VZCZCXRO9688
PP RUEHGR
DE RUEHPO #0175/01 0821843
ZNR UUUUU ZZH
P 231843Z MAR 06
FM AMEMBASSY PARAMARIBO
TO RUEHC/SECSTATE WASHDC PRIORITY 8182
INFO RUCNCOM/EC CARICOM COLLECTIVE
RUEHAO/AMCONSUL CURACAO 0997
RUEHCV/AMEMBASSY CARACAS 1537
RHEBAAA/DOE WASHDC

UNCLAS SECTION 01 OF 02 PARAMARIBO 000175 
 
SIPDIS 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR WHA/CAR, WHA/EPSC, EB/ESC/IEC/ENR, INR 
 
E.O. 12958: N/A 
TAGS: EPET ENRG ETRD ECON EINV KTDB PREL PBTS SP
NS 
SUBJECT: UPDATE ON SURINAME'S PLAN TO IMPLEMENT PETROCARIBE 
AGREEMENT 
 
REF: A) 05 PARAMARIBO 602 
 
     B) PARAMARIBO 141 
 
PARAMARIBO 00000175  001.2 OF 002 
 
 
¶1. (SBU) Emphatic recent public remarks of Natural Resource 
Minister Gregory Rusland that everything is in place for 
Suriname to implement its PetroCaribe agreement 
notwithstanding (see ref A), there remains significant 
opposition among important Government of Suriname (GOS) 
players.  According to the Permanent Secretary (Perm Sec) 
for Energy, Mining and Water Supply, Jainoel H. Abdul, the 
Finance Minister is uncomfortable with the increased debt 
levels resulting from PetroCaribe's financing scheme, and 
the state oil company's director has serious reservations 
about the role his enterprise is expected to play.  Asked 
to explain the decision to move forward despite these 
reservations, Perm Sec Abdul cites a wish to diversify 
supply sources and cites a scheme to invest short-term 
savings to both meet the Venezuelan loans and reduce 
mortgage rates for Surinamers. 
 
¶2.  (U) Recent statements made by Minister Rusland have 
given the impression that Suriname is ready to move forward 
with PetroCaribe immediately.  A March 2 article in 
newspaper "Dagblad Suriname," for example, reported on 
Minister Rusland's remarks that once technical requirements 
for the import of the oil are completed, only the 
administrative steps remain. 
 
¶3. (SBU) In a meeting to explore Suriname's expectations 
regarding PetroCaribe, EconOff asked why the government 
would proceed with the agreement in spite of its serious 
concerns.  Mr. Abdul replied that it is necessary for 
Suriname to find cheaper, alternate sources of oil. He 
stressed that Suriname did not want to eliminate current 
international commercial sources of oil, but merely reduce 
dependence on a small pool of suppliers. The government 
envisions importing 5,000 barrels of oil from Venezuela per 
day, or 1,825,000 barrels a year, about one-third of 
Suriname's total yearly imports. 
 
¶4. (SBU) When asked to explain how Suriname would avoid 
indebtedness inherent in PetroCaribe's long-term financing 
scheme, Mr. Abdul explained Suriname's plans.  The GOS 
proposes to sell PetroCaribe oil to the state electricity 
company (EBS) and Suralco at fair market prices and 
reinvest the returns at an anticipated 7 percent return. 
Given the two-year interest grace period on Venezuelan 
financing, the government predicts it can not only service 
the loan from the proceeds but also net a further $2.5 
million USD per year.  This money would be made available 
for commercial banks to offer 7 percent mortgages to 
address the country's low-income housing shortage.  (Note: 
current commercial mortgages average 14 to 15 percent. End 
note.) 
 
¶5. (SBU) Mr. Abdul admitted that these rosy plans face 
several logistical challenges.  Currently 63% of the state 
oil company's (Staatsolie) domestic product is supplied to 
Suralco.  As a reliable customer that always pays its 
bills, Suralco purchased $80.5 million USD worth of 
domestic oil in 2004 from Staatsolie. Under the proposed 
PetroCaribe agreement, Staatsolie would simply be used as a 
storage and transport facility, rather than 
producer/supplier, seriously undermining its business model 
and explaining its lack of enthusiasm for the plan.  As for 
the sale of oil to EBS, Staatsolie supplies a mere 4% of 
its output to the utility company which is on the verge of 
bankruptcy and is currently receiving government-subsidized 
oil to be able to continue its operations (see ref B). It 
is not likely to be operating in the black in the 
foreseeable future.  Neither is it certain that low incomer 
Surinamese will have the wherewithal to take advantage of 
the lower interest rate mortgages without an increase in 
their overall purchasing power. 
 
¶6. (SBU) EconOff asked if it would be more helpful to 
Suriname if President Chavez simply discounted his oil 
rather than create this elaborate financing scheme; Mr. 
Abdul replied that the Venezuelan president cannot offer 
discounts per OPEC rules. There are two external events, 
which may compel Suriname to formulate a near-term 
consensus on the PetroCaribe agreement: 1) a CARICOM 
meeting next month in Jamaica to ascertain how PetroCaribe 
is being implemented among member states and 2) pressure to 
 
PARAMARIBO 00000175  002.2 OF 002 
 
 
conclude an implementation agreement (third phase of 
PetroCaribe agreement) between Staatsolie and Venezuela's 
state oil company PDVSA, which will force Staatsolie to 
publicly voice its concerns. 
 
Comment 
------- 
 
¶7. (SBU) It is clear that among fiscal conservatives within 
the Surinamese government and the, to date, well-run state 
oil company, there are serious reservations about the long- 
range negative impacts PetroCaribe oil will have on the 
economy. There has also been scant thought given to what 
view Suriname might eventually have of this arrangement 
if/when Suriname becomes more than a marginal oil exporting 
country. 
 
BARNES