Facing massive power shortage, Lebanon agrees to buy Egyptian electricity; political infighting slows reform

C O N F I D E N T I A L SECTION 01 OF 02 BEIRUT 001304 
 
SIPDIS 
 
DEPT FOR NEA/FO, NEA/ELA 
P FOR DRUSSELL AND RRANGASWAMY 
ALSO FOR IO ACTING A/S HOOK AND PDAS WARLICK 
USUN FOR KHALILZAD/WOLFF/SCHEDLBAUER 
NSC FOR ABRAMS/RAMCHAND/YERGER/MCDERMOTT 
 
E.O. 12958: DECL: 09/04/2018 
TAGS: ECON, ENRG, EFIN, PREL, PGOV, EG, JO, LE 
SUBJECT: FACING MASSIVE POWER SHORTAGE, LEBANON AGREES TO 
BUY EGYPTIAN ELECTRICITY; POLITICAL INFIGHTING SLOWS REFORM 
 
REF: BEIRUT 1199 
 
Classified By: Ambassador Michele J. Sison for reasons 1.4 
(b) and (d). 
 
SUMMARY 
------- 
 
1. (C) Facing massive electricity shortages that have left 
residents of some regions without power twelve hours per day, 
Lebanon signed an agreement for the purchase of surplus 
electricity from Egypt, implementing one of the measures 
pledged in the new Lebanese cabinet's ministerial policy 
statement.  Nonetheless, the GOL still needs to negotiate the 
price, to lower the "exorbitant" rates the Egyptian 
authorities are demanding, according to Lebanese Energy 
Minister Alain Tabourian. 
 
2. (C) In recent months, residents have taken to the streets 
in several regions of Lebanon, burning tires and blocking 
roads to protest power outages.  Lebanon clearly needs the 
electricity, but with losses at state-owned Electricite du 
Liban (EDL) topping 2 billion dollars per year, the GOL is 
desperate to secure it at preferential rates.  Meanwhile, 
there appears to be little or no coordination between 
Tabourian, a March 8 minister, and PM Siniora, as personal 
squabbles get in the way of successful energy management. 
End summary. 
 
3. (U) On August 27, Lebanese, Jordanian and Syrian Energy 
Ministers, Alain Tabourian, Khaldoun Katishat and Ahmad 
Al-Ali respectively, signed an agreement in Jordan with 
Egyptian Energy Minister Hassan Younis for the purchase of 
450 megawatts of surplus Egyptian electricity, to be divided 
equally among the three countries.  Tabourian also succeeded 
in getting the Jordanian and Syrian counterparts to agree to 
divert any surplus from their share of Egyptian electricity 
to Lebanon. 
 
MASSIVE SHORTAGES CAUSE UNREST 
------------------------------ 
 
4. (U) Tabourian told the Embassy that demand for electricity 
this summer has reached 2200 megawatts, while production is 
only 1400 megawatts, leaving a huge shortage of 800 
megawatts.  The poor condition of Lebanese power plants and 
the need for maintenance has forced national power utility 
Electricite du Liban (EDL) to impose severe power rationing 
all over Lebanon, exceeding 12 hours out of 24 in some areas. 
 As a result, people have taken to the streets in several 
regions burning tires and blocking roads to protest against 
severe power rationing. 
 
UNSUSTAINABLE DRAIN ON THE STATE COFFERS 
---------------------------------------- 
 
5. (U) By purchasing electricity from Egypt, Lebanon could be 
able to reduce power cuts to 4-6 hours per day, according to 
one of Tabourian's advisors.  However, Lebanon also 
desperately wants to cut its energy bill, which Tabourian 
estimates absorbs 20-25 percent of GDP. "It is simply 
unsustainable," he told DCM (reftel).  EDL's recurrent 
financial losses have been a major drain on state finances, 
with losses projected to reach 2 billion dollars in 2008, 
according to the government. 
 
6. (C) The Egyptian authorities, however, have so far not 
offered concessions on pricing.  Tabourian claims they are 
demanding an "exorbitant" rate for the electricity they are 
providing, especially given Lebanon's commitment to purchase 
from the Egyptians year-round.  Minister Tabourian complained 
that Egyptian President Mubarak had promised PM Siniora 
during his August 16 visit to Alexandria that Egypt would 
support Lebanon with electricity and gas, but "where is the 
support?" Tabourian asked.  Price negotiations are still in 
progress. 
 
7. (SBU) Jordan also has offered to sell Lebanon 50-70 
megawatts of electricity, and Tabourian said he will study 
the offer.  Press reports, however, have indicated that 
 
BEIRUT 00001304  002 OF 002 
 
 
Jordan plans to use the Al Hussein thermal power plant (23 km 
north of Amman), which it had closed because of 
inefficiencies and high production costs, to provide this 
electricity.  Tabourian has made it clear he is not looking 
for more high-priced electricity, so this initiative may lead 
nowhere. 
 
COMMENT:  POLITICAL SQUABBLES PREVENT ACTION 
-------------------------------------------- 
 
8. (C) As electricity rationing causes more and more 
frustration among the Lebanese population, its provision 
becomes of increasing concern to the political actors in 
Lebanon.  PM Siniora has made trips to Egypt and Iraq, at 
least partially in search of energy supplies, but bad blood 
(reftel) between Siniora and March 8 Minister Tabourian after 
the Egypt trip resulted in Tabourian's boycott of Siniora's 
Iraq visit.  There now seems to be little coordination on 
energy initiatives between the Ministry of Energy and the 
PM's office.  Likewise, during his September 2-3 trip to 
Qatar, President Sleiman discussed possible Qatari "support" 
on electricity and the future Qatari provision of natural gas 
to Lebanon, without Tabourian's participation.  Though 
Tabourian's office said he planned to meet with the President 
in the coming days for a briefing, the Energy Ministry seems 
for now to be on the sidelines, slowing action to relieve the 
shortage. 
 
9.  (C) Ultimately, the capacity constraints and 
infrastructure dilapidation in the energy sector in Lebanon 
can only be resolved through privatization.  Minister 
Tabourian indicated to DCM (reftel) that privatization would 
not be an immediate priority, given his short time at the 
Ministry, and because of the shortages, so far he has had to 
spend all his time trying to find stop-gap energy supplies 
just to keep the lights on.  It seems doubtful that he can 
make progress in setting up the corporate structures at EDL 
necessary for privatization before the end of his term.  End 
comment. 
 
SISON