Government starves commercial sector to hide fuel shortage

Fuel queues disappeared abruptly over one weekend in October 2002 giving an impression that the government had addressed the fuel shortage in the country but what had happened was that it had ordered suppliers to starve commercial clients to serve retail customers only.

Normally suppliers sold 60 percent of their fuel to the commercial market but the Ministry of Energy had ordered them to serve retail customers only because it was afraid of a backlash from angry commuters.

Full cable:

Viewing cable 02HARARE2246, ZIMBABWE’S FOREX/FUEL QUANDARY

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This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS HARARE 002246

SIPDIS

SENSITIVE

STATE FOR AF/S

NSC FOR SENIOR AFRICA DIRECTOR JFRAZER

USDOC FOR 2037 DIEMOND

PASS USTR ROSA WHITAKER

TREASURY FOR ED BARBER AND C WILKINSON

USAID FOR MARJORIE COPSON

¶E. O. 12958: N/A

TAGS: ECON EPET EFIN ETRD ZI

SUBJECT: ZIMBABWE’S FOREX/FUEL QUANDARY

REF: HARARE 2102

Sensitive but unclassified. Protect accordingly.

¶1. (U) Summary: Zimbabwe’s fuel shortage has worsened.

Each new Libyan demand for foreign exchange sets off an

eleventh hour crisis, as the GoZ seeks to wean hard

currency from a rapidly shrinking economy. End Summary.

Scapegoating Suppliers

———————-

¶2. (SBU) In a new twist since our last report (ref), the

GoZ has sought to deflect attention from the forex

squeeze by lashing out at both parastatal NOCZIM and

private oil companies. With angry commuters stranded

last Thursday, Energy Ministry officials insisted

publicly that downstream operators were hoarding fuel.

In calmer moments, GoZ technocrats dismissed these

charges for us, acknowledging that the GoZ had once again

fallen short of forex.

¶3. (SBU) Lines at the pumps disappeared abruptly over the

weekend. An end to the shortage? On the contrary, an

oil executive told us the Energy Ministry had ordered him

to service only retail customers, leaving commercial

clients in a lurch. Normally, the firms sells 60 percent

of its fuel on commercial markets. He believed other

downstreamers received similar instructions.

Comment

——-

¶4. (U) On one hand, the GoZ’s behavior is unremarkable.

It invoked an implausible fable about hoarded reserves,

falling back on its habitual bias against free markets.

Then it diverted fuel from Zimbabwe’s productive sector,

a certain recipe for national impoverishment, but not

surprising from a government that has frittered away one-

third of its GDP.

¶5. (U) On the other hand, the GoZ betrayed a perceptible

touchiness over long gas lines, perhaps fearing the

consequences and fall-out of a prolonged shortage. If it

wants to avert this recurring nightmare, the GoZ may one

day have to reconcile policy with stubborn macroeconomic

facts, namely that a) it lacks fuel because it lacks

forex and b) it would ultimately raise forex by devaluing

its currency and shoring up exports. Not an option the

government of Robert Mugabe would relish, but possibly

more attractive than a nationwide standstill.

Sullivan

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