US embassy cable - 04KUWAIT2907

C O N F I D E N T I A L SECTION 01 OF 02 KUWAIT 002907 
 
SIPDIS 
 
STATE FOR PM, NEA, NEA/ARP, NEA/NGA 
 
E.O. 12958: DECL: 09/01/2014 
TAGS: MOPS, PREL, EAID, MARR, PGOV, KU, IZ 
SUBJECT: FUEL FOR IRAQ: ONE MONTH REPRIEVE FROM CUT-OFF 
 
REF: A. KUWAIT 2873 
     B. KUWAIT 2772 
     C. KUWAIT 2747 
 
Classified By: Charge d'Affaires Matthew H. Tueller, Reasons 
1.4(a) and (d) 
 
1.  (C) Kuwait Petroleum Corporation (KPC) and USG 
delegations met again on September 1 to continue discussions 
over Kuwait's provision of assistance-in-kind (AIK) and 
Operation Iraqi Freedom (OIF) fuel supplies for US forces, 
which KPC had been instructed to terminate on September 4. 
KPC Chairman Nader Sultan stressed again that KPC had been 
supplying fuel in the absence of any payment agreement with 
the Kuwaiti Ministry of Defense (MOD), the Government of 
Kuwait (GOK) or the USG.  In fact, he said, the Ministry of 
Defense had informed KPC that because MOD has no more funds, 
fuel supplies should be stopped.  Sultan advised CDA to speak 
to he Minister of Defense regarding AIK fuel for use in 
Kuwait, and relay KPC's need for MOD instructions to continue 
providing fuel beyond September 4.  He cautioned, however, 
that MOD would likely need a Council of Ministers decision to 
authorize more spending. 
 
2.  (C) Concerning fuel for OIF, Sultan reiterated the need 
to negotiate a commercial contract.  But he suggested a 
possible short-term compromise, pending the Minister of 
Energy's approval.  According to Sultan, if the two sides 
could agree that a contract governing OIF fuel supplies would 
be put in place, then he could seek a brief extension in the 
cut-off deadline.  Specifically, Sultan asked for the US 
delegation's concurrence that in the future, (1) KPC would be 
supplying OIF fuel under a contract; (2) pricing would be 
determined by the two sides; 3) fuel volumes would correspond 
to those projected by the US military; and (4) some decision 
would be made as to how to handle fuel that KPC has supplied 
since MOD stopped paying.  CDA agreed that the US did accept 
the principle of a contract for OIF fuel, and that plans were 
being made for a political level team to visit Kuwait to 
reach agreement on commercial terms.  Based on this, Sultan 
said, KPC would recommend that the GOK continue providing 
fuel until contract details can be finalized during 
high-level political discussions. 
 
3.  (C)  After the meeting, CDA delivered letter in para 4 to 
Minister of Defense's Office Director MG Humaidi.  Humaidi 
subsequently reported that after consulting with the Minister 
of Defense, he called the Minister of Energy, who agreed that 
Kuwait would continue providing AIK and OIF fuel supplies 
until October 4.  The Minister of Energy will deliver written 
instructions to KPC to keep deliveries going.  This extension 
is based upon the August 30 (Ref A) and September 1 
discussions, and the understanding that a senior US team will 
visit Kuwait later this month to discuss the price and 
duration of OIF fuel deliveries.  CDA then spoke with KPC 
Chairman Sultan, who confirmed that he had been instructed to 
extend the deadline for cutoff of fuel to October 4. 
 
4.  (SBU) BEGIN TEXT OF LETTER TO MINISTER OF DEFENSE. 
 
Your Excellency, 
 
I would like to take this opportunity to advise you of steps 
the U.S. Government is taking to address the matter of fuel 
supplies that Kuwait provides for U.S. forces in Iraq. 
Issues related to fuel supplies for forces in Iraq have been 
the subject of several senior level bilateral discussions 
over the past eight months. 
 
At this point, we are engaged in negotiations with Kuwait 
Petroleum Corporation on terms of a contract to cover the 
fuel that is going to Iraq for the use of U.S. forces in 
Iraq.  Several technical issues have been resolved in 
meetings held with KPC on August 30 and September 1. 
Discussions are proceeding well. 
 
We expect that senior-level political discussions will take 
place in the near future so that outstanding matters can be 
resolved and a contract covering the oil going to Iraq can be 
signed. 
 
There are two matters that I hope can receive you attention 
in connection with the discussions taking place with KPC. 
The first is quite urgent. 
 
KPC advised the U.S. military on August 20 that absent a 
commercial arrangement, all fuel deliveries to U.S. forces 
would cease as of September 4.  As we have now entered into 
discussions on a contract covering the fuel for Iraq, we hope 
that you can advise KPC to continue providing the fuel for 
U.S. forces while negotiations proceed.  Any interruption of 
fuel supply to our forces in Iraq would of course have 
extremely negative consequences. 
 
The second issue relates to ensuring that appropriate KPC 
officials understand that arrangements covering fuel provided 
for the use of U.S. forces in Kuwait are covered separately 
and are not part of the discussions related to a contract 
covering fuel for Iraq.  I believe it is appropriate that 
this matter be covered with KPC by the Government of Kuwait 
rather than in the context of these contractual discussions. 
 
Your assistance in these two matters would be greatly 
appreciated.  Please accept my assurances of the highest 
consideration. 
 
END TEXT OF LETTER. 
 
5.  (U) Baghdad minimize considered. 
TUELLER