VZCZCXYZ0006
OO RUEHWEB

DE RUEHQT #1424 1721607
ZNR UUUUU ZZH
O 211607Z JUN 07
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7257
INFO RUEHBO/AMEMBASSY BOGOTA PRIORITY 6733
RUEHCV/AMEMBASSY CARACAS PRIORITY 2590
RUEHLP/AMEMBASSY LA PAZ JUN 0634
RUEHPE/AMEMBASSY LIMA PRIORITY 1737
RUEHBR/AMEMBASSY BRASILIA PRIORITY 3758
RUEHGL/AMCONSUL GUAYAQUIL PRIORITY 2482
RUEHSO/AMCONSUL SAO PAULO PRIORITY 0193
RUEHRI/AMCONSUL RIO DE JANEIRO PRIORITY 0045
RHMFIUU/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY

UNCLAS QUITO 001424 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR WHA/EPSC FAITH CORNEILLE 
TREASURY FOR SGOOCH 
 
E.O. 12958: N/A 
TAGS: EPET ECON PGOV EC
SUBJECT:  CONGRESS REJECTS PRESIDENT'S PETROLEUM BILL 
 
REFTEL: QUITO 1422 
 
¶1.  (SBU) Summary:  The Correa administration's bill to sanction 
trafficking in contraband petroleum and its derivatives was rejected 
June 19 by Congress on the grounds that it was too broad, the 
penalties were too heavy, it referred to more than one issue, and 
certain parts of it were unconstitutional.  Congress returned the 
law to the President suggesting revisions.  End Summary. 
 
¶2.  (U) The Correa administration presented Congress with a measure 
to stop the rampant illegal trade in petroleum derivatives.  Because 
derivatives are highly subsidized in Ecuador, contraband derivatives 
are often smuggled to Peru and Colombia.  The issue is also 
problematic in the marine sector, where fishing boats sell 
contraband subsidized diesel at sea. 
 
¶3.  (SBU) The bill would have allowed the Ministry of Energy, the 
Director for Hydrocarbons, or a designated party to essentially fine 
and suspend operations of anyone they determined was permitting 
trafficking, intending to traffic, or actually trafficking in 
contraband petroleum or its derivatives.  It specifically denied 
recourse to an injunction ("recurso amparo") or administrative 
review for those sanctioned.  A U.S. oil company expressed concern 
that the bill provided for fines and payment of damages for 
unspecified contract violations, which they feared could be used 
against them or other foreign oil companies.  Fines for many 
violations could have reached up to approximately USD 500,000. 
 
¶4.  (SBU) COMMENT:  This is the third measure that Correa has 
supported that has been rejected or substantially modified by 
Congress in the past two weeks (see reftel on the Santa Elena 
province proposal, septel on the banking law).  While the version 
Correa presented was not acceptable to Congress, it also contained 
provisions to promote the development of natural gas fields. 
Congress might also support more limited measures to combat 
contraband.  A new, more focused law could gain passage.  END 
COMMENT. 
 
JEWELL