most affected by a price increase, are Syria's farmers. Most Syrian farmers operate a diesel-powered irrigation pump 24 hours/day, seven days/week for seven months each year. Depending on the size of the pump's engine, it may consume 80-480 liters/day of operation. Facing the prospect of market-priced diesel, Syria's farmers are worried that any increase in fixed agricultural prices will not be sufficient to cover their production costs (ref A). -------------- CONCURRENT SARG ACTIONS -------------- ¶4. (SBU) Wealthy industrialists with the means to store diesel have already begun stockpiling subsidized fuel in anticipation of a price increase. The government daily Tishreen reported that 2.2 million liters of diesel were confiscated from the Assia pharmaceutical plant in Aleppo this week. Although local sources say he had broken no laws, plant owner Muhammad Al Sakhni was arrested for "hoarding excessive fuel" -- enough to allegedly meet half of Aleppo's daily demand -- when his factory required only 160,000 liters/month. ¶5. (C) Although not reported publicly, Post has learned that the SARG has already invested in technology to curb diesel smuggling. An executive of Advanced Fleet Services, Ltd (AFS-Syria) told Econoff that his company has, for some months, been installing Chinese-made "smart card" readers at gas stations around Syria, and the SARG is now requiring "PetroCards" to be used when fueling most government vehicles. Additionally, the executive claimed to have installed GPS-tracking devices on the para-statal Marukhat fuel company tanker trucks that not only track their whereabouts but also alert system monitors when the fuel tanks are opened. -------------- COMMENT -------------- ¶6. (C) Most Syrians interpret the distribution of coupons as the strongest indication yet that the SARG will soon cease diesel subsidies (ref B). Although fifteen days have been allotted to complete the process, Syrians with long experience in SARG bureaucratic inefficiency doubt that this window will be sufficient and expect long queues and confusion in the coming days. Less than two days before the distribution is set to begin, the public is still awaiting government instructions telling them where to appear in order to receive the ration cards. We note that the official announcement declared that coupons would only be issued "to those who deserve them," which we take to mean Syrian citizens and long-time Palestinian refugee residents of Syria. Many are speculating that Iraqi refugees and Lebanese citizens living in Syria would not be eligible to receive them. CORBIN