AFGHANISTAN'S WINTER FUEL SHORTAGE

C O N F I D E N T I A L SECTION 01 OF 02 KABUL 005260

SIPDIS

STATE FOR SA/FO, SA/A, EB
NSC FOR THARRIMAN, KAMEND
TREASURY FOR APARAMESWARAN
COMMERCE FOR AADLER
USAID FOR JPRYOR
USTDA FOR DSTEIN

E.O. 12958: DECL: 12/27/2010
TAGS: ENRG EAID ECON EFIN ETRD AF
SUBJECT: AFGHANISTAN'S WINTER FUEL SHORTAGE

REF: A. KABUL 4872

B. TASHKENT 3214

Classified By: AMBASSADOR RONALD NEUMANN. REASONS 1.4 (B,D)

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SUMMARY
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1. (SBU) A diesel fuel shortage in Afghanistan threatens to
leave Kabul, Kandahar and other regions cold and in the dark
this winter. USAID currently provides the GoA with diesel
fuel for power generation that is both expensive and
logistically challenging to supply. Recent losses of diesel
fuel supplies from Kazakhstan and Uzbekistan have raised
concerns that supplies may be inadequate to meet increased
winter demand and could place the GoA in a politically
vulnerable situation. Embassy is working to manage the
situation: Ambassador is being provided daily sitreps of
fuel deliveries to major cities, with additional fuel
resources steered to areas in greatest need. USAID is now
working with an expanded number of fuel suppliers to minimize
the risk of supply chain disruption and has amassed a ten day
supply of diesel, the largest accumulation of reserves in
winter months in Afghanistan since USAID took over the
program in 2003. While significant USAID, international
donor and IFI resources are dedicated to rebuilding
Afghanistan,s shattered power infrastructure, this massive
reconstruction effort will not provide significant relief
until late 2008 at the earliest. To help cover
Afghanistan,s interim emergency power needs, Post intends to
ask major donors here to consider creating an Afghan
emergency fuel fund to share the near-term fuel supply
burden. End Summary.

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DIESEL FUEL FOR AFGHANISTAN: EXPENSIVE AND SCARCE
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2. (SBU) In 2003 USAID, at the urgent request of the GoA,
assumed responsibility from the (World Bank-managed) Afghan
Reconstruction Trust Fund to provide diesel fuel for power
generation in Kabul, Kandahar, Lashkar Gah and Qalat. This
fiscal year, USAID is budgeted to spend USD 55 million
appropriated in the FY 2005 supplemental on diesel fuel
deliveries to the GoA. However, increased fuel prices over
the past year have raised the cost of providing equivalent
levels of diesel-generated power to approximately USD 83
million for the current fiscal year. The GoA is aware that
this shortfall will require them to make additional unpopular
rationing allocations.


3. (SBU) Unreliable suppliers, logistical problems bringing
tanker trucks across the border, poor winter weather
conditions, inadequate roads, corruption and a difficult
security situation all contribute to produce an unusually
complex supply challenge. Diesel fuel suppliers for USAID
and the U.S. military have been unable to obtain fuel from
Kazakhstan and Uzbekistan. Embassy Almaty informed post that
the Kazak government suspended all diesel fuel exports in mid
October to ensure adequate domestic supplies for the winter.
Uzbekistan, another prior source of diesel fuel imports to
Afghanistan, has been suffering from a severe fuel shortage
for the last three months and is no longer able to export
diesel fuel (Ref B). The loss of diesel supplies from
Central Asia has exacerbated an already difficult fuel
situation.

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DRIVERS KILLED DELIVERING FUEL
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4. (C) USAID currently has diesel reserves to guarantee
power generation for ten days (a large margin by local
standards: In the past reserves have dropped to as low as a
two day supply). Suppliers have contracted with USAID to
provide sufficient fuel through the end of February.
However, in the past contractors have proven unreliable in
delivering on their commitments and winter weather conditions
in the coming weeks may become treacherous. Diesel fuel can
only be imported into the country overland via a dilapidated
road system that crosses mountainous terrain. The security
situation in Afghanistan also hampers fuel imports. USAID
reports that since September, 2004, 27 truck drivers and
other contractors have been killed trying to deliver fuel
into Afghanistan. Approximately two dozen tanker trucks have
been stolen, destroyed or seriously damaged over the same
period. CFC-A reports that four drivers carrying aviation
fuel have been killed in the last six weeks.

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TOO MUCH DEMAND, TOO LITTLE POWER
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5. (C) User connections in Kabul alone have increased from
70,000 to 110,000 in the last two years. Consequent
increased demand is straining a fragile and already
overburdened urban power generation and transmission
infrastructure. The GoA faces grousing and the potential for
large-scale public discontent as the country,s power grid,
especially in the capital, suffers from blackouts of
increasing duration. Local Afghans report that electricity
in parts of Kabul is often unavailable for days at a time and
that regular power availability can be as low as five hours a
day.

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WHAT WE ARE DOING
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6. (C) Embassy is moving aggressively to head off a
potential diesel crisis this winter. Ambassador is being
provided daily sitreps of fuel deliveries to major cities,
with additional fuel resources steered to areas in greatest
need. USAID is working with an expanded number of suppliers
to ensure that difficulties of any one provider will not cut
off the supply. Most importantly, USAID has amassed a ten
day supply of diesel, the largest amount of reserves on hand
in winter months in Afghanistan since USAID took over the
program in 2003. USAID will continue to augment these
reserves as supply and storage capacity allow.

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COMMENT
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7. (C) Significant USAID, international donor and IFI
resources are being put into the coordinated reconstruction
of Afghanistan,s shattered power generation, transmission
and distribution infrastructure, including the construction
of a north-south transmission line that will end Kabul,s
dependence on costly and environmentally unfriendly diesel
generation (Ref A). The bulk of this massive energy grid
reconstruction, however, will not come on line until late
2008 at the earliest. Meanwhile, Afghanistan,s improving
economy and its increased appetite for electricity are
straining current resources to the extent that the Karzai
administration could face a political crisis if Kabul and
other cities experience prolonged power interruptions this
winter While Post is working proactively to avoid such a
situation, ensuring adequate funding for diesel fuel for
Kabul and other cities during winter months will be a
significant call on GoA and donor resources for at least the
next few years. Accordingly, Post intends to ask major
donors to consider creating and contributing to an Afghan
emergency fuel fund to share the near-term burden of keeping
the lights on in Kabul.
NEUMANN