VZCZCXRO0998
RR RUEHAG RUEHBC RUEHDE RUEHDF RUEHIK RUEHKUK RUEHLZ RUEHROV RUEHSR
DE RUEHLB #0133/01 0331559
ZNR UUUUU ZZH
R 021559Z FEB 09
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC 4121
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RHEHAAA/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 02 BEIRUT 000133 
 
SENSITIVE 
 
SIPDIS 
 
STATE FOR NEA/ELA 
STATE PASS USTR FRANCESCKI 
STATE PASS USAID BEVER/LAUDATO/SCOTT 
TREASURY FOR PARODI/BLEIWEISS/CORREA 
USDOC FOR 4520/ITA/MAC/ONE 
NSC FOR ABRAMS/RAMCHAND/YERGER/MCDERMOTT 
 
E.O. 12958: N/A 
TAGS: ECON EFIN PREL PGOV LE
SUBJECT: LEBANON: LEBANON MEETS USG BENCHMARK FOR PARIS III SUPPORT 
(ECONOMIC WEEK IN REVIEW, JANUARY 26 - FEBRUARY 1, 2009) 
 
CONTENTS 
-------- 
 
-- LEBANON MEETS USG BENCHMARK FOR BUDGETARY SUPPORT 
-- U.S. AND FRENCH PRESSURE SAFADI INTO ACTION ON WTO 
-- CABINET REDUCES MOBILE PHONE RATES 
-- IMF TEAM TO VISIT BEIRUT FOR EPCA REVIEW 
-- EDL CHAIRMAN: POLITICAL BACKING CRUCIAL TO SOLVING ELECTRICITY 
PROBLEMS 
-- LEBANON SEEKS USG BACKING TO ATTEND G-20 FORUM 
 
CABINET SETS GAS EXCISE FLOOR: 
MEETS USG BENCHMARK FOR BUDGETARY SUPPORT 
------------------------------ 
 
¶1. (SBU)  On January 23, the cabinet passed a gas excise floor of LL 
470 (approximately 31 cents) per liter, uncapping the price of gas 
at the pump and tying it to international oil prices, senior staffer 
at the Ministry of Finance (MOF) Zeina Kassem told EconOff January 
¶29.  In line with this decision, the Ministry of Energy and Water 
(which issues weekly prices for oil derivatives every Wednesday) 
raised the price of 20 liters of gas at the station from about $15.7 
to $16 starting January 29, due to the rise in international oil 
prices. 
 
¶2. (SBU) By setting a gas excise floor, the cabinet met one of the 
USG benchmarks for the disbursement budgetary support pledged at 
Paris III, as the gas excise floor exceeds the USG benchmark of LL 
300/liter.  MOF senior staffer Nadine Yazbek told us the MOF would 
like to use the $50 million it is scheduled to receive from the USG 
for meeting the benchmark to pay off Eurobonds held by the Central 
Bank of Lebanon (CBL).  As of September 2008, the CBL held $150 
million in Eurobonds maturing between May and August 2009, she said. 
 
 
U.S. AND FRENCH PRESSURE 
SAFADI INTO ACTION ON WTO 
-------------------- 
 
¶3. (U) On January 29, Lama Oueijan, senior advisor at the Ministry 
of Economy and Trade (MOET), told EconOff and visiting NEA/ELA 
economic desk officer Katherine Allen that USTR had contacted the 
MOET, saying it would support a new working party meeting for 
Lebanon late-February or early-March if it saw progress on WTO 
legislation.  Following this call, said Oueijan, Minister of Economy 
and Trade Mohammad Safadi met his French counterpart Christine 
Lagarde on the sidelines of a conference on Lebanon's role in the 
Mediterranean region, organized by the Arab Institute in Paris, in 
collaboration with the Safadi Foundation.  Oueijan said Lagarde 
pressured Safadi to move WTO-related legislation forward, which led 
him to contact Parliament Speaker Berri, asking him help get 
parliament to vote in the proposed law on international trade and 
licensing before the end of February.  Safadi will also work with 
the cabinet to pass a decree reviewing the fees for commercial 
registration (ad valorem fees), Oueijan claimed. 
 
CABINET REDUCES 
MOBILE PHONE RATES 
------------------- 
 
¶4. (U) During its January 29 session, cabinet delivered on its 
promise of lowering mobile phone tariff rates for both prepaid and 
postpaid lines.  Effective March 1, the monthly fee for postpaid 
lines will be lowered to $15 from $25, and the rate per minute to 11 
cents from 13 cents.  On April 1, the duration of prepaid lines will 
be extended to three months from one month, and the rate per minute 
cut to 36 cents.  The reduction in rates comes as the Ministry of 
Telecommunications is in the process of expanding the mobile network 
and expects to be able to add 800,000 new lines by the end of April. 
 Ministry of Telecom advisor Gilbert Najjar told Allen and EconOff 
January 30 that those lines should result in a significant increase 
in mobile subscriptions, which will more than compensate the GOL for 
the lower rates. 
 
IMF TEAM TO VISIT BEIRUT 
FOR EPCA REVIEW 
-------------------- 
 
¶5. (SBU) An IMF team is expected in Beirut on February 19 to conduct 
 
BEIRUT 00000133  002 OF 002 
 
 
Article IV consultations and an Emergency Post-Conflict Assistance 
(EPCA) review, Director General of the Ministry of Finance (MOF) 
Alain Bifani told us on January 29.  The team will assess 
macroeconomic, monetary, and financial indicators.  Last year, 
Lebanon signed its second EPCA agreement with the IMF. 
 
EDL CHAIRMAN: POLITICAL BACKING 
CRUCIAL TO SOLVING ELECTRICITY PROBLEMS 
------------ 
 
¶6. (SBU) On January 29, the chairman of national power utility 
Electricite du Liban (EDL), Kamal Hayek, told us EDL's problems 
cannot be fixed without political support.  He said EDL is the only 
large public entity with no political patron, resulting in chronic 
deficits, massive staff shortages, outdated equipment, and a 
shortage of production capacity. 
 
¶7. (SBU) Hayek believed the GOL should take action simultaneously on 
three fronts:  corporatization, public and private investment in new 
power plants, and tariff restructuring.  While a tariff revision 
would provide expenditure savings of about $200 million per year, 
the idea of a tariff revision was rejected in the January 23 cabinet 
session, a senior MOF official told us separately.  Hayek also 
stressed the need for EDL to acquire additional power to meet 
increased demand.  He said he will once again visit Cairo the week 
of February 2 to discuss the purchase of electricity from Egypt, 
but, noting negotiations have been going on since last summer, Hayek 
doubted they would ever succeed without political backing from the 
PM. 
 
LEBANON SEEKS USG BACKING TO 
ATTEND G-20 FORUM 
------------------- 
 
¶8. (SBU) During a meeting with NEA/ELA regional economic desk 
officer Katherine Allen on January 28, Chairman of the Banking 
Control Commission (BCC) Walid Alameddine raised the possibility of 
U.S. backing for Lebanon's participation at the next G-20 meeting in 
April 2009.  He said that according to the White House website, G-20 
countries opened the Financial Stability Forum to emerging countries 
during their November 15-16, 2008 meeting.  Alameddine said he sent 
a letter to PM Siniora asking him to seek U.S. backing, and noted 
that while Siniora showed interest in having Lebanon play a greater 
role, the PM will follow-up on this issue with the Saudis. 
 
SISON