R 141507Z APR 88
FM AMEMBASSY BEIRUT
TO SECSTATE WASHDC 6549
INFO USDA WASHDC
AMEMBASSY ALGIERS
AMEMBASSY DAMASCUS
AMEMBASSY NICOSIA
AMEMBASSY PARIS
AMEMBASSY TEL AVIV

C O N F I D E N T I A L SECTION 01 OF 03 BEIRUT 02181 
 
STATE FOR NEA/ARN AND AID/ANE/MENA 
 
USDA FOR PAUL KIENDALL 
 
E.O. 12356:  DECL:  OADR 
TAGS: EAID EAGR ETRD BEXP PGOV PINR LE
SUBJECT:  LEBANON:  EXCHANGE WITH MFA ECONOMIC DIRECTOR 
          ON U.S. WHEAT AID AND SALES 
 
REF:  BEIRUT 2062 (NOTAL) 
 
¶1.  (C - ENTIRE TEXT) 
 
¶2.  BEGIN SUMMARY:  MFA DIRECTOR OF ECONOMIC AFFAIRS 
SALLOUKH MADE DEMARCHE TO DCM ON FAMILIAR THEME OF A 
GOVERNMENT-TO-GOVERNMENT WHEAT PROGRAM WITH THE U.S. 
SALLOUKH ARGUED THAT FREE WHEAT WOULD HAVE GOOD 
PROPAGANDA VALUE FOR THE U.S. AND WOULD HELP THE 
GOL'S FINANCES.  REGARDING DISTRIBUTION, SALLOUKH 
THOUGHT THAT ALL FOREIGN ASSISTANCE PROGRAMS TO LEBANON 
WERE FLAWED IN THIS REGARD AND CONTENDED THAT LEBANON 
WAS NO WORSE THAN OTHER COUNTRIES.  THE SMUGGLING 
PROBLEM, ACCORDING TO HIM, IS GREATLY EXAGGERATED; 
ONLY "5 PERCENT" OF LEBANESE BREAD IS DIVERTED TO 
NEIGHBORING COUNTRIES.  THE DCM STRESSED THAT THE USG 
IS CONCERNED ABOUT EQUITABLE DISTRIBUTION TO ALL 
CONFESSIONS WITHOUT MILITIA INVOLVEMENT.  EVEN IF 
LEBANON WERE GRANTED FREE WHEAT FROM THE U.S., IN 
ACCORDANCE WITH OUR WORLDWIDE POLICY, IT WOULD BE TIED 
TO THE GOL'S ENACTING ECONOMIC REFORMS.  SPECIFICALLY, 
THE GOL WOULD HAVE TO ADDRESS THE PROBLEM OF ITS 
38.7 MILLION USD BREAD SUBSIDY.  THE DCM STATED THAT 
RECENT PRESS REPORTS, CITING AMBASSADOR BOUHABIB AS 
BLAMING THE U.S. EMBASSY IN BEIRUT FOR BLOCKING A 
WHEAT PROGRAM, WERE ERRONEOUS AND THE DECISION TO 
PROVIDE AID INVOLVES VARIOUS AGENCIES AND DEPARTMENTS 
IN THE USG.  REGARDING WHEAT SALES, THE DCM UNDERLINED 
OUR STRONG DESIRE TO BE GIVEN A FAIR OPPORTUNITY TO 
COMPETE IN GOL WHEAT TENDERS.  SALLOUKH PLANS TO ENLIST 
ECONOMY MINISTER QASSIR'S HELP IN PREPARING A REPORT 
ON THE WHEAT SITUATION IN LEBANON.  HE WILL ALSO RAISE 
U.S. INTEREST IN COMPETING FOR GOL WHEAT TENDERS WITH THE 
MINISTER.  THE DCM REPLIED THAT WE WELCOMED ANY 
INFORMATION SALLOUKH COULD PROVIDE ON BOTH SUBJECTS. 
END SUMMARY. 
 
¶3.  ON APRIL 12, DCM, ACCOMPANIED BY ECON COUNSELOR, 
PAID INTRODUCTORY CALL ON AMBASSADOR FAWZI SALLOUKH, 
LEBANESE MINISTRY OF FOREIGN AFFAIRS ECONOMIC DIRECTOR. 
MEETING LASTED APPROXIMATELY AN HOUR.  THE PRINCIPAL 
TOPIC OF DISCUSSION WAS WHEAT FOR LEBANON. 
 
¶4.  AMBASSADOR SALLOUKH MADE A STRONG PITCH FOR A 
GOVERNMENT-TO-GOVERNMENT WHEAT PROGRAM, WITH THE USG 
PROVIDING FREE WHEAT TO LEBANON.  SALLOUKH INDICATED THAT 
AMBASSADOR BOUHABIB HAS ALREADY RENEWED THIS REQUEST IN 
WASHINGTON.  FIRST AMONG THE REASONS CITED BY SALLOUKH 
FOR A WHEAT PROGRAM WAS THE "PROPAGANDA" VALUE FOR THE 
U.S. IN SO DIRECTLY HELPING THE GOL.  SECONDLY, SALLOUKH 
STATED THAT FREE WHEAT WOULD ASSIST THE GOL IN COPING 
WITH ITS FOREIGN EXCHANGE SHORTAGE.  SALLOUKH PROPOSED A 
U.S. WHEAT GRANT BE HANDLED AS A REGULAR WHEAT PURCHASE. 
THAT IS, THE GOL WOULD SELL THE FREE WHEAT TO THE 
MILLERS WHO IN TURN WOULD SELL THE FLOUR TO BAKERS.  THE 
HARD CURRENCY SAVED FROM NOT HAVING TO PURCHASE WHEAT 
COULD BE SPENT ELSEWHERE, TOWARD PAYING LEBANON'S 
EXTERNAL DEBT OR PURCHASES OF FOREIGN-MADE EQUIPMENT FOR 
LEBANON'S PUBLIC UTILITIES, FOR EXAMPLE. 
 
¶5.  SALLOUKH STATED THIS FRIDAY, APRIL 15, HE WILL BE 
MEETING ECONOMY MINISTER VICTOR QASSIR.  SALLOUKH WILL 
SEEK THE MINISTER'S SUPPORT IN PREPARING A REPORT ON 
THE WHEAT SITUATION IN LEBANON TO BE PROVIDED TO THE 
U.S. 
 
¶6.  DCM TOOK THAT OPENING TO EXPLAIN TO SALLOUKH THAT 
PRESS REPORTS APPARENTLY STIMULATED BY LEBANESE 
AMBASSADOR TO THE U.S. ABDALLAH BOUHABIB THAT 
WASHINGTON FAVORED WHEAT AID TO LEBANON BUT THAT IT WAS 
OUR EVIL EMBASSY IN BEIRUT THAT WAS BLOCKING IT WERE 
UNINFORMED.  FIRST OF ALL, ON THE BASIS OF THE SEVERE 
NEED WE PERCEIVED HERE LAST FALL WHEN THE LEBANESE POUND 
AND PRICES HAD GONE CRAZY, WORSENING THE PLIGHT OF 
ALREADY POOR PEOPLE, WE HAD INCREASED THE FOOD AID THAT 
WE PROVIDED LEBANON THROUGH PVO'S BY 35 PERCENT, TO A 
VALUE OF SOME USD 23 MILLION.  SECONDLY, THE DECISION TO 
PROVIDE THE FOOD AID BY THAT ROUTE, AS OPPOSED TO 
THROUGH A GOVERNMENT-TO-GOVERNMENT PROGRAM, HAD BEEN 
ARRIVED AT BY OUR USUAL DECISION-MAKING PROCESS, 
INVOLVING VARIOUS OFFICES IN WASHINGTON (AID, STATE, 
COMMERCE, AGRICULTURE, THE CONGRESS) AS WELL AS THE 
EMBASSY. 
 
¶7.  THE DCM THEN CONTINUED THAT ANY INFORMATION ON THE 
WHEAT SITUATION IN LEBANON IS MOST WELCOME.  HE STATED 
THAT OUR CURRENT FOOD ASSISTANCE TO LEBANON IS CHANNELED 
THROUGH PRIVATE VOLUNTARY ORGANIZATIONS BECAUSE OF THE 
CENTRAL GOVERNMENT'S WEAKNESSES.  HE UNDERLINED THAT THE 
PVO'S SEEM THE BEST VEHICLES TO ENSURE THAT OUR 
ASSISTANCE REACHES NEEDY LEBANESE, REGARDLESS OF CON- 
FESSION.  AMONG THE QUESTIONS DEBATED IN CONSIDERING 
WHEAT FOR LEBANON, THE DCM EXPLAINED, WERE EQUITABLE 
DISTRIBUTION, BREAD SMUGGLING OR "EXPORTS" TO NEIGHBORING 
COUNTRIES AND REFORM OF THE GOL'S BREAD SUBSIDY.  DCM 
MADE IT CLEAR THAT BY "EQUITABLE DISTRIBUTION" WE MEAN 
HONEST DISTRIBUTION THROUGHOUT THE COUNTRY WITHOUT 
REGARD TO CONFESSION AND WITHOUT MILITIA INVOLVEMENT. 
 
¶8.  SALLOUKH RESPONDED THAT THE SUBSIDY MIGHT BE 
REDUCED, BUT SAID THAT THIS WOULD HAVE TO BE DONE 
"GRADUALLY," GIVEN THE CURRENT PUBLIC PRESSURE OVER 
SALARY INCREASES AND THE PERCEIVED HIGH COST OF LIVING. 
THIS DECISION IS "POLITICAL," HE DECLARED.  DCM REPLIED 
THAT WE ESTIMATED THE BREAD SUBSIDY TO COST THE GOL 
USD 38.7 MILLION PER YEAR IN FOREIGN EXCHANGE AND 
STRESSED OUR WORLDWIDE POLICY INTEREST IN REFORMS DIRECTE 
TOWARD MORE OPEN MARKET-ORIENTED ECONOMIC POLICIES. 
 
¶9.  REGARDING BREAD EXPORTS, SALLOUKH CLAIMED 
THAT THIS PROBLEM IS "NOT AS DANGEROUS AS IMAGINED," 
HE DID NOT DENY THAT BREAD IS BEING SENT ABROAD. 
"FRANKLY SPEAKING," SALLOUKH SAID HE IS AWARE THAT THERE 
ARE TAXI DRIVERS DRIVING FROM LEBANON TO DAMASCUS WITH 
5 KILOS OF LEBANESE BREAD WHO MAY GIVE ONE KILO AT THE 
BORDER TO SYRIAN OFFICIALS TO FACILITATE CROSSING. 
HE ALSO THOUGHT SOME LEBANESE BREAD GOES TO CYPRUS, 
BUT IS ONLY CONSUMED BY LEBANESE RESIDENT THERE, "A 
SMALL NUMBER."  REGARDING SMUGGLING TO ISRAEL, SALLOUKH 
THOUGHT IT NON-EXISTENT.  IN TOTALY, SALLOUKH ESTIMATED 
THE TOTAL BREAD DIVERTED FROM LEBANON AT NO MORE THAN 
5, AND PROBABLY CLOSER TO 1 PERCENT OF THETOTAL 
PRODUCED, NOT THE 25 PERCENT SOMETIMES CITED.  WE 
LISTENED BUT DID NOT AGREE, INDICATING INTEREST IN ANY 
INFORMATION SALLOUKH COULD PROVIDE IN THAT REGARD. 
 
¶10. ON DISTRIBUTION, SALLOUKH THOUGHT MOST AID TO 
LEBANON IS NOT HANDLED AS IT SHOULD BE.  HE SAID THAT 
SAUDI ASSISTANCE, FOR EXAMPLE, HAD BEEN HANDED-OUT 
LOCALLY, REGARDLESS OF INCOME LEVEL; ALL 23 FAMILIES 
IN HIS APARTMENT BUILDING WERE OFFERED KING FAHD FOOD 
PACKAGES.  WITH THE EXCEPTION OF HIS FAMILY AND TWO 
RELATIVES LIVING IN THE SAME BUILDING, THE TWENTY 
OTHERS ACCEPTED THE AID, THOUGH NOT IN NEED.  SALLOUKH 
BELIEVED MALDISTRIBUTION EXISTS IN OTHER FOREIGN 
ASSISTANCE PROGRAMS TO LEBANON AND FOR THAT MATTER 
THROUGHOUT THE WORLD.  SALLOUKH CONTENDED THAT COMPARED 
TO OTHER COUNTRIES RECEIVING U.S. WHEAT, DISTRIBUTION 
AND SMUGGLING WOULD BE NO WORSE IF NOT SLIGHTLY LESS 
OF A PROBLEM IN LEBANON. 
 
¶11.  THE DCM STATED THAT THE USG WAS NOT ONLY 
CONSIDERING GIVING LEBANON WHEAT, BUT IS ALSO VERY 
INTERESTED IN SELLING IT AS WELL.  HE POINTED TO 
OUR STRONG DESIRE TO COMPETE FOR GOL WHEAT TENDERS 
UNDER OUR EEP PROGRAM AND THE NEED TO GIVE AMPLE 
NOTICE TO U.S. EXPORTERS, CITING THE MOST RECENT 
EXPERIENCE IN REFTEL.  (GOL INFORMED US--DELIBERATELY 
LATE--THAT IT HAD OPENED THE TENDER ON MARCH 28, WITH 
A DEADLINE OF MARCH 30.)  SALLOUKH SAID HE WOULD 
RAISE THIS ISSUE WITH MINISTER QASSIR IN THEIR UPCOMING 
MEETING. 
 
¶12.  COMMENT:  WE BELIEVE SALLOUKH IS SINCERE IN HIS 
PLEDGE TO RAISE THE WHEAT TENDER ISSUE WITH QASSIR. 
WE WOULD, HOWEVER, BE PLEASANTLY SURPRISED IF THIS 
RESULTS IN A REAL OPENING FOR U.S. EXPORTERS, GIVEN 
ALLEGATIONS  THAT QASSIR  HIMSELF BENEFITS 
FROM THE TRANSACTION AS IT OCCURS.  END COMMENT. 
 
¶13.  BIO DATA:  AMBASSADOR SALLOUKH, TWENTY-EIGHT YEAR 
VETERAN OF THE MFA, APPEARS TO BE IN HIS EARLY TO 
MID FIFTIES.  HE IS A SHI'ITE MUSLIM FROM BETWEEN 
ALEY AND SOUK-EL-GHARB IN THE SHOUF MOUNTAINS.  ALTHOUGH 
HE HAS SERVED THREE MONTHS AS MFA ECONOMIC AFFAIRS 
DIRECTOR, HE ALREADY SEEMS MORE ON TOP OF THE JOB THAN 
HIS PREDECESSOR GEORGE KHOURY, WHO HAD BEEN THERE 
ONE AND A HALF YEARS AND IS NOW OFF TO SANAA.  MOST OF 
SALLOUKH'S YEARS ABROAD HAVE BEEN SPENT IN THE AFRICAN 
CONTINENT:  2 YEARS IN LIBERIA, 7 IN SIERRA LEONE, 9 
IN NIGERIA AND 4 IN ALGIERS.  FOR THE SAKE OF HIS 
CHILDREN'S EDUCATION, MANY OF THOSE YEARS HAVE BEEN 
SPENT WITHOUT HIS WIFE, DAUGHTER AND 2 SONS WHO 
REMAINED IN LEBANON.  SALLOUKH SAYS HE HAS KNOWN 
MANY AMERICAN AMBASSADORS, MOST RECENTLY AMBASSADOR 
JOHNSTONE. 
 
KELLY