Robertson on how Zimbabwe was getting its fuel

The Mugabe administration was literally mortgaging the country’s assets to obtain fuel according to economist John Robertson.

Robertson told United States embassy officials that the northern part of the country was getting its fuel supplies from Mozambique through a deal with Libya.

He said Zimbabwe was paying for Libyan fuel through the transfer of equity in and ownership of various Zimbabwean assets, including commercial farms, the pipeline itself, and an oil storage facility in Msasa.

The US embassy said interestingly, an equity deal involving the same oil pipeline and Msasa storage facility was reportedly consummated with Kuwaiti sources for oil which was purchased the previous year.

Robertson reported that the Libyans were now tired of being offered equity or Zimbabwe dollars and were increasingly insisting on payment in forex for their oil due to their own operational and production costs.

Southern Zimbabwe, he said, was being supplied fuel from South Africa through a deal with businessman John Bredenkamp through a loan to Mugabe.

Relations between Mugabe and Bredenkamp were however strained as he was no longer willing to increase his financial exposure to the government.

Full cable:

Viewing cable 02HARARE1719, ZIMBABWE FACES FUEL SHORTAGES UNLESS NEW

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

C O N F I D E N T I A L SECTION 01 OF 02 HARARE 001719

SIPDIS

STATE FOR AF/S, AF/EX, HR/OE-MTRACY

NSC FOR SENIOR AFRICA DIRECTOR JFRAZER

USDOC FOR 2037 DIEMOND

LONDON FOR CGURNEY

PARIS FOR NEARY

NAIROBI FOR PFLAUMER

TREASURY FOR ED BARBER AND CWILKINSON

E.O. 12958: DECL: 07/24/2012

TAGS: ECON EPET ETRD ZI

SUBJECT: ZIMBABWE FACES FUEL SHORTAGES UNLESS NEW

BENEFACTOR APPEARS

REF: HARARE 01664

Classified By: Labor officer Karen Bel.

Reasons: 1.5 (B) and (D).

¶1. (C) Summary. Amid rumors of imminent fuel shortages

reminiscent of those that occurred in 1998, a local economist

estimates that Zimbabwe retains at best a one-month supply of

oil should pipeline and tanker shipments be curtailed. The

southern and northern regions are serviced by different

supply sources and each is threatened by discrete factors,

both of which involve the lack of forex. If both regions

were to lose oil supplies simultaneously, however, the

northern part would probably retain access to more fuel than

the southern part due to reserves currently stocked in the

local storage facilities. For the moment, and in the absence

of the GOZ discovering an outside lifeline, it seems to be a

question of when — not if — the shortages set in. End

summary.

¶2. (C) Laboff met with economist John Robertson on July 23 to

sound out recurrent rumors of an imminent fuel shortage due

to the chronic lack of forex. Robertson confirmed that he

has also heard the rumors, but he had no concrete information

indicating that suppliers have yet withdrawn. However, he

confirmed that funding for both current major sources of fuel

is in jeopardy, and stated that Zimbabwe is “not far off”

from widespread shortages.

¶3. (C) Currently, the northern part of the country is

serviced via pipeline from Mozambique through an arrangement

with Libya. According to Robertson, the GOZ has been paying

for Libyan fuel through the transfer of equity in and

ownership of various Zimbabwean assets, including commercial

farms, the pipeline itself, and an oil storage facility in

Msasa. (Note: Interestingly, an equity deal involving the

same oil pipeline and Msasa storage facility was reportedly

consummated with Kuwaiti sources for oil which was purchased

last year. End note.) As stated in reftel, however, Finance

Minister Simba Makoni reported that the Libyan Area Foreign

Bank has limited its investments in Zimbabwe to purchases of

shares in the Commercial Bank of Zimbabwe. Regardless,

Robertson reported that the Libyans are apparently tired of

being offered equity or Zimbabwe dollars, and are

increasingly insisting on payment in forex for their oil, due

to their own operational and production costs.

¶4. (C) By contrast, the southern part of the country —

which for purposes of the oil distribution scheme includes

Victoria Falls as well as Beitbridge, Bulawayo, and Chipinge

— is serviced by shipments from South African oil companies

(Sassoil), with the funding reportedly provided by

Zimbabwe-based businessman John Bredenkamp through a loan to

Mugabe. The fuel for this region is brought in via truck and

rail. Shortages have already been reported during the past

few months, including a period of several days during which

no fuel was available in the Bulawayo area. This shortage

was relieved when fuel from stocks in the northern part of

the country was shipped in to Bulawayo via truck. Funding

for the southern region is allegedly endangered due to

strained relations between Mugabe/the GOZ and Bredenkamp, who

reportedly is unwilling to increase his financial exposure to

the GOZ. (Note: Robertson opined that some of the strain is

due to Bredenkamp’s perception that a close relationship with

the GOZ is detrimental to his other business interests, which

is in fact evidence that inclusion on the US sanctions list

is effective. End note.) If Bredenkamp refuses to finance

future purchases, the GOZ will once again be scrambling for

enough forex to maintain shipments from South Africa. Should

this alternative source of fuel dry up, the shortage could be

managed for a short period by trucking in fuel from the

northern stocks. However, the capacity of the pipeline is

insufficient to provide fuel for the entire country, and if

the southern source is cut off, the reserves of the country

would rapidly be depleted.

¶5. (C) According to Robertson, there seems to be little hope

for new sources of funding for either the northern pipeline

fuel source or the southern road/rail fuel source. Both

import schemes require large amounts of forex, which is in

spectacularly short supply. There are few forex-generating

exports and even fewer forex-generating domestic businesses.

The GOZ is facing increasing pressure to purchase and import

food in addition to that provided through humanitarian aid

programs, and further economic reverses are expected.

Despite negotiations with the Libyans and other oil producing

nations, no new sponsor has appeared on the horizon.

Additionally, there appear to be no new sources for loans to

the GOZ, as there are no repayment prospects for either new

or existing loans.

¶6. (C) Comment: Although the rumor that “when the pig comes

through the pipeline, that’s all there is” cannot be

substantiated, there is little doubt that Zimbabwe is facing

widespread fuel shortages within a month, should either

source be cut off. The financiers of both current sources of

fuel are dissatisfied with the status quo. Unless some new

source of forex, or new benefactor, appears on the scene,

fuel shortages are not far away. End comment.

SULLIVAN

(41 VIEWS)