GOG CONTINUES TO COURT CHINESE INVESTMENT, PRINTS

C O N F I D E N T I A L SECTION 01 OF 02 CONAKRY 000655

SIPDIS
SENSITIVE

E.O. 12958: DECL: 03/16/2019
TAGS: ECON EFIN EINV EMIN EPET PREL PGOV PHUM GV
SUBJECT: GOG CONTINUES TO COURT CHINESE INVESTMENT, PRINTS
MONEY

REF: A. REF A: CONAKRY 00470

B. REF B: CONAKRY 00559

C. REF C: CONAKRY 00584

CONAKRY 00000655 001.2 OF 002


Classified By: ECONOFF BRIANA WARNER FOR REASONS 1.4 (B) AND (D)


1. (C) SUMMARY: The economic relationship between the Chinese
and the GOG seems to be strengthening, despite increased
international scrutiny on the CNDD after the September 28
massacre. On October 10, the Chinese International Fund, in
partnership with Sonangol, publicly signed a cooperation
agreement on October 10 to invest "billions" in Guinea over
the next seven years. However, the money from this agreement
has yet to flow into the impoverished country, and the GOG is
reportedly having large amounts of money printed in China to
meet government salary payments. END SUMMARY.


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CHINESE INVESTMENT
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2. (C) In July, the Chinese International Fund (CIF) signed a
memorandum of understanding with the GOG for future
investment in Guinea's infrastructure development (reftel A).
On October 10, representatives from the CIF and Sonangol held
a public signing of the memorandum, broadcast on several
television and radio outlets. During the broadcast, Mahmoud
Thiam, the Minister of Mines, said the CIF plans to invest
billions of dollars in financing and infrastructure
development in Guinea over the next seven years.



3. (C) He also announced that in turn for infrastructure
development, the GOG would be teaming up with the CIF in the
jointly owned Guinean Development Corporation, which will
explore Guinea's oil resources as well seek mining sector
concessions. Hyperdynamics, an American oil interest which
previously held a 33,000 sq. mile oil exploration concession
off the coast of Guinea (reftel B),recently announced it
will be releasing nearly 60% of its concession to the GOG in
December. According to Thiam and his Secretary General,
Aboubacar Koly Kourouma, Chinese exploration will most likely
be focused on this newly available contract. Many
international investors also speculate that the Chinese
International Fund is also interested in obtaining Rusal's
recently expropriated bauxite mining and refining facility
(reftel C).


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PRINTING MONEY
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4. (C) According to sensitive reporting as well as private
exchange operators, the GOG received several shipping
containers full of new Guinean Francs (GF) from China over
the last month. (NOTE: The GOG has their money printed in
China and the UK due to insufficient security options in
Guinea. END NOTE.) Several sources within the private
exchange market noted that they have seen a significant rise
in the amount of new bills on the market. Banking officials
also noted the difference, saying that they are seeing money
marked with numbers far beyond the recognized money supply.
According to contacts within the government, the GOG escorted
several shipping containers of money from the port to Camp
Alpha Yaya on September 29. Sensitive reporting also noted
the existence of these containers within the camp. Contacts
say that the GOG has simply run out of money, and is using
the new tender as the only means to pay government workers
and military salaries. Although the official rate remains
stable at around 5000 GF to the dollar, the unofficial
exchange rate has increased by 1000 GF to the dollar over the
past two weeks, both due to rumors of money printing as well
as the tenuous political environment.


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COMMENT
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5. (C) Since September 28, the CNDD has suffered increasing
international pressure to step down, and is most likely
bracing itself for some type of international economic

CONAKRY 00000655 002 OF 002


isolation. This budgetary pressure is compounded by the fact
that many of the mining companies have simply stopped
operating due to security and expropriation concerns. A deal
with the Chinese may prove to be the GOG's one and only
lifeline to support their bloated government payroll. The
fact that the CIF was willing to do a public signing with the
GOG after the events of the last two weeks, shows that the
Chinese believe that either the CNDD will be staying in
power, or that someone else friendly to the Chinese will be
able to ensure their investments in the future.



6. (C) In many of the Embassy's recent meetings, political
and economic contacts have emphasized the importance of
Chinese support for the CNDD, saying that international
isolation will have little effect in Guinea if China
continues to promise large-scale investment. According to
many, Chinese support just might keep Dadis in power. It
should be noted that China held its national day reception as
scheduled on October 1, just three days after the stadium
massacre and during an official day of national mourning. The
majority of the attendees were Chinese and Guinean staff from
the Chinese mission and few western diplomats attended the
reception.



7. (C) Despite Chinese promises however, CIF investment has
yet to flow into Guinea. The GOG is obviously trying to tread
water with their budget until they are able to obtain this
external support by printing money. This expansive monetary
policy will most likely prompt inflation in a country that
has suffered extensive economic damage since the CNDD took
power, which is due in part to the global economic crisis,
but also to weak economic management. END COMMENT.
BROKENSHIRE