US embassy cable - 04KUWAIT390

C O N F I D E N T I A L SECTION 01 OF 04 KUWAIT 000390 
 
SIPDIS 
 
STATE FOR PM, NEA, NEA/ARP, NEA/NGA 
 
E.O. 12958: DECL: 01/31/2014 
TAGS: EAID, PREL, MARR, MOPS, KU, IZ 
SUBJECT: BLOOMFIELD DELEGATION MEETS INTER-MINISTERIAL 
COMMITTEE 
 
REF: 00243 
 
Classified By: CDA FRANK URBANCIC; REASON 1.4 (A,B,D) 
 
1.  (C) Summary.  A senior U.S. delegation led by PM A/S 
Lincoln Bloomfield Jr. with PDASD/ISA Peter Flory, met on 
January 27 with representatives of the Kuwait Ministries of 
Foreign Affairs, Finance, Defense and Energy as well as the 
Kuwait Petroleum Corporation at the Kuwait Ministry of 
Finance (other meetings Septel).  The GOK had convened the 
meeting to address outstanding assistance-in-kind (AIK) fuel 
issues unresolved since May 2003.  The Kuwait side had 
requested payment of $82 million for fuel supplied during the 
period of May 1 through December 1, 2003, and a contract with 
a USG entity to cover on-going fuel support for Coalition 
forces.  They explained that without a contract as the legal 
basis for provision of fuel, it would be "very difficult" to 
continue the program.  The U.S. side secured the GOK team's 
agreement to refer USG consumption data and request for a 
continuation of AIK, i.e., cost-free fuel support, to their 
Ministries, leadership for further consideration.  The 
Kuwaiti request for a contract remains open.  End Summary. 
 
 
Grateful for Contributions Made Thus Far 
---------------------------------------- 
 
2.  (C) A U.S. delegation led by PM A/S Lincoln Bloomfield 
Jr., with PDASD/ISA Peter Flory, BG Trautman of CENTCOM and 
MG Taguba of CFLCC, met with Kuwaiti officials (delegation 
lists at para 19) at the Ministry of Finance on January 27 to 
discuss Kuwait,s continued assistance-in-kind (AIK) fuels 
subsidy to Coalition forces engaged in Operation Iraqi 
Freedom (OIF).  In early December, the Ministry of Finance 
had presented Embassy a bill in excess of $82 million for 
fuel supplied during the period of May 1 through December 1, 
2003 and had asked for a contractual arrangement with the 
Kuwait Petroleum Corporation (KPC) and a USG entity to cover 
all future fuels supplied to Coalition forces (Reftel).  The 
Bloomfield delegation was charged with ensuring the fuel 
supply was not interrupted and that Kuwait understands USG,s 
expectation that the AIK fuels would continue at the GOK,s 
expense. 
 
3.  (C) A/S Bloomfield opened the meeting by observing the 
significant role that Kuwait has played both in securing the 
defeat of the Saddam Hussein regime and in the on-going 
Coalition military stabilization campaign and humanitarian as 
well as reconstruction programs for Iraq.  He cited the food, 
electricity, medical support, telecommunications, use of 
bases, ports and airfields, and especially provision of fuel 
as critical to our efforts.  He noted that in partial 
recognition of those efforts, Kuwait would be honored as a 
Major Non-NATO Ally (MNNA) at a March ceremony in Washington. 
 He reported that in meetings earlier that day with the Prime 
Minister and Foreign Minister, he had delivered a letter from 
the Secretary of State regarding the ceremony and that Mr. 
Flory would do the same later with a letter from Secretary 
Rumsfeld to the Minister of Defense.  He said that his trip 
to Kuwait seeking agreement on the continuation of AIK fuels 
indicated the critical importance that Washington attaches to 
our bilateral relationship and to the Iraq operations it is 
supporting. 
 
4.  (U) Bloomfield observed that in the coming months, the 
largest troop rotation since World War II would see more than 
200,000 U.S. military personnel rotating out of and into 
Iraq.  Those forces, with the support of 34 other nations, 
were needed to stabilize Iraq.  The 26 million people of Iraq 
would not, he said, soon forget the outstanding contributions 
of Kuwait. 
 
5.  (U) The costs, Bloomfield remarked, indeed are very large 
for Kuwait, as they are for the U.S.  The United States, he 
said, is spending approximately $4 billion a month for 
military operations alone in Iraq.  Even with a budget 
deficit, the Administration had gone back to Congress for 
supplemental budget requests the past two years.  The latest 
supplemental was for $87 billion, with $19 billion of that 
earmarked for Iraq's reconstruction.  This is an enormous 
assistance program that, for example, dwarfs the Camp David 
financial commitments.  The costs are not only financial. 
More than 500 American soldiers have lost their lives in 
Iraq.  However, and as a result of the Coalition's success in 
Iraq and in the earlier liberation of Afghanistan, over 50 
million people now are free and at peace with their 
neighbors. 
6.  (U) Bloomfield further acknowledged Kuwait,s 
considerable contribution to regional stability, citing the 
generous pledge taken at the Madrid Donors, Conference, and 
the recent agreement to consider a substantial reduction in 
Iraq's debt to Kuwait.  These were big and difficult 
decisions to take, he said, but clearly were the right 
actions to ensure long-run prosperity and stability. 
 
 
Declining Usage Rate 
-------------------- 
 
7.  (C) Following these remarks, CENTCOM personnel provided a 
comprehensive update on OIF.  They described the nature of 
the remaining threat in Iraq, and briefed on operations 
undertaken by elements of the 101st Airborne, 82d Airborne 
and 4th Infantry divisions.  To provide the GOK team a better 
understanding of the Coalition's military activities in Iraq, 
CENTCOM described four on-going offensive operations as well 
as three upcoming operations. 
 
8.  (C) Bloomfield said that we anticipate the U.S. military 
forces rotating into Iraq will be a lighter force than the 
units they replace, and hopefully their tempo of operations 
would be allowed to decline over the coming months as 
essential services such as the refineries, power generation, 
roads, education, healthcare and agriculture are more fully 
restored.  He noted that the Coalition is training over 
200,000 Iraqis now on the payroll as police, border patrol, 
facilities protection services and the new Iraqi army.  He 
said our objective is to empower Iraqi security forces to be 
stable, professional and proud to serve but not threatening 
to their neighbors.  This program, with time, could be 
expected to reduce the need for Kuwait AIK fuels; but for now 
the Coalition's job is not finished. 
 
9.  (C) Bloomfield acknowledged that in 2003 Kuwait had 
donated approximately 482 million gallons of fuel, mostly jet 
fuel.  (Note: That donation accounted for approximately 22 
percent of Kuwait,s aviation fuel production, 4.5 percent of 
GOK revenue from fuel sales overall and 1.2 percent of 
Kuwait,s GDP.)  He provided the GOK team with a 
CENTCOM-produced projection of fuel needs for 2004, totaling 
458 million gallons, noting that in both years, the fuel 
needs spiked in March and April -- in 2003, due to the war; 
in 2004, due to the troop rotations. 
 
10. (C) Bloomfield said that the charts and CENTCOM briefing 
on force structure and deployments illustrated two points of 
importance: 
 
a)    there remains a significant need for continued military 
stabilization operations in Iraq; but 
 
b)    with the changes in force structure from relatively 
heavy combat units to lighter infantry forces, fuel needs 
will trend downward, over time if not immediately. 
 
Bloomfield asked the GOK team to work with USG to try to 
overcome the domestic political challenges in obtaining solid 
support in the Kuwait Parliament for the continued 
uninterrupted supply of fuel as a contribution to the 
military operation in Iraq.  Noting that the trend line for 
fuel use was headed downward even by the conservative CENTCOM 
12-month projection, he pledged USG would provide periodic 
updates on usage rates so Kuwait might better anticipate the 
monthly requirement of U.S. forces and thereby regularize its 
production, avoiding present logistical complications in 
providing the fuel. 
 
11. (C) Bloomfield concluded by saying that Kuwait was 
absolutely entitled to the most accurate accounting of our 
fuel utilization requirements, noting that Embassy, Pentagon 
and CENTCOM stood ready at any time to explain the basis of 
our projected fuel needs.  He added that he had volunteered 
his own availability to the Prime Minister to re-engage at a 
later date should it be necessary to ensure that we remain 
good and complementary allies in bringing OIF to its eventual 
and successful conclusion.  He concluded that continued GOK 
support through AIK was "absolutely critical to stabilizing 
Iraq." 
 
 
Kuwait,s Bind: We Need a Contract 
--------------------------------- 
12. (C) Chief of the Kuwaiti delegation Acting Ministry of 
Finance U/S Abdullah Al-Mansour came directly to the point. 
He said that Kuwait indeed had made a sizable contribution 
through AIK fuel and other programs in support of OIF. 
However, the size of the contribution was of less importance 
than the need for a legal basis for the assistance program. 
He noted that it was "very difficult" to continue AIK fuels 
without a legal contract with an identified American entity 
responsible for accounting for past usage as well as future 
usage.  He said that representatives of the Ministries of 
Foreign Affairs and Defense were present in the room and 
prepared to sign a fuels agreement. 
 
13. (C) Al-Mansour explained that the agreement the Ministry 
of Finance had arranged between KPC and the Ministry of 
Defense (MOD) had expired on January 1, 2004.  That earlier 
understanding had it that MOD would pick up the tab for the 
AIK fuels program until the end of hostilities.  The Cabinet 
now had defined that date as May 1, 2003.  KPC had a legal 
requirement to have its delivery of fuels covered by 
contract.  Al-Mansour said that the issue had been discussed 
in the Council of Ministers and the decision taken to 
regularize the fuels program. 
 
14. (C) This then was a two-part exercise.  First, an 
American entity would be named to step into the contractual 
position MOD had had with KPC until the turn of the year. 
Second, payment would be required for fuel provided since May 
of last year and terms arranged for payment for fuel in the 
future.  Al-Mansour emphasized that the price for the fuel 
was negotiable and of lesser importance.  The problem KPC and 
Ministry of Finance shared was in not having a legal basis 
for continued provision of fuel and in accounting for past 
supplies.  He said that the Parliament and Audit Bureau were 
in the process of examining the Ministries, and KPC,s books 
on the fuel deliveries. 
 
 
More and Better Data Offered 
---------------------------- 
 
15. (C) A/S Bloomfield reiterated the importance that USG 
attaches to our continued reliance on AIK fuels.  He 
reassured the Kuwaiti side that although we could not answer 
all the GOK,s questions on usage rates we certainly could 
and would do better than we had in the past.  He expressed 
full understanding for the internal Kuwaiti requirements for 
accountability and legal arrangements with KPC, and asked 
that the GOK revisit the issue at upcoming Council of 
Ministers, meetings in recognition that all the Coalition 
partners were making considerable sacrifices for regional 
stability, especially the United States and Kuwait.  He asked 
whether it would be "bureaucratically possible" to use the 
2004 monthly projected usage rates as a vehicle for the 
government to contract with KPC so as to continue the supply 
of fuel.  Usage rates were projected to drop over time, and 
he expressed the hope that the Council of Ministers might 
consider continuing this vital support.  Bloomfield explained 
that our information was spotty before but that we now had a 
track record, could make better projections, and can point to 
factors that will eventually bring down the requirement for 
AIK fuels.  He emphasized that we are in the middle of a 
critical and very serious operation in Iraq; repeated that 
the USG,s own "burn rate" for military operations is about 
$4 billion a month, not counting reconstruction assistance or 
other costs.  Just as Kuwait seeks relief from its 
contribution, we want to bring our soldiers home as soon as 
possible once regional stability is assured and democracy 
launched in Iraq.  But we are not there yet. 
 
16. (C) PDASD Flory seconded Bloomfield,s thanks for 
Kuwait,s considerable efforts to date.  He said that the 
Defense Department and Secretary Rumsfeld personally 
"appreciate everything that Kuwait has done and continues to 
do" in support of OIF.  Without Kuwait,s support in fuels, 
bases and the disruption in the lives of its citizens, the 
success in Iraq would not be possible, he said.  He continued 
that he had visited Kuwait since 1999 and called the GOK/USG 
partnership the key to regional stability.  That "shared 
effort," he said, was critical for success on the long road 
ahead.  He reiterated the importance we attach to the MNNA 
status Kuwait has earned and pledged greater predictability 
on future fuel usage rates. 
 
Kuwait Kicks the Can Down the Road 
---------------------------------- 
 
17. (C) Al-Mansour thanked the US delegation for 
understanding the "predicament" KPC, the Ministry of Defense 
and Ministry of Finance faced in continuing the supply of AIK 
fuels without an agreement.  He said, "There is no problem to 
reduce the price; but we need a legal contract."  He said he 
appreciated the US side,s acknowledgement that Kuwait,s 
budget process and contracting regulations are similar to 
those of the United States and agreed that continued mutual 
cooperation and respect were vital to success in Iraq over 
the coming months especially. 
 
18. (C) Al-Mansour concluded by agreeing to raise the fuels 
projection information with the leadership of the Ministries 
represented at the meeting.  He said he would work toward 
using that data as the basis for a formal agreement.  He 
repeated that KPC and the Ministries "must cover ourselves 
with a contract with someone" to legally provide AIK fuels in 
accordance with Kuwait,s government procurement regulations. 
 
19. (U) Delegations: 
 
U.S. DELEGATION 
 
U.S. Department of State 
Lincoln P. Bloomfield, Jr. 
   Asst. Secretary for Political-Military Affairs 
Frank C. Urbancic 
   Charge d,Affairs; Embassy Kuwait 
Thomas Williams 
   Deputy Director NEA/ARP 
Stephen Carrig (note taker) 
   Economic Counselor; Embassy Kuwait 
 
U.S. Department of Defense 
Peter C.W. Flory 
   Principal Deputy Asst. Secretary for Intrnl Security 
Affairs 
MG Antonio Taguba, USA 
   Deputy CFLCC 
BG George Trautman, USMC 
   Deputy J-5, USCENTCOM 
COL (P) John Mulholland, USA 
   OMC-K 
Commander Peter McVety, USN 
   OSD Country Director, Gulf 
 
KUWAIT DELEGATION 
 
Kuwait Ministry of Finance 
Abdullah al-Mansour 
   Acting Under Secretary 
Maha al-Rsheid 
   Controller, General Accounts 
Tahani al-Mazan 
   Administrative Researcher 
 
Kuwait Army General Staff Headquarters 
BG Abdul Rahman al-Othman 
   Director, Military Operations 
Colonel Kamel Abul al-Awadi 
   Head of Plans and Programming 
 
Kuwait Ministry of Energy 
Ahmad al-Sirafi 
   Director, Planning & Intrnl Rels Dept 
 
Kuwait Petroleum Corporation 
Mohammed al-Qassem 
   Exec. Asst to MD for Sales 
 
Kuwait Ministry of Foreign Affairs 
Ayham al-Omar 
   Counselor ) America,s Department 
Ghanim al-Sager 
   First Secretary ) Legal Department 
 
20. (U) Assistant Secretary Bloomfield has cleared this 
message. 
 
21. (U) Baghdad minimize considered. 
URBANCIC