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### Viewing cable 06BEIRUT2652, LEBANON: WHEAT SHIPMENT NEEDED TO KEEP BREAD ON

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
06BEIRUT2652 | 2006-08-16 06:19 | 2011-05-19 23:30 | UNCLASSIFIED | Embassy Beirut

`

    VZCZCXRO1423
    OO RUEHAG RUEHBC RUEHDE RUEHDF RUEHIK RUEHKUK RUEHLZ
    DE RUEHLB #2652/01 2280619
    ZNR UUUUU ZZH
    O 160619Z AUG 06
    FM AMEMBASSY BEIRUT
    TO RUEHC/SECSTATE WASHDC IMMEDIATE 5091
    INFO RUEHEE/ARAB LEAGUE COLLECTIVE PRIORITY
    RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
    RHMFISS/CDR USCENTCOM MACDILL AFB FL PRIORITY
    RHEHNSC/NSC WASHDC PRIORITY
    RUEHNO/USMISSION USNATO PRIORITY 0095

` `

    "UNCLAS SECTION 01 OF 02 BEIRUT 002652

    SIPDIS

    SIPDIS

    STATE ALSO PASS TO USAID
    CAIRO FOR AGRICULTURE COUNSELOR

    E.O. 12958: N/A
    TAGS: EAID ECON IS LE PREL SY
    SUBJECT: LEBANON:  WHEAT SHIPMENT NEEDED TO KEEP BREAD ON
    THE TABLE

    ¶1.  This message contains an action message for the
    Department -- please see para 6.

    ¶2.  Embassy meetings with GOL and agrifood industry leaders
    have confirmed that current stocks of wheat in Lebanon are at
    a critically low level.  President of Dora Flour Mills and
    Chair of the Agrifood Traders Syndicate Arslan Sinno told
    emboffs that perhaps only a 10-15 day reserve supply of wheat
    remains in Lebanon.  Sinno added that commercial mills have
    been taking steps to stretch remaining grain stocks by
    rationing their output, closing for portions of the day, and
    only partially filling orders from industrial bakers.  Sinno
    explained that the milling/flour industry in Lebanon is very
    much dependent on maintaining stocks of wheat to be milled on
    demand.  Lebanon's climate and the high overhead cost of
    maintaining storage facilities preclude most consumers from
    storing large quantities of flour.

    ¶3.  Sinno and other mill owners confirm that they currently
    have no means of getting stocks of wheat delivered to
    Lebanon.  Normally, Lebanese millers import wheat from Russia
    using small capacity ships, holding less than 10,000 tons.
    The millers prefer Russian wheat as it trades at
    approximately 165 USD per ton CNF (including freight costs),
    while U.S. wheat costs over $240 per ton including freight.
    Orders placed prior to July 12, 2006 that were inbound to
    Lebanon have had to be canceled or resold on the market,
    often at a loss to the miller in Lebanon.  Ship owners
    operating grain transports have refused to cross the sea
    blockade to port in Lebanon.  Several mill owners report
    frustrating and unusual demands from their shippers,
    including one ship owner requesting a letter signed by
    President Bush and Prime Minister Olmert of Israel
    guaranteeing the ship's safety.  Sinno stressed the urgency
    of getting a shipment of grain en route to Lebanon, as
    turn-around times for U.S.-originating grain shipments
    average 30 days.

    ¶4.  The Agrifood Syndicate has approached the GOL and the US
    Embassy with a proposal asking for help to alleviate the
    wheat shortage.  In a letter to Lebanese PM Siniora and
    Minister of the Economy Sami Haddad, the syndicate proposes
    that the GOL request from the USG a humanitarian shipment of
    wheat. The transit and delivery of the shipment would be
    guaranteed by the USG, who could make the proper assurances
    to the IDF to allow the shipment to cross the blockade.  The
    30,000-ton shipment (approximately 6 million USD in value),
    enough for approximately 1 month of normal flour consumption
    in Lebanon, would then be sold to Lebanese commercial
    millers.  If the wheat were sold at a ""replacement rate""
    (i.e. the previously negotiated rate for Russian wheat),
    bread and flour prices would remain more or less constant in
    Lebanon.  The Syndicate has also approached the Embassy of
    France with a similar proposal, but Sinno and others prefer
    U.S. wheat as ""more suitable"" for Lebanese flour products.
    Proceeds from the sale could then be used by the GOL for
    reconstruction or humanitarian concerns.

    ¶5.  Previously, Lebanon has benefited from USAID/USDA
    humanitarian wheat programs, such as ""Food for Education.""
    In the most recent wheat shipment, the International Orthodox
    Christian Charities (IOCC) NGO received 50,000 tons of wheat,
    which was then sold at auction to local Lebanese mills.  The
    IOCC used the proceeds to support its local education
    initiatives.  There is no current PL-480 program for Lebanon,
    as its per-capita income is too high.  Under current USDA and
    USAID rules, request for a similar grain shipment would need
    to originate from a U.S.-based NGO and be coupled with
    Embassy Beirut's endorsement.

    ¶6.  ACTION REQUEST:  Based on suggestions from the agrifood
    sector and the GOL on grain shipments, post recommends that
    the Department engage with USDA and USAID to:

    --Investigate the possibility of donating 25,000 to 30,000
    tons of ""#2 U.S. Hard Red Winter Wheat"" to the GOL for
    re-sale and distribution as described above.

    --Arrange for shipment of the wheat by U.S.-flag transport
    vessels

    --Liaise with the Government of Israel to clear the shipment
    through the sea blockade

    ¶7.  Comment:  Maintaining bread and flour proces at current

    BEIRUT 00002652  002 OF 002

    levels and insuring the supply of wheat in the short-run will
    alleviate domestic economic pressure on the Siniora
    government.  The visibility of USG efforts to stave off a
    potentially crippling crisis of a bread and flour shortage
    would go far to demonstrate USG support for the GOL and the
    Lebanese people.  While there are several NGOs who could
    handle such an operation under normal circumstances (Mercy
    Corps, IOCC, World Vision, YMCA), most of their operations
    have turned to meeting the immediate humanitarian needs of
    Lebanon's inernally displaced persons (IDPs).  Allowing the
    GOL to be the receiver of such a shipment would secure
    immediate and efficient distribution of the grain upon
    arrival and bolster the private sector's confidence in the
    GOL.

    ¶8.  Comment continued:  Given the time needed to get a ship
    of wheat loaded and to Lebanon, we hope that this request can
    be approved and acted upon as promptly as possible.  As in
    fuel, wheat shortages are likely to benefit Syrian
    blackmarketeers while hurting the average Lebanese consumer
    -- and damaging the credibility of the Siniora government.
    We should not underestimate the impact, political and
    otherwise, bread shortages and/or hikes in bread prices would
    have, especially during this critical period.  End Comment.
    FELTMAN
    "

`