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. -------------- CHINESE INVESTMENT -------------- ¶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). -------------- PRINTING MONEY -------------- 
 ¶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. -------------- COMMENT -------------- ¶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