VZCZCXYZ0002
RR RUEHWEB

DE RUEHMU #2453/01 3072026
ZNR UUUUU ZZH
R 032026Z NOV 06
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 8126
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEHBO/AMEMBASSY BOGOTA 1472
RUEHCV/AMEMBASSY CARACAS 0803
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEHNSC/NSC WASHINGTON DC

UNCLAS MANAGUA 002453 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR WHA/CEN, WHA/AND, WHA/EPSC, AND EB/ESC/IEC 
 
E.O. 12958: N/A 
TAGS: EPET ECON PGOV EINV NU
SUBJECT: VENEZUELAN DIESEL SALES - NOT MUCH BEEF 
 
REF: CARACAS 3257 
 
¶1. (SBU) Summary: As of October 24, Venezuela delivered two 
shipments of diesel fuel to Nicaragua.  The first delivery of 
84,000 gallons eventually went to mayors for local 
distribution and sale.  Five Managua bus cooperatives agreed 
to buy the second phantom shipment of 800,000 gallons in 
exchange for promises of fleet and depot modernization. 
Neither sale affected local gas prices or brought any 
immediate benefit to Nicaraguans.  Alternativa Bolivariana 
Petroleos de Nicaragua (Albanic) VP and Managua Mayor 
Dionisio Marenco spearheaded the operation.  Marenco 
announced many grandiose plans for Albanic's share of the 
sale proceeds, including extensive social programs, a liquid 
natural gas plant and a development bank.  So far, revenue 
from the diesel sales has not matched these plans; the effort 
has come off as a botched attempt to pump up the FSLN before 
the elections.  End Summary. 
 
------------------------------ 
What has and has not been sent 
------------------------------ 
¶2. (SBU) On October 7, after almost a year of hype, Venezuela 
delivered its first shipment of 84,000 gallons of diesel to 
Nicaragua's Rama port on the Atlantic coast.  It arrived with 
much fanfare and celebration, but was significantly less than 
the 250,000 gallons promised.  A lack of storage facilities 
resulted in the diesel being loaded onto 11 tanker trucks and 
driven to Managua where it sat for a week.  A second shipment 
of 800,000 gallons of diesel reportedly arrived on October 24 
and was stored in tanks near Puerto Sandino on the Pacific 
coast.  However, National Ports Director  Alejandro Fiallos 
repeatedly denied that this quantity of fuel had arrived via 
any Nicaraguan port.  October 26 press reports claimed the 
fuel came directly into Petroleos de Nicaragua's (Petronic ) 
the national oil company) port and storage tanks, but sources 
inside the company deny this.  To date, no one has seen or 
claimed to have received this diesel shipment.  A promised 
shipment of 350,000 barrels of bunker fuel for electricity 
generators was "cancelled" on October 10 because of the  lack 
of storage and transportation facilitates.  There is no set 
date or announcement of a third shipment of diesel. 
(Comment: This lack of consistency in the shipments makes the 
Venezuelan fuel an unreliable alternative for consumers.  End 
Comment.) 
 
----------------------------- 
Who is running the operation? 
----------------------------- 
¶3. (U) An entity known as Alternativa Bolivariana Petroleos 
de Nicaragua (Albanic) handles all fuel deliveries and sales. 
 Albanic was created by an agreement between the Association 
of Municipalities of Nicaragua (Amunic ) made up mostly of 
FSLN mayors) and Petroleos de Venezuela's (PDVSA) affiliate 
PetroCaribe.  Managua's FSLN mayor and VP of Albanic Dionisio 
Marenco spearheaded the delivery and sales efforts.  So far, 
Albanic has no operating capital or offices, intending to use 
revenues from the sale of the fuel to set up formal 
operations.  Albanic will pay PetroCaribe 60% of the sales 
revenue at the time of the sale and the other 40% in 25 
years.  During these 25 years, the 40% residual will be used 
for social programs run by Albanic. 
 
----------------- 
So who bought it? 
----------------- 
¶4. (U) The first shipment of 84,000 gallons of diesel was 
originally intended for the bus transportation union, on the 
condition that it lower bus fares from 3 cordobas to 2.50 
(the current exchange rate is 17.90 cordobas to one USD). 
The union turned down the offer, saying it would only cover 3 
days of fuel needs and therefore did not justify lowering the 
fares.  (Note: The bus transportation union reports 
consumption at 600,000 gallons a month.  End note.)  Marenco 
then tried to sell the diesel to ENEL (the state-owned 
electricity generating company).  But ENEL President Frank 
Kelly said a quick purchase could not take place as the fuel 
had to be tested for quality and ENEL had to honor existing 
longer-term contracts with Esso restricting outside fuel 
purchases.  Kelly added that the small quantity of diesel 
would only produce 40 hours of electricity, about 10 days 
worth of peak-hour operations. 
¶5. (SBU) Finally, late on October 11, Marenco sold the 84,000 
gallons of diesel to several local municipalities, including 
Matagalpa, Masaya, and Jinotega.  Although the fuel was 
originally offered for USD 200,000, Albanic earned USD 
225,000 from the sale.  Thus, the mayors paid 12.93 cordobas 
per liter for fuel that it resold to local gasoline stations 
in the municipalities.  The average price of diesel on 
October 15 in Nicaragua was 12.95 cordobas per liter. 
(Comment: After taxes, transportation costs and the mark-up 
are added, the final sale price of the diesel was not any 
different from market price.  Falling international oil 
prices also limited Albanic's ability to offer a competitive 
price.  End comment.)  The whole drama was covered 
extensively by the Nicaraguan press. 
 
¶6. (SBU) In contrast, the second alleged shipment arrived 
with almost no press coverage and shrouded in mystery. 
Marenco claims to have negotiated with Petronic for the 
purchase, storage, and resale of diesel from 
PetroCaribe/PDVSA.  A source inside Petronic, however, stated 
that while there were talks between the two companies, 
Petronic has no deal with Albanic and is not storing any fuel 
for them.  The only headline the second shipment received was 
on October 27 when five major Managua bus transportation 
cooperatives signed an agreement to buy the diesel and reduce 
bus fares by 50 cents.  The deal did not receive support from 
the bus transportation union and no one disclosed the sale 
price.  According to the Managua Transportation Regulator 
Francisco Alvarado, an FSLN member, the price was high enough 
to allow Albanic to replace the fleet of buses in Managua, 
improve service and modernize the terminals.  Since this 
announcement, there has been no mention of Albanic or the 
diesel anywhere in the press.  (Comment: Albanic's 
consistency issues limits its ability to establish the 
permanent contracts necessary to "get business going."  End 
comment.) 
 
--------------- 
Albanic,s Plans 
--------------- 
¶7. (U) Long a trumpeter of the "positive" role Venezuelan oil 
could play in Nicaragua, Daniel Ortega did not try to hide 
his role in Albanic's efforts when the first shipment arrived 
on October 7.  Defying security regulations, Ortega, Marenco, 
and 200 supporters entered Puerto Rama to "receive the fuel." 
 As the sale of the diesel stalled, Ortega disappeared from 
this story, leaving Marenco as the front man.  Mayors who are 
members of Albanic, and purchased the first shipment of 
diesel, initially participated in the PR effort by explaining 
how the diesel would make a difference in their 
municipalities.  After the October 11 sale, however, there 
was little talk of who benefited from the "cheaper" fuel and 
how. 
 
¶8. (U) In the interim between the two shipments, Marenco 
announced several grandiose plans for the use of Albanic's 
40% share of the income.  Social improvement plans included 
fixing Managua roads and parks, building houses and artisinal 
wells, subsidizing the "Clean Neighborhood" campaign, 
offering free clinics and distributing free medicine, and 
creating a scholarship fund for young people from 
disadvantaged neighborhoods. 
 
¶9. (U) Marenco also announced ambitious "development" 
projects such as building a liquid natural gas plant as part 
of a larger project to include receiving terminals on the 
Atlantic and Pacific coasts.  Marenco claimed Albanic would 
open its own gas stations, since a station was forced to 
close because it stored Albanic diesel without permission 
from its franchise owner.  Albanic's shares of the oil sales 
were also supposed to provide the USD 600 million in capital 
needed to create a development bank (Bandes) that would 
service all of Central America.  Bandes would replace the 
Japanese Government in financing the new bus fleet Albanic 
promised the transportation cooperatives. 
 
------- 
Comment 
------- 
10 (SBU) At this stage, Albanic has only earned USD 90,000 
from the first shipment and, if it exists and was sold at the 
same price, USD 857,000 from the second shipment.  These 
revenues are far from the USD 600 million needed to 
capitalize the development bank, let alone engage in all of 
the other business projects.  Marenco's promises require 
large and consistent shipments of fuel to establish a 
customer base and cash flow, something not happening now. 
The shipments have not affected fuel prices in Nicaragua.  As 
stated in para 5, the first shipment was small and sold at a 
price that was no lower than regular shipments.  The secrecy 
surrounding the arrival, location, and sale price of the 
alleged second shipment suggests that it would result in no 
real savings either.  The reduced bus fares and the promised 
fleet modernization were merely publicity ploys by Marenco to 
support an image that Albanic and the Venezuelan fuel are 
really going to help average Nicaraguans.  It is clear at 
this stage that Albanic and its activities are designed more 
to promote the FSLN in the final days before the election, 
than to help Nicaraguans or engage in any productive social 
activities.  The silence from Marenco and Albanic since the 
second shipment was "sold," strongly indicates that it has 
been a failed one at that.  End Comment. 
TRIVELLI