(S) AIK FUEL: GOK WANTS TO KNOW WHAT IT'S SIGNING

S E C R E T SECTION 01 OF 02 KUWAIT 000127

SIPDIS

STATE FOR NEA/ARP

E.O. 12958: DECL: 01/20/2014
TAGS: PREL MARR MOPS IZ KU
SUBJECT: (S) AIK FUEL: GOK WANTS TO KNOW WHAT IT'S SIGNING
UP FOR

REF: STATE 4882

Classified By: CDA FRANK URBANCIC; REASON: 1.4 (B, D)


1. (S) SUMMARY: Charge delivered copy of reftel dipnote to
the FM January 10, asking that the GOK continue supplying
fuel to US and coalition forces pending bilateral discussions
to resolve who will pay for what. He also asked for urgent
approval for the deployment of twelve additional C-130s to
Ali al-Salem airbase; this approval was on hold at MOD
pending resolution of the fuel issue. The FM promised to
raise the matter with the Prime Minister immediately. He
explained that the Cabinet's decision to provide this support
was only for "the actual war" in Iraq, which has "ended." He
urged the USG to send a delegation to clarify how much it is
asking Kuwait to cover, and for how long, before the JMC in
March. Charge also called KPC chief Nader Sultan January 10
to ensure continued supplies; and he met with a Finance
Ministry official on the subject. ECON Chief also spoke
directly with the Kuwait Petroleum Corporation, which
actually provides the fuel. END SUMMARY.


2. (S) Charge met January 10 with Foreign Minister Shaykh
Dr. Mohammed Sabah al-Salem al-Sabah, and raised the Finance
Minister's letter billing the USG for nearly KD 25 million
(nearly USD 85 million) worth of fuel provided to US and
coalition forces, which we had understood was
Assistance-In-Kind (AIK) based on the assurances of the Prime
Minister (reftel refers). Stressing the USG's appreciation
for Kuwait's generous support to Operation Iraqi Freedom to
date, the Charge asked for a commitment to maintain the flow
of fuel for the coalition, sine die as had been the practice
so far. He also delivered a copy of the dipnote contained in
reftel.


3. (S) The Charge also asked that the GOK approve the
deployment to Ali Al-Salem airbase of twelve additional C-130
aircraft, which are urgently needed for the massive troop
rotation "OIF2" running from January through May/June. This
approval had been put on hold at MOD pending clarification of
the fuel supply issue. OMC-K Chief explained that this will
be the largest troop movement of its kind since World War II:
approximately 120,000 personnel rotating out of Iraq and
100,000 rotating in; 80 percent of those movements will be
through Kuwait.


4. (S) The Minister replied that he was familiar with this
issue. He explained that the Finance Minister (Mahmoud
al-Nouri, who faces the threat of parliamentary "grilling")
was "being tough with all the ministries" in order to show
that he was capable of "getting hold of loose ends." The
money allocated to pay for AIK fuel was appropriated with the
understanding that it was "confined to the actual war," which
has "ended." Nouri therefore wants to clarify with the USG
"how much, how long," because right now, it seems like an
"open-ended commitment to provide fuel at no charge." Dr.
Mohammed recommended that a US delegation come to discuss the
issue with Nouri before the March 30-31 Joint Military
Commission (JMC). When the Charge noted that the matter
would ultimately require a political decision, Dr. Mohammed
agreed that "maybe a committee of different ministries" could
meet with the US delegation.


5. (S) The FM asked what MOD had to say. The Charge replied
that according to MOD, some of the KD500 million pledged for
Iraq support is still available. The Finance Ministry had
given MOD a budget supplement to cover the cost of AIK fuel,
and MOD had entered into an agreement with the Kuwait
Petroleum Corporation (KPC). Now, MOD had reportedly used up
the supplement. Perhaps a simple mechanism would be for
Finance to grant MOD another supplement drawn from the KD500
million.


6. (S) Dr. Mohammed said he understood the urgency and
promised to raise the matter immediately with the Prime
Minister. (This even though the FM was in a hurry to get to
the airport, as he needed to fly to Yemen that day for a
democracy and human rights conference.)

(U) FINANCE MINISTRY
--------------


7. (S) Earlier in the day, Charge also delivered a copy of
reftel dipnote to Mustafa Al-Shamali, Assistant
Undersecretary at the Ministry of Finance, underscoring the
critical need for fuel supplies to continue uninterrupted
during the ongoing troop rotation. Al-Shamali said that he
would work with his contacts at KPC to ensure that the fuel
would not be abruptly shut off. Rather, he suggested that
the GOK and KPC would like the USG to enter into some sort of
formal contractual agreement with KPC on fuel supplies, to
regularize the relationship now that major combat operations
for the liberation of Iraq have been "completed." This
agreement would give KPC legal cover, he suggested, in case
anyone should question the terms of the relationship.


8. (S) Al-Shamali's assistant pointed out that the Council of
Ministers had issued a declaration in August that the USG
should be billed for fuel and other costs related to Iraq
operations as of the beginning of May (presumably coinciding
with the declared end of major combat operations). As a
result of that decision, the Ministry of Finance sent the
December 1, 2003 diplomatic note seeking reimbursement for
the approx. USD85 million in fuel expenditures. He also
noted that between March 1 and August 30, Kuwait spent 62
million Kuwaiti Dinars, or about USD204 million, on fuel,
food and other costs associated with Operation Iraqi Freedom.
While Kuwaiti law 12/2003 allowed the Ministry of Finance to
pay charges through August, the Ministry has not been
authorized to spend funds beyond September 1.


9. (S) COMMENT: We understand that, in the GOK view, the
Defense Cooperation Agreement obligates the GOK to provide
AIK only for the direct defense of Kuwait, and OIF --
especially since the end of major combat operations -- is
outside that scope. The GOK would not accept the argument
that it is legally bound to continue providing this
assistance on an open-ended, unlimited basis, and we are
taking care not to make that argument. We believe the fuel
will continue to flow for the near term pending resolution of
who will pay for what. The tab is running at about USD1.2
million per day at the moment. We recommend a visit soon by
an appropriate inter-agency delegation, to try to reach an
explicit understanding with the GOK on this and other longer
term mil/mil strategic issues.


11. (S) COMMENT CONTINUED: The first test of whether the
GOK is comfortable with this approach will be whether -- and
how quickly -- it approves the deployment of the additional
C-130s. OMC-K will raise this question again January 11 with
the Chief of Staff of the Armed Forces.
URBANCIC