HARD TIMES: CHAD NEEDS USG HELP TO MEND FENCES

UNCLAS NDJAMENA 000288 SENSITIVE SIPDIS STATE FOR AF/C AND AF/EPS PARIS AND LONDON FOR AFRICA WATCHERS E.O. 12958: N/A TAGS: PREL ECON EFIN IMF IBRD EPET ETRD CD SUBJECT: HARD TIMES: CHAD NEEDS USG HELP TO MEND FENCES WITH THE BANK AND THE FUND REF: Ndjamena 0171 ¶1. (U) This is an action message: See para 15. -------------- Summary: -------------- ¶2. (SBU) Chad's new Prime Minister believes that the World Bank already has unfairly and unilaterally decided at the highest level to end its relationship with Chad in the petroleum sector, which would be a major blow to his government's ability to implement its ambitious reform agenda. The IMF delegation currently in Chad is seeking seriously to engage with the GOC to put Chad on an extraordinary "staff monitored program" aimed at getting the IMF-GOC relationship back on a more normal track in the near future. The IMF delegation appears to understand the geopolitical situation in which the GOC finds itself in a highly unstable region and with massive Darfur refugee and IDP presence in Chad, and is under no illusions as to Chad's capacity to reform its practices to put its financial and budgetary houses in better order. Even so, the IMF is trying not/not to "give up on Chad," in stark contrast to what the bank seems poised to do. ¶3. (SBU) Embassy N'Djamena believes that USG interests in Chad, including relieving the humanitarian tragedy emanating from Darfur and seeking a resolution of the Darfur conflict, require helping Chad to make progress on the national reconciliation agenda and political reform program of new Prime Minister Youssouf Saleh Abbas. A breakdown in the relationship of Chad with the IFI's could deal a severe blow to the new government's chances of success; undermine confidence in the international community's humanitarian efforts in eastern Chad, including EUFOR and MINURCAT, as well as its efforts to resolve the Darfur crisis; and undercut USG interests by complicating the operations of the Chad-Cameroon oil pipeline project, a major American private investment. We believe that the department should intervene to advocate at the highest possible levels that the Bank and the Fund make their best efforts to maintain a productive relationship with Chad. End Summary. -------------- Chad and the World Bank -------------- ¶4. (SBU) On Friday, 11 July, Prime Minister Youssouf Saleh Abbas convoked Ambasssador Nigro to discuss the Chad-World Bank relationship. The Prime Minister said that he now had firm evidence that the problems in the relationship were the result of an "ideological" opposition on the part of President Zoellick to continuing the Chad-World Bank relationship in the petroleum sector. He said that the source of his information was from inside the Bank itself. ¶5. (SBU) The Prime Minister described the course of relations since he came to the Primature. First, there was the Bank's failure to send its resident representative back to Chad after the events of February. Then, there was the Bank's failure to engage with the Chadian delegation in Washington in April, when the delegation had been told that a Presidential letter would be necessary before normal engagement might resume. Then there was the request that the Prime Minister plan to come to Washington to discuss the relationship. The Prime Minister said that he had complied in good faith, writing himself to the Bank and to the IMF that he wanted to maintain Chad's relationship with both institutions and that he planned to visit Washington in early July. ¶6. (SBU) Then the bank had said that Mr. Zoellick was not available at that time, so the Prime Minister rescheduled his visit to a later date in July. Finally, there was a communication from the bank through the Chad administrator that the Government of Chad must meet some requirements - laid out in eight points - before further discussion of a visit to Washington could be discussed. The Prime Minister said it was evident from this chain of communications that the Bank was seeking to break with Chad at least in the petroleum sector. ¶7. (SBU) The Prime Minister complained that the Bank was singling out Chad for punishment unfairly. The World Bank continued to have petroleum-sector relationships with Congo-Brazzaville, the Democratic Republic of Congo, and Sudan, despite record of non-compliance with norms by both those governments. Even if the Bank considered only Chad's performance to be so poor that the relationship must be ended, then the Bank should at least give the GOC a chance to explain its side of the story before making its definitive decision. ¶8. (SBU) The Prime Minister said that Chad had welcomed the IMF's decision to send a delegation to Chad and that he had instructed his ministers to work seriously with the delegation. The Prime Minister said that he had requested that the Bank send a delegation as well but had received no answer. The Prime Minister said that he had proposed that a Chadian delegation could meet a Bank delegation outside of Chad, such as in Paris. But that had been met by the listing of eight preconditions, as he had mentioned earlier. ¶9. (SBU) The Prime Minister repeated that he was committed to building a better relationship with the World Bank, but that the Bank was evidently opposed to this. He said that a break with the Bank would be a severe blow to his new government, which needed the help of the international community, including the IFI's, if it were to succeed in "turning the page" on the errors of the past and make real progress for the Chadian people. The Prime Minister said that the Bank should take into account Chad's current situation and the role it was playing in midst of a regional security and humanitarian crisis. This was not the time for the World Bank "to slam the door" in Chad's face. The Prime Minister requested USG support in the GOC's attempt to maintain normal, across-the-board relationships with the IMF and the World Bank. -------------- IMF Delegation in Chad -------------- ¶10. (SBU) An IMF technical delegation arrived in town last week. Ambassador met with the delegation over brunch on Saturday, July 12. The delegation head said that they were seeking seriously to engage with the GOC again after the most recent failure of Chad to perform to IMF criteria. He said the current goal might be to put Chad on a "staff monitored program," which has no financial incentives for Chad and which is aimed at putting the IMF-GOC relationship back on a more normal track in the near future, as early as six months from now, if Chad performed adequately. The IMF delegation was cognizant of Chad's history of internal instability, as well as of the difficult geopolitical situation in which the country finds itself today -- in a highly unstable region, with massive Darfur refugee and IDP burdens, and with active enmity for its neighbor to the east. ¶11. (SBU) At the same time, the delegation's analysis of Chad's financial and budgetary problems indicated that it was under no illusions as to Chad's current performance and future capacity to reform its practices and to put its financial and budgetary houses in better order. The delegation's position seemed to be that it was too early to give up on the IFI-Chad relationship and that the importance of Chad efforts to resolve regional tensions and provide humanitarian assistance to refugees and IDPs argued in favor of continued efforts to work with the GOC to make progress in managing its petroleum revenues responsibly. -------------- Comment: -------------- ¶12. (SBU) The World Bank and the IMF appear to be pursuing rather different courses of action regarding Chad. While the Bank seems to be engineering a break with Chad, at least in the key petroleum sector, the IMF seems to be doing its best to maintain a working relationship with Chad, despite previous setbacks and continued marginal performance on Chad's part. In short, the IMF seems intent not/not to "give up on Chad," in stark contrast to what the bank seems poised to do. ¶13. (SBU) Embassy Ndjamena believes that USG interests in Chad, including relieving the humanitarian tragedy emanating from Darfur and seeking a resolution of the Darfur conflict, require helping Chad to make progress on the national reconciliation agenda and political reform program of new Prime Minister Youssouf Saleh Abbas. A breakdown in the relationship of Chad with the IFI's would be a severe blow to the new government's chances of success. It could undermine confidence in the international community's humanitarian efforts in eastern Chad, including EUFOR and MINURCAT, as well as its efforts to resolve the Darfur crisis. And it could undercut USG interests by complicating the operations of the Chad-Cameroon oil pipeline project, a major American private investment in the region. ¶14. (SBU) Embassy Ndjamena believes that the Department should intervene to advocate at the highest possible levels at the Bank and at the IMF for both IFI's to make their best efforts to maintain a productive relationship with Chad. It is especially important that the Chad-World Bank relationship in the petroleum sector be maintained, in order not to complicate the operation in the Chad-Cameroon pipeline project. End Comment. -------------- Action request -------------- ¶15. (SBU) Action Request: That the Department intervene at the highest possible levels at the World Bank and at the IMF to ensure that both institutions make their best efforts to maintain a productive relationship with Chad. NIGRO