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Pentagon, State Dept. criticized over Kyrgyz jet fuel deals

By Andrew Higgins and Walter Pincus
Washington Post Staff Writers
Monday, December 20, 2010; 11:00 PM

To keep U.S. warplanes flying over Afghanistan, the Pentagon allowed a "secrecy obsessed" business group to supply jet fuel to a U.S. air base in Kyrgyzstan, turning a blind eye to an elaborate fraud involving fuel deliveries from Russia, according to congressional investigators.

In a report due to be released Tuesday, the House Subcommittee on National Security and Foreign Affairs hammers the Pentagon and also State Department diplomats for ignoring red flags raised by jet fuel contracts worth nearly $2 billion for the Manas Transit Center, a U.S. base used for in-flight refueling over Afghanistan.

The U.S. military's long but mostly hidden dependence on Russian fuel is a sensitive issue. The congressional report, which details the use of false end-user certification to evade Russian export restrictions, comes as Moscow and authorities in Kyrgyzstan are pushing to wrest control of the lucrative jet fuel supply business from a Gibraltar-registered business group comprising Mina Corp. and Red Star Enterprises.

Subcommittee chairman John F. Tierney (D-Mass.) warned that the United States "should be very cautious about the potential for overreliance on Russian fuel supplies supporting the mission in Afghanistan." He added that the previous use of deception to obtain Russian fuel raised concerns. "The fact that the Department of Defense and Department of State ignored or were unaware of the false certifications is astonishing."

The report, which follows an eight-month investigation into the jet fuel contracts, found no evidence of corrupt ties between Mina Corp. or Red Star and the families of Kyrgyz leaders. Yet it cautioned that a lack of proper oversight and a neglect of America's broader interests in the region had often left Washington blind to "political, diplomatic and geopolitical collateral consequences." These include the ouster of two Kyrgyz governments in popular revolts stirred in part by anger over alleged jet fuel corruption and also U.S. ties with Moscow.

Only last month did the Defense Logistics Agency, or DLA, ask who owns the Gibraltar-registered business group that has won jet fuel contracts with a total value of about $3 billion in Kyrgyzstan and Afghanistan.

John Lough, a spokesman for Mina Corp. and Red Star, declined to comment on the report's findings, saying the firms had not yet seen it. The DLA also declined to comment for the same reason.

The subcommittee detailed what it called the companies' "unusual behavior and hyper secrecy," including a scheme to evade Russian export regulations through the use of end-user certificates that claimed the fuel was for use by civil aviation. It also revealed how they last reached out in 2009 to Maksim Bakiyev, the son of the then Kyrgyz president, to open up "back-channel negotiations" with the Pentagon over the future of the base. This followed a decision by Kyrgyzstan to close the base, later reversed when Washington agreed to more than triple the rent.

The release of the report comes as the Pentagon is under strong pressure to turn much of the jet fuel business over to a new joint venture made up of a Kyrgyz state company and a subsidiary of Gazprom, Russia's state-controlled energy giant.

Moscow earlier this year sharply reduced jet fuel supplies to Kyrgyzstan and applied further pressure recently by cutting deliveries destined for U.S. forces in Afghanistan. Mina last Friday complained that its main office in Kyrgyzstan had been targeted for an "illegal raid" by Kyrgyz authorities. It said Kyrgyzstan wanted to "shut down its business."

Both the Pentagon as well as its contractors have in the past downplayed the importance of Russian supplies but, according to congressional investigators, "for most of the past five years, Mina and Red Star procured a majority of their fuel from refineries in Russia despite a perceived official ban on the export of fuel for military use." To get around Russian restrictions, they "constructed complex arrangements in which proxy subcontractors obtained certifications from Kyrgyz authorities stating that the fuel was being procured for domestic civil aviation."

Mina and Red Star, say investigators, "told DLA-Energy and Pentagon officials about the deception; but, despite extensive memoranda and e-mails documenting the arrangements, senior DLA-Energy officials claimed that they were not aware of the scheme and asserted that there might not have been a Russian ban."

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