VZCZCXYZ0004
PP RUEHWEB

DE RUEHLP #2056 2122053
ZNR UUUUU ZZH
P 312053Z JUL 06
FM AMEMBASSY LA PAZ
TO RUEHC/SECSTATE WASHDC PRIORITY 0096
INFO RUEHAC/AMEMBASSY ASUNCION 6020
RUEHBO/AMEMBASSY BOGOTA 3338
RUEHBR/AMEMBASSY BRASILIA 7189
RUEHBU/AMEMBASSY BUENOS AIRES 4452
RUEHCV/AMEMBASSY CARACAS 1727
RUEHPE/AMEMBASSY LIMA 1742
RUEHMN/AMEMBASSY MONTEVIDEO 3940
RUEHQT/AMEMBASSY QUITO 4358
RUEHSG/AMEMBASSY SANTIAGO 8920
RHEHNSC/NSC WASHINGTON DC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS LA PAZ 002056 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR WHA/AND 
TREASURY FOR SGOOCH 
ENERGY FOR CDAY AND SLADISLAW 
 
E.O. 12958: N/A 
TAGS: ECON EINV ENRG EPET BL
SUBJECT: HYDROCARBONS REGULATOR STANDS FIRM AGAINST GOB 
 
REF: LA PAZ 1842 
 
¶1. (SBU) Summary: Bolivia's hydrocarbons regulator has 
accused Bolivia's state oil company, YPFB, of entering into 
contracts that are against state interests -- charges 
ironically similar to those of the GOB against Enron and 
former President Gonzalo Sanchez de Lozada.  The GOB 
reportedly tried to pressure the regulator into retracting 
its resolution, but the regulator ratified its decision and 
publicly protested the GOB's pressure tactics.  The 
Hydrocarbons Minister has delegated the case to the Public 
Ministry for investigation.  End summary. 
 
¶2. (U) On July 21, the independent hydrocarbons regulator 
denied a permit to Iberoamerica Trading for the export of 
2,000 barrels per day of crude oil to Univen Petroquimica in 
Brazil.  Iberoamerica had entered into a contract with 
Bolivia's state oil company, YPFB, to purchase crude oil that 
would have been sold to Univen at below market rates.  In 
exchange, Univen would have refined the crude oil and sold 
the extracted diesel to YPFB at below market rates.  However, 
based on the regulator's analysis, Bolivia would have lost 
several million dollars on the deal.  Thus, the regulator 
denied the permit as contrary to national interests. 
Ironically, these charges are similar to those made by the 
GOB against Enron and former President Gonzalo Sanchez de 
Lozada (reftel). 
 
¶3. (U) On July 26, the President of YPFB and the Minister of 
Hydrocarbons convened a press conference and stated that the 
regulator had mis-calculated.  On the 27th, the regulator 
reaffirmed its decision and told the press the GOB had tried 
to pressure it into admitting that it had erred.  Despite the 
pressures, the regulator stuck to its guns and responded that 
it would not change its determination based on intimidation; 
however, it explained that Iberoamerica Trading was free to 
appeal its decision within the regulatory system in accord 
with established procedures.  (Note: According to the 1994 
regulatory law, appeals against sector regulator decisions go 
first to the sector regulator, then to the general regulator, 
then finally to the Supreme Court.  End note.)  The 
Hydrocarbons Minister has turned the case over to the public 
prosecutor for investigation.  Opposition leaders are calling 
for the resignation of YPFB President Jorge Alvarado. 
 
¶4. (SBU) Comment:  The tables are turned as the GOB is 
accused of signing hydrocarbons contracts that are harmful to 
the state.  Faced with such accusations, the GOB resorted to 
pressuring the independent regulator, which the government 
had already vowed to eliminate in its national development 
plan.  However, to the GOB's credit, forced to chose between 
its stated goal of combating corruption and protecting its 
brainchild -- a revamped YPFB -- it decided to investigate 
the corruption accusations against the state oil company.  On 
the other hand, industry contacts worry that the 
investigation may be more of a show the government employs to 
save face than an impartial fact-finding process.  End 
comment. 
GREENLEE