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Posted at 04:16 PM ET, 10/28/2011

Pentagon shifts away from disputed fuel contracts

For years, Pentagon contracts to deliver jet fuel to Kyrgyzstan have been the subject of controversy, with allegations, so far unproved, that the families of two former Kyrgyz presidents profited from them. Now, the allegations involving the Mina Corp. and Red Star Enterprises may fade away.

The Defense Logistics Agency recently announced that, under a new contract worth hundreds of millions of dollars, the jet fuel will be delivered primarily by a Russian-Kyrgyz company, along with a Miami-based firm.

The matter of fuel deliveries to Kyrgyzstan has been the focus of debate for some time. The U.S. air base there, Manas Transit Center, serves as a main airport for coalition troops heading for or leaving Afghanistan, and the fuel delivered there is used by NATO tankers to refuel fighter aircraft flying over the battlefields.

Earlier questions about the ownership of Mina and Red Star -- and how they won their contracts despite a lack of experience in jet fuel logistics -- led to accusations of corruption.

They were registered in Gibraltar and run by what congressional investigators once described as a “secrecy obsessed” business group. It was only in November 2010 that the Defense Department learned the identify of their owners: the French wife of an elusive California businessman, Douglas Edelman, who once ran a bar and hamburger shop in Kyrgyzstan, and Erkin Bekbolotov, his then-35-year-old Kyrgyz partner.

At that time, the Kyrgyz government, concerned about corruption, demanded the contract be shifted to a partnership it had entered into with Gazpromneft-Aero, a Russian company.

Under the new arrangement, the Kyrgyz-Russian entity, Gazpromneft-Aero Kyrgyzstan, will gradually increase its role, handling up to 90 percent of the jet fuel needs at the Manas facility over the coming year, while a unit of World Fuel Services, the Miami-based firm, will provide a minimum of 10 percent.

World Fuel Services is listed on the New York Stock Exchange and delivers fuel to over 3,000 air fields throughout the world.

Rep. John Tierney (D-Mass.), as chairman of the House Committee on Oversight and Government Reform, last year led a congressional investigation into the Kyrgyzstan fuel delivery contracts. Investigators recommended changes be made in how they were handled, in part by improving transparency.

By  |  04:16 PM ET, 10/28/2011

 
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