AMBASSADOR'S ATTEMPTS TO TIE DOWN CONCESSIONARY

C O N F I D E N T I A L SECTION 01 OF 02 KUWAIT 000841 SIPDIS FOR NEA/ARP AND EB, LONDON FOR TSOU, PARIS FOR ZEYA OSD FOR PAUL HULLEY E.O. 12958: DECL: 03/15/2016 TAGS: EPET PREL ECON MOPS KU IZ SUBJECT: AMBASSADOR'S ATTEMPTS TO TIE DOWN CONCESSIONARY OIF FUEL SUPPLY WITH FOREIGN MINISTER AND KPC CEO Classified By: Ambassador Richard LeBaron for reasons 1.4 (b) and (d) ¶1. (C) Foreign Minister Shaykh Dr. Mohammed Al-Salem Al-Sabah told the Ambassador March 8 that the GOK has instructed Kuwait Petroleum Corporation (KPC) to renew the Operation Iraqi Freedom (OIF) fuel contract and urged that U.S. negotiators meet with KPC representatives. Shaykh Dr. Mohammed added, however, that Minister of Energy Shaykh Ahmed Al-Fahd Al-Sabah had some new ideas regarding pricing, intimating that the current concessionary prices could change. The FM would not comment on the length of renewal when pressed by the Ambassador. The meeting came the day after the Ambassador sent an interagency-approved letter to the FM requesting the continuation of concessionary pricing for jet fuel provided to U.S. forces in Kuwait for use in OIF. (Text of letter is included for the record in para 5.) ¶2. (C) The Ambassador called on KPC CEO Hani Hussain on March 12 to follow up, after hearing that DESC's KPC negotiating partners still had not received instructions on terms of a new contract. The Ambassador noted that is was not so much a questions of DESC and KPC negotiating as it was a political question that needed to be answered by the GOK on the pricing and contract duration for OIF fuel. The Ambassador provided Hussain with the details of his conversation with the Foreign Minister and said that the U.S. preference was to maintain the existing terms of the contract for at least one more year. ¶3. (C) Hussain said that the Cabinet had made the decision to extend the concessionary price through the end of March but that KPC could not take any action to extend it further without explicit instructions from the GOK. He said that the Energy Minister was currently out of the country but that he was expected to return on the evening of March 12, at which point Hussain promised he would raise it with the Minister. The Ambassador thanked Hussain for his involvement and pointed out that, beside the cost of the fuel, another critical element for the U.S. military is the certainty of supply and that all sides would be best served by settling on a new contract as soon as possible. Next Steps -------------- ¶4. (SBU) The ball is in Hussain's court to get back to the Ambassador. If we don't hear from him in the next few days, we will re-engage. Text of Letter to Foreign Minister -------------- ¶5. (SBU) Kuwait, March 8, 2006 Your Excellency: I would like to ask your assistance in facilitating a Government of Kuwait instruction to the Kuwait Petroleum Corporation (KPC) regarding the continuation of concessionary pricing for jet fuel provided to U.S. forces in Kuwait for use in Operation Iraqi Freedom (OIF). In April 2005, the Government of Kuwait agreed to provide up to 880,000 gallons of fuel per day to U.S. forces in Kuwait for use in OIF, at a price of $0.57 per gallon. This is a very generous contribution and is but one of many ways that Kuwait has supported U.S. and Coalition efforts in Iraq. The specific fuel contract between KPC and the U.S. military ended on January 31 and has not yet been renewed. KPC has not yet received instructions from the Government of Kuwait to renew the concessionary price contract, and has advised us that the company is waiting for specific instructions. The United States Government kindly requests the Government of Kuwait to approve the renewal of the jet fuel contract at the previously agreed upon price of $0.57/gallon for a period of one year. As U.S. Vice President Dick Cheney noted during his January 17 call on then Prime Minister and now His Highness Amir Shaykh Sabah Al-Ahmed Al-Jaber Al-Sabah, the United States remains firmly committed to our efforts in Iraq. His Highness the Amir urged the United States to maintain its efforts in Iraq to achieve security and stability, saying that Kuwait would continue to work tirelessly in support of U.S. efforts to bring peace and stability to Iraq. We continue to count on Kuwait to help the United States alleviate the cost of this effort. I look forward to discussing this issue with you further at your earliest convenience. Please be assured of my highest consideration. Sincerely, Richard LeBaron Ambassador ********************************************* Visit Embassy Kuwait's Classified Website: http://www.state.sgov.gov/p/nea/kuwait/ You can also access this site through the State Department's Classified SIPRNET website ********************************************* LEBARON