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Viewing cable 08ASMARA225, EC SHEDS LIGHT ON CONFISCATED FOOD AID

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Reference ID Created Released Classification Origin
08ASMARA225 2008-04-23 12:25 2011-08-25 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Asmara
VZCZCXRO5635
RR RUEHROV
DE RUEHAE #0225/01 1141225
ZNR UUUUU ZZH
R 231225Z APR 08
FM AMEMBASSY ASMARA
TO RUEHC/SECSTATE WASHDC 9622
INFO RUCNIAD/IGAD COLLECTIVE
RUEHSA/AMEMBASSY PRETORIA 1432
RUEAIIA/CIA WASHDC
RHEHNSC/NSC WASHDC
UNCLAS SECTION 01 OF 02 ASMARA 000225 
 
SIPDIS 
 
SIPDIS 
 
SENSITIVE 
 
AIDAC 
 
LONDON AND PARIS FOR AFRICA WATCHERS 
DEPT FOR AF/E - PLEASE PASS USAID 
NAIROBI FOR USAID - GPLATT 
KAMPALA FOR USAID - DSUTHER 
PRETORIA FOR USAID - PDISKIN 
ROME FOR FODAG 
 
E.O. 12958:  N/A 
TAGS: ECON EAID EAGR PGOV ER
SUBJECT:  EC SHEDS LIGHT ON CONFISCATED FOOD AID 
 
REF:  06 ASMARA 458, and others 
 
1.  (SBU) SUMMARY:  European Commission (EC) First Secretary 
Stephane Halgand (protect) told Emboffs the EC, with the full 
cooperation of the Eritrean government, is reviewing the seizing of 
12,500 metric tons (MT) of its food aid in spring 2006.  The review 
will likely recommend retroactively amending the EC's pre-2006 
Eritrean food aid contracts to allow the seizure as part of a cash 
for work (CFW) scheme that sold the food aid locally to fund 
short-term agricultural and infrastructure projects.  END SUMMARY. 
 
---------------------------- 
2.  (SBU) WHERE'S THE WHEAT? 
---------------------------- 
 
In an April 15 meeting, Halgand briefed Emboffs on the EC'S efforts 
to account for its food aid summarily confiscated in spring 2006 by 
the GSE to support a unilaterally instituted CFW scheme.  The GSE 
confiscated at the time over 90,000 metric tons (MT) of total 
international food aid (mostly wheat): from the EC (12,500 MT), from 
USAID (14,000 MT/$4.5 million), and from the World Food Program 
(WFP) (64,000 MT), as well as lesser amounts from other 
international donors.  In fall 2006, high-level EC visitors informed 
the GSE that the Commission would be willing to amend its food aid 
contracts to allow for a CFW alternative, contingent upon the GSE 
fully accounting for the confiscated food stocks.  In summer 2007, 
the GSE permitted an EC contractor to travel in 15 districts to 
conduct a review of the GSE's actual CFW activities.  As a second, 
final stage of review, the EC is currently conducting a financial 
audit with the GSE about the disposition of funds from the seized 
food aid.  Once this review is completed, the EC office in Asmara 
will forward its findings to Brussels with a recommendation on 
whether to retroactively amend the original food aid contracts to 
permit the GSE's CFW activities. 
 
----------------------------------- 
3.  (SBU) CASH FOR WORK IN PRACTICE 
----------------------------------- 
 
Halgand stated that the EC's 2007 review of the CFW program 
indicated that the seized food aid was, in fact, monetized under a 
CFW scheme to pay mainly unskilled laborers for soil and water 
conservation activities.  Project workers were paid between $1.33 
and $2.66 per day based on output.  In monetizing the seized aid, 
Halgand believes the donor grain was transferred first from the 
Ministry of Agriculture (MoA) to the Eritrean Grain Board (EGB) 
which set a standard price, and then sold to local flour mills for 
processing at $32.00/MT.  The processed grain was then transferred 
to the Ministry of Trade and Industry (MoTI) for distribution to 
local bakeries and Hidri ration outlets for $104.00/MT. 
 
--------------------------------------------- ----------- 
4.  (SBU) THE GSE'S SURPRISINGLY DETAILED RECORD KEEPING 
--------------------------------------------- ----------- 
 
Halgand also provided an electronic copy of the March 2008 Final 
Report on EC Food Aid Contribution to the State of Eritrea (not for 
distribution).  The report provided a detailed account of the 
organization of CFW, including internal GSE procedures, a listing of 
funded conservation projects, and the grain stock wastage.  The 
report also concluded that the GSE's CFW program met the EC's 
criteria for enhancing food security, "project activities have 
contributed to food security and livelihoods at household level," 
and that over 300,000 people benefited from the scheme.  Halgand 
elaborated that the EC would retroactively amend the pre-2006 food 
aid agreement with the GSE if EC headquarters views the results of 
the report as satisfactory. 
 
----------------- 
5.  (SBU) COMMENT 
----------------- 
 
Post believes the EC's audit provides a good overview of the 
disposition of all of the seized food aid.  Halgand noted that 
Eritrea consumes approximately 600,000 MT of grain per year.  Since 
the 90,000 MT of confiscated grain equals 2 months of normal 
consumption, he believes it probable that Eritrea's processing and 
distribution system effectively absorbed and processed almost the 
entire stock of seized donor food aid during spring/summer 2006. 
 
ASMARA 00000225  002 OF 002 
 
 
The EC's findings show no indication that any of the confiscated 
food aid was exported to obtain hard currency.  Given the expense 
and effort of re-export compared to the minimal net hard currency 
gain (total food confiscated was worth approximately $25 to $30 
million), Post agrees the GSE likely used the confiscated aid to 
displace regular food imports. 
 
The Final Report on EC Food Aid Contribution to the State of Eritrea 
indicates a high level of sophistication in the GSE's accounting 
practices.  Although the GSE does not share its financial and budget 
information, the report's detail indicate a strong system of 
internal financial accounting. 
MCMULLEN