Identifier
Created
Classification
Origin
09KUWAIT1003
2009-10-20 03:41:00
CONFIDENTIAL
Embassy Kuwait
Cable title:
KUWAIT CHARGING FULL PRICE FOR JET FUEL
how-toVZCZCXYZ0000 PP RUEHWEB DE RUEHKU #1003 2930341 ZNY CCCCC ZZH P 200341Z OCT 09 FM AMEMBASSY KUWAIT TO RUEHC/SECSTATE WASHDC PRIORITY 4079 INFO RUEKJCS/SECDEF WASHINGTON DC PRIORITY RUCQAAA/USCINCCENT INTEL CEN PRIORITY
C O N F I D E N T I A L KUWAIT 001003
SIPDIS
DEPARTMENT FOR NEA/ARP
E.O. 12958: DECL: 10/19/2019
TAGS: MARR EPET PREL KU
SUBJECT: KUWAIT CHARGING FULL PRICE FOR JET FUEL
REF: A. KUWAIT 565
B. KUWAIT 477
Classified By: Economic Counselor Oliver John for reasons 1.4 (b & d).
C O N F I D E N T I A L KUWAIT 001003
SIPDIS
DEPARTMENT FOR NEA/ARP
E.O. 12958: DECL: 10/19/2019
TAGS: MARR EPET PREL KU
SUBJECT: KUWAIT CHARGING FULL PRICE FOR JET FUEL
REF: A. KUWAIT 565
B. KUWAIT 477
Classified By: Economic Counselor Oliver John for reasons 1.4 (b & d).
1. (C) As part of our review of potential outstanding issues
for the -- now postponed -- Joint Military Commission, post
wants to follow-up on reftels (particularly Ref A request for
guidance to which a response was never received) and provide
an update on the status of Kuwaiti fuel allocations for the
U.S. military. In addition to the fuel provided free under
the terms of the Defense Cooperation Agreement, Kuwait had
previously allocated 860,000 gallons per day of subsidized
JA1 jet fuel to the U.S. military and additional fuel at
market price.
2. (C) The agreement to provide subsidized jet fuel expired
in the end of December 2008 and the GoK subsequently notified
the USG that it intended to suspend the subsidy for the next
six-month period (January 1, 2009 through June 30). Post
understands that DESC has been paying market price for
Kuwaiti jet fuel supplied in 2009 (resulting in an increase
of costs of about $59.4 million from January to August). On
October 1, the Kuwait Petroleum Corporation formally notified
DESC that the Kuwaiti cabinet issued a resolution pricing JA1
jet fuel at "the market prevailing price" for the follow-on
period from July 1 through December 31.
3. (C) In ref A, Post provided suggested talking points
requesting a continuation of the subsidies until the
withdrawal of U.S. combat forces from Iraq and sought
interagency concurrence on this suggested approach.
Ambassador, unaware that the bills had been paid in full,
asserted this position informally with the GoK, most recently
in a meeting with MFA U/S Al-Jarallah two weeks ago.
Regrettably, as the non-discounted bills have already been
paid for the first six-month period of 2009, Post believes it
would be impossible to seek a subsidy retroactively, and
would also be very difficult to roll back the pricing going
forward. However, given the sharp fall in the price of fuel
from its height in 2008, the current difference between
subsidized and fair market prices is limited and the
consequent value of the previous Kuwaiti subsidy much less.
Post notes that Kuwait continues to provide free fuel as
previously under its Defense Cooperation Agreement
obligations.
********************************************* *********
For more reporting from Embassy Kuwait, visit:
visit Kuwait's Classified Website at:
http://www.intelink.sgov.gov/wiki/Portal:Kuwa it
********************************************* *********
JONES
SIPDIS
DEPARTMENT FOR NEA/ARP
E.O. 12958: DECL: 10/19/2019
TAGS: MARR EPET PREL KU
SUBJECT: KUWAIT CHARGING FULL PRICE FOR JET FUEL
REF: A. KUWAIT 565
B. KUWAIT 477
Classified By: Economic Counselor Oliver John for reasons 1.4 (b & d).
1. (C) As part of our review of potential outstanding issues
for the -- now postponed -- Joint Military Commission, post
wants to follow-up on reftels (particularly Ref A request for
guidance to which a response was never received) and provide
an update on the status of Kuwaiti fuel allocations for the
U.S. military. In addition to the fuel provided free under
the terms of the Defense Cooperation Agreement, Kuwait had
previously allocated 860,000 gallons per day of subsidized
JA1 jet fuel to the U.S. military and additional fuel at
market price.
2. (C) The agreement to provide subsidized jet fuel expired
in the end of December 2008 and the GoK subsequently notified
the USG that it intended to suspend the subsidy for the next
six-month period (January 1, 2009 through June 30). Post
understands that DESC has been paying market price for
Kuwaiti jet fuel supplied in 2009 (resulting in an increase
of costs of about $59.4 million from January to August). On
October 1, the Kuwait Petroleum Corporation formally notified
DESC that the Kuwaiti cabinet issued a resolution pricing JA1
jet fuel at "the market prevailing price" for the follow-on
period from July 1 through December 31.
3. (C) In ref A, Post provided suggested talking points
requesting a continuation of the subsidies until the
withdrawal of U.S. combat forces from Iraq and sought
interagency concurrence on this suggested approach.
Ambassador, unaware that the bills had been paid in full,
asserted this position informally with the GoK, most recently
in a meeting with MFA U/S Al-Jarallah two weeks ago.
Regrettably, as the non-discounted bills have already been
paid for the first six-month period of 2009, Post believes it
would be impossible to seek a subsidy retroactively, and
would also be very difficult to roll back the pricing going
forward. However, given the sharp fall in the price of fuel
from its height in 2008, the current difference between
subsidized and fair market prices is limited and the
consequent value of the previous Kuwaiti subsidy much less.
Post notes that Kuwait continues to provide free fuel as
previously under its Defense Cooperation Agreement
obligations.
********************************************* *********
For more reporting from Embassy Kuwait, visit:
visit Kuwait's Classified Website at:
http://www.intelink.sgov.gov/wiki/Portal:Kuwa it
********************************************* *********
JONES