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Is the Kyrgyz Government About to put the Brakes on the Pentagon Fuel Contract

It seems the $315 million contract awarded by the Pentagon to a controversial and secretive fuel-supplier is only part of the story about future operations at Kyrgyzstan’s Manas Transit Center.

The contract, awarded to Mina Corp on November 3, covers only 80 percent of the overall projected jet fuel needs over the next year at Manas, a key logistics hub for US and NATO operations in Afghanistan. The other 20 percent appears destined for a Kyrgyz government-run entity, US officials say.

More importantly, the Kyrgyz government may be preparing to put the brakes on the Pentagon contract. On November 5, the Kyrgyz Foreign Ministry issued a statement urging the US government to “suspend its cooperation” with Mina Corp.

The provision for part of Manas’ fuel-supply needs to be handled by a Kyrgyz outfit is seen as vital to maintaining smooth relations with the Central Asian state. Mina Corp currently figures in both a US congressional subcommittee probe and a Kyrgyz government investigation into fuel supply operations at Manas.

In addition, various Kyrgyz leaders have expressed aversion to the idea of Mina Corp having a continuing role at Manas. The November 5 statement issued by the Kyrgyz Foreign Ministry made an explicit reference to “corrupt schemes” at Manas and stated that Mina Corp should not be allowed to continue to supply fuel at the transit center until the conclusion of the Kyrgyz investigation.

Prior to the release of the Foreign Ministry statement, Mimi Schirmacher, a spokeswoman for DLA, confirmed that 20 percent of fuel supply at the air base near Bishkek is earmarked for a “second” vendor.

“The contract [to Mina Corp] was awarded for a minimum of 96 million US gallons, and up to 120 US million gallons. The amended solicitation is to allow for a future, second contract award to provide between 20 percent and 50 percent of the [Manas Transit Center’s] requirements. Therefore, Mina may ultimately be required to provide less than 120 million US gallons,” Schirmacher told EurasiaNet.org on November 4.

The only vendor in the running to become the secondary supplier is a Kyrgyz state-owned enterprise, which would operate in conjunction with an international partner such as Gazprom, EurasiaNet.org has learned.

Meanwhile, Mina’s new deal with the Pentagon to supply 96 million gallons per year out of the 120 million gallons initially requested for 2011 is potentially more lucrative for the company than its previous supply contract.

In 2009, Mina was awarded a contract to supply 105 million gallons per year at a cost of $234 million. On November 4, US Defense Logistics Agency (DLA) announced it would be paying Mina Corp $315 million to deliver just 96 million gallons of TS-1 jet fuel.

Neither DLA nor Mina Corp responded to questions about the difference in the contract totals, but a variety of factors – including fluctuations in fuel prices and logistical overheads – could influence the final amount. “The other big issue is that the old pricing may have benefited from no Russian excise tax,” an industry insider told EurasiaNet.org.

The imposition of a Russian excise tax on fuel exports to Kyrgyzstan on April 1, 2010, was widely perceived as a punitive act by the Kremlin in response to an alleged re-exporting scheme, under which cheap Russian fuel bought for use in Kyrgyzstan was re-sold in third countries.

According to the US government’s Federal Procurement Data System (FPDS), Mina Corp received $15.4 million on April 16 in a payment described as “compensates contractor for Russian export duties.” On May 27, Mina Corp refunded the money, the FPDS entry explains there were “changes [to] Russian duty compensation procedures.”

Meanwhile, there is at present no sign yet that a Kyrgyz-Gazprom joint venture is “technically or financially ready” to fulfill 20 percent supply role, never mind 100 percent, of the contract, the industry insider said.

In addition to irking the Kyrgyz government, the decision to award the bulk of the contract to Mina Corp has reportedly stirred tension within the US Department of Defense. Elements within the Pentagon had feared that DLA’s decision to renew ties with Mina Corp would alienate the Kyrgyz government, and thus erode Washington’s standing in a strategically important Central Asian state. On the other hand, DLA’s reluctance to partner with a Kyrgyz-Gazprom supplier is “understandable,” the source added.

By. Deirdre Tynan

Originally published by EurasiaNet.org




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