FUEL FOR IRAQ: ONE MONTH REPRIEVE FROM CUT-OFF

C O N F I D E N T I A L SECTION 01 OF 02 KUWAIT 002907

SIPDIS

STATE FOR PM, NEA, NEA/ARP, NEA/NGA

E.O. 12958: DECL: 09/01/2014
TAGS: MOPS PREL EAID MARR PGOV KU IZ
SUBJECT: FUEL FOR IRAQ: ONE MONTH REPRIEVE FROM CUT-OFF

REF: A. KUWAIT 2873

B. KUWAIT 2772

C. KUWAIT 2747

Classified By: Charge d'Affaires Matthew H. Tueller, Reasons
1.4(a) and (d)


1. (C) Kuwait Petroleum Corporation (KPC) and USG
delegations met again on September 1 to continue discussions
over Kuwait's provision of assistance-in-kind (AIK) and
Operation Iraqi Freedom (OIF) fuel supplies for US forces,
which KPC had been instructed to terminate on September 4.
KPC Chairman Nader Sultan stressed again that KPC had been
supplying fuel in the absence of any payment agreement with
the Kuwaiti Ministry of Defense (MOD),the Government of
Kuwait (GOK) or the USG. In fact, he said, the Ministry of
Defense had informed KPC that because MOD has no more funds,
fuel supplies should be stopped. Sultan advised CDA to speak
to he Minister of Defense regarding AIK fuel for use in
Kuwait, and relay KPC's need for MOD instructions to continue
providing fuel beyond September 4. He cautioned, however,
that MOD would likely need a Council of Ministers decision to
authorize more spending.


2. (C) Concerning fuel for OIF, Sultan reiterated the need
to negotiate a commercial contract. But he suggested a
possible short-term compromise, pending the Minister of
Energy's approval. According to Sultan, if the two sides
could agree that a contract governing OIF fuel supplies would
be put in place, then he could seek a brief extension in the
cut-off deadline. Specifically, Sultan asked for the US
delegation's concurrence that in the future, (1) KPC would be
supplying OIF fuel under a contract; (2) pricing would be
determined by the two sides; 3) fuel volumes would correspond
to those projected by the US military; and (4) some decision
would be made as to how to handle fuel that KPC has supplied
since MOD stopped paying. CDA agreed that the US did accept
the principle of a contract for OIF fuel, and that plans were
being made for a political level team to visit Kuwait to
reach agreement on commercial terms. Based on this, Sultan
said, KPC would recommend that the GOK continue providing
fuel until contract details can be finalized during
high-level political discussions.


3. (C) After the meeting, CDA delivered letter in para 4 to
Minister of Defense's Office Director MG Humaidi. Humaidi
subsequently reported that after consulting with the Minister
of Defense, he called the Minister of Energy, who agreed that
Kuwait would continue providing AIK and OIF fuel supplies
until October 4. The Minister of Energy will deliver written
instructions to KPC to keep deliveries going. This extension
is based upon the August 30 (Ref A) and September 1
discussions, and the understanding that a senior US team will
visit Kuwait later this month to discuss the price and
duration of OIF fuel deliveries. CDA then spoke with KPC
Chairman Sultan, who confirmed that he had been instructed to
extend the deadline for cutoff of fuel to October 4.


4. (SBU) BEGIN TEXT OF LETTER TO MINISTER OF DEFENSE.

Your Excellency,

I would like to take this opportunity to advise you of steps
the U.S. Government is taking to address the matter of fuel
supplies that Kuwait provides for U.S. forces in Iraq.
Issues related to fuel supplies for forces in Iraq have been
the subject of several senior level bilateral discussions
over the past eight months.

At this point, we are engaged in negotiations with Kuwait
Petroleum Corporation on terms of a contract to cover the
fuel that is going to Iraq for the use of U.S. forces in
Iraq. Several technical issues have been resolved in
meetings held with KPC on August 30 and September 1.
Discussions are proceeding well.

We expect that senior-level political discussions will take
place in the near future so that outstanding matters can be
resolved and a contract covering the oil going to Iraq can be
signed.

There are two matters that I hope can receive you attention
in connection with the discussions taking place with KPC.
The first is quite urgent.

KPC advised the U.S. military on August 20 that absent a
commercial arrangement, all fuel deliveries to U.S. forces
would cease as of September 4. As we have now entered into
discussions on a contract covering the fuel for Iraq, we hope
that you can advise KPC to continue providing the fuel for
U.S. forces while negotiations proceed. Any interruption of
fuel supply to our forces in Iraq would of course have
extremely negative consequences.

The second issue relates to ensuring that appropriate KPC
officials understand that arrangements covering fuel provided
for the use of U.S. forces in Kuwait are covered separately
and are not part of the discussions related to a contract
covering fuel for Iraq. I believe it is appropriate that
this matter be covered with KPC by the Government of Kuwait
rather than in the context of these contractual discussions.

Your assistance in these two matters would be greatly
appreciated. Please accept my assurances of the highest
consideration.

END TEXT OF LETTER.


5. (U) Baghdad minimize considered.
TUELLER