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.
Viewing cable 02HARARE1719, ZIMBABWE FACES FUEL SHORTAGES UNLESS NEW
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
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
SUBJECT: ZIMBABWE FACES FUEL SHORTAGES UNLESS NEW
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
¶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.