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What to make of Manas’ fuel woes? Wading through the politics of fuel contracts in Kyrgyzstan August 3, 2010

Posted by Guest Blogger in Analysis.
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By Joshua Foust

Joshua Foust is a military consultant. He is a contributor to PBS Need to Know, a contributing editor at Current Intelligence, and he blogs about Central Asia and the Caucasus at http://www.registan.net/.

The Transit Center at Manas, in Kyrgyzstan, is one of the lynchpins of the U.S. war in Afghanistan. Established during the initial invasion, the Air Base serves as a major logistics hub for the entire war effort: it’s where most U.S. troops go before entering or leaving the warzone and it’s where the Air Force’s fleet of aerial fuel tankers is based. They are responsible for keeping aircraft flying over Afghanistan.

Ever since its opening, however, the U.S. presence at Manas has been plagued with controversy: over the lease the U.S. pays the Kyrgyz government, over scattered security incidents, and especially over the issue of fuel contracting.

The complexities and controversy of Manas demonstrate that efforts to fight a war in one country can plunge another into civil war. Both the process and the outcome in this case are deeply flawed and their impact on Kyrgyzstan as well as the war in Afghanistan.

Manas has long represented a financial windfall for local contractors. In 2006, the FBI revealed that the family of Askar Akayev, who was President of Kyrgyzstan until a coup in 2005, maintained a vast criminal network extending to the administration, and in particular the fuel costs, at Manas. After the Akiev family was forced out of Bishkek by an angry mob, Kurmanbek Bakiyev took over rule of the country. Only, Bakiyev’s family was also involved in the overcharging of fuel at Manas—sometimes by as much as 100%. The corruption around this contract grew so severe it wound up playing a substantial role in this year’s latest revolution in the country.

Yet, the U.S. has very little idea of who owns the companies licensed to sell fuel at Manas. Regardless, the Obama administration extended the fuel contract earlier this year, essentially brushing aside concerns that it was fueling a corrupt enterprise. In any context, the fuel contract—worth $1 billion over the last six years—would be substantial. But in a place like Kyrgyzstan, channeling so much money into a single company was bound to create resentment and political conflict.

Moreover, it remains unclear who these companies actually are. Mina is the firm in charge of fuel at Manas, and a sister firm of sorts, Red Star (no one actually knows their relationship, though they share several staff), supplies Bagram. The two companies’ ownership is unclear. In response, Congress recently began an investigation into their structure and ownership, deliberately uncovering the web of subcontracts, business relationships, and financial dependencies.

Unfortunately, the investigation seems stalled. Despite Congress’ urging, the two contracting firms have refused to disclose their ownership. (There are ubiquitous rumors that Maxsim Bakiyev, the ousted President’s son, was involved in extorting the Kyrgyz businessmen involved in fuel contracting for millions of dollars using one or both of these companies.) Congress has been only marginally assisted in its investigation by the interim government in Kyrgyzstan, as they are also wrapped up in continued political and ethnic intrigue.

Unfortunately, it’s difficult to determine just how much the fuel contracts are worth—most speculation runs above $700 million for the last three years. Both companies are registered in Gibraltar, a tax haven that does not disclose its records to the U.S. While the contract was renewed in 2009 without bidding—the military exercised an option year on the contract—this year it is a competitive bid. The challenge, other fuel supply companies complain, is that the new bid seems designed to favor the two companies currently under investigation for wrongdoing. The fuel contract was awarded on a no-bid contract to first one firm, then another, both of which have possible ties to international criminal networks and have been documented of price-gouging the U.S. military.

Whoever wins the Manas contract is stepping into a political hornet’s nest. If the rumors of Mina’s and Red Star’s ownership turn out to be true, then the Pentagon has been unwittingly funding a vast, international criminal enterprise for the last five years. If those companies lose their contracts to sell fuel, they’re going to be angry about it. Similarly, whoever steps into their shoes will have to negotiate Kyrgyzstan’s often confusing and occasionally violent politics.

It’s not immediately clear who’s a better bet for keeping the supply of fuel for the war in Afghanistan steady: a known “bad”, like the current companies, or an unknown probably “good,” like the newer firms bidding on the contract. Either way, the contracted supply of fuel to Manas Air Base will remain deeply contentious, both in Bishkek and in Washington.

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