KAZAKHSTAN: EFFORTS TO OVERTURN BAN ON JET FUEL

S E C R E T ALMATY 001932

SIPDIS


NOFORN

E.O. 12958: DECL: 05/20/2015
TAGS: KZ MOPS PREL POLITICAL
SUBJECT: KAZAKHSTAN: EFFORTS TO OVERTURN BAN ON JET FUEL
FOR GANCI


Classified By: CDA Mark Asquino, reasons 1.4 (B) and (D).


1. (C) SUMMARY: Since the April 19 ban on export of jet fuel
from Kazakhstan, post has contacted every relevant ministry
and agency in the GOK to request it be lifted. Beginning with
an April 22 letter to Prime Minister Akhmetov, who signed the
decree, Embassy has approached the Ministries of Foreign
Affairs, Defense, and Energy and Mineral Resources with
requests to release the fuel for which Red Star Limited
Enterprises had contracted in support of coalition air
operations for OEF. A May 18 meeting with Minister of Energy
and Mineral Resources Shkolnik is the latest and most
promising of those efforts, though there is no positive
result yet. There is no evidence that the reluctance to lift
the ban is part of a plan to de-stabilize the current Kyrgyz
government. It is more likely that the delay in obtaining
relief from the ban is due to typical obstruction within the
Kazakhstani government. END SUMMARY.

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Background
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2. (C) On April 19, the Government of Kazakhstan announced a
ban on the export of jet fuel for a period of 90 days. While
the reasons for the ban were not publicly announced, it
appears that the GOK implemented it to counter rising jet
fuel costs resulting from decreased production. On May 16,
the President of the Kazakhstani venture Kumkul Resources
Thomas Dvorak and President of PetroKazakhstan Bernard
Isautier intimated to Ambassador that PetroKazakhstan was
producing less jet fuel than in the past, and opined that
Kazakhstan's statements that there is a domestic shortage of
jet fuel may be true. While denying that the export ban was
having any price control effect, both confirmed that there is
ample jet fuel being produced by Russian refineries. They
said that the Government of Kazakhstan could direct the
refinery at Pavlodar to produce more jet fuel, and did not
understand why this order had not been given yet. Minister of
Energy Shkolnik told POEC chief on May 18 that rising jet
fuel costs were behind the GOK's decision.


3. (SBU) Red Star Enterprises Limited, the Defense Energy
Support Center's sole contractor for procuring jet fuel for
Ganci Airbase in Kyrgyzstan, notified post on April 21 that
due to the Kazakhstani ban and the on-going investigations of
Akayev-owned businesses in Kyrgyzstan, coalition air
operations might have to be reduced due to inadequate
deliveries of jet fuel.

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Post's Actions
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4. (C) On April 22, Embassy delivered a letter from the
Ambassador to Prime Minister Akhmetov, asking that the ban be
lifted for fuel supplies going to Ganci. From April 23 to May
10, Ambassador, DCM, and DATT made repeated contact with
representatives of the Ministries of Defense and Foreign
Affairs, encouraging these ministries to support the U.S.
request to lift the ban on jet fuel exports. During a meeting
with Presidential Assistant Masimov, Ambassador was informed
that the ban was intended to control the rising price of jet
fuel, and thereby assure that Kazakhstan has sufficient
supplies at a reasonable price for its domestic needs.


5. (C) On May 11, Ambassador met with Vice President of
KazMunaiGas Timur Kulibayev and First Deputy Minister of
Energy and Mineral Resources Baktikhozha Izmukhambetov
regarding the request to lift the ban. Kulibayev seemed
supportive of the request, and recommended that the
Ambassador write another letter to Prime Minister Akhmetov,
asking that the ban be lifted specifically for the delivery
of 4,250 tons of jet fuel for which Red Star had already
paid. That letter was delivered on May 13.


6. (S/NF) During the same meeting, Kulibayev offered to
import more jet fuel from Russia than Kazakhstan required,
with the intention to send the excess to Ganci; he added the
caveat that this proposal would take time to realize.
Izmukhambetov offered his services as the point of contact
for the transaction. Both noted that the fact that U.S.
forces would be the final recipient of the fuel would have to
be kept secret. Embassy conversations with Red Star indicated
that Red Star was already seeking contracts with Russian and


other outside suppliers and that short-term relief from the
ban was what was required to keep air operations at an
acceptable tempo.

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A Promise of Help
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7. (SBU) On May 18, POEC chief raised the subject with
Minister of Energy and Mineral Resources Shkolnik. Shkolnik
said that he had just become aware of the impact of the
export ban that morning, upon his return from overseas. He
stated that supporting OEF operations out of Ganci is "our
common strategic task." He asked that we provide him the
specifics on how many tons of fuel were required so that he
could issue the order permitting the export. Embassy sent
him a copy of Ambassador's May 11 letter to Akhmetov
specifying the 4,250 tons already purchased.


8. (SBU) Post is in regular contact with Red Star on the
issue. Sources in Red Star report that during the April 20
meeting between Presidents Nazarbayev and Bakiyev, Bakiyev
received assurances that the matter would be resolved. Red
Star also reported that KG Vice Prime Minister Usenov sent
Shkolnik an official letter requesting that Shkolnik prepare
and release a decree authorizing the delivery of 20,000 tons
of jet fuel from the refineries in Pavlodar and Shymkent to
Red Star.


9. (SBU) Red Star informed Embassy Bishkek on May 20 that
1,600 MT of jet fuel had been loaded on rail cars in Omsk,
Russia and was making its way to Bishkek. Red Star expects
this shipment to take 5-6 days to reach Bishkek. An
additional 3,400 MT has not yet been loaded, but will follow
the initial shipment in increments.


10. (C) COMMENT: While we believe the case for lifting the
ban for deliveries to Red Star has been made, it is not clear
why the request has not yet been acted on. Contrary to
rumors heard from outside the mission, we see no evidence
that the jet fuel ban is intended either to limit the War on
Terrorism or to destabilize the new Kyrgyz government. In
all probability the reasons for the GOK's delay in lifting
the ban (or refusal to do so) are murky and complex and may
become clearer only in the future. The Mission will
continue to do everything it can to get the ban lifted, and
the jet fuel on its way to Ganci. END COMMENT.
ORDWAY


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