US embassy cable - 05KUWAIT1160

C O N F I D E N T I A L SECTION 01 OF 02 KUWAIT 001160 
 
SIPDIS 
 
STATE FOR PM, NEA, NEA/ARPI, NEA/I 
OSD/ISA FOR A/S RODMAN AND PDASD FLORY 
 
E.O. 12958: DECL: 03/20/2015 
TAGS: MOPS, PREL, EAID, MARR, PGOV, KU, IZ 
SUBJECT: FUEL PAYMENT NEGOTIATIONS HIT THE PRESS 
 
REF: A. KUWAIT 0762 
 
     B. KUWAIT 0540 AND PREVIOUS 
 
Classified By: Ambassador Richard LeBaron for reasons 1.4 (a), (b) and 
(d) 
 
1.  (C) Summary.  Kuwait's daily newspapers have run 
front-page stories purporting to provide the inside scoop on 
an allegedly acrimonious disagreement between USG and Kuwait 
regarding purchase of OIF fuel.  The press assert that 
Kuwait's request for payment of $500 million for post-war 
fuel deliveries met with a "condescending" letter from SecDef 
Rumsfeld, putting off payment.  GOK public comment has been 
measured, with government officials noting that payment will 
be forthcoming and that a "commercial basis" contract is 
under discussion.  Privately, GOK officials have pushed for 
resolution of the issue for fuel delivered after 1 January 
2005; they have put on the table an offer of refined product 
at $24/barrel.  End Summary. 
 
The Stories 
----------- 
 
2.  (U) After a local story on 17 March, Kuwait's daily 
newspapers have run front-page AP, Al-Jazeera and AFP wire 
stories purporting to provide the background on allegedly 
acrimonious U.S.-Kuwait AIK/OIF fuel negotiations.  The 
controversy surfaced in Kuwait with a front-page story in the 
17 March edition of the "Arab Times."  That English language 
daily quoted a Kuwaiti source "on condition of anonymity" as 
saying that Kuwait had asked USG for $500 million in payment 
for fuel supplied to U.S. forces in Iraq following the war. 
 
3.  (C) That story further quoted the 16 March edition of the 
London-based pan-Arab paper Al-Hayat in citing its source for 
the fuel information as Islamist Kuwaiti MP Nasser Al-Sane. 
Reportedly, Al-Sane had told his supporters in Kuwait some 
days earlier that before and during the Iraq war, Kuwait had 
supplied $450 million of fuel free of charge, and that 
subsequent to the war an additional $500 million was supplied 
as well.  The story continued that Kuwait's request for the 
$500 million for post-war fuel support met with a 
"condescending" and "tough-worded letter" of response from 
U.S. Secretary of Defense Donald Rumsfeld.  The "Kuwait 
Times" characterized the letter as saying that since 
Washington had "liberated the state from Iraqi occupation in 
1991 and because it enjoys a fiscal surplus, there was no 
need to demand the payment."  Papers here also reported that 
the GOK "summoned U.S. Ambassador Richard LeBaron in protest" 
regarding the letter (Note: Charge was summoned, in 
Ambassador's absence, on 20 February; see Ref A). 
 
Kuwaiti Response 
---------------- 
 
4.  (U) GOK public response to the press reports has been 
measured.  On 17 March, the wire services quoted Energy 
Minister H.E. Shaykh Ahmed Al-Fahd Al-Sabah as telling their 
reporters he was "surprised" by press reports of an alleged 
dispute regarding fuel.  He allowed that U.S. forces indeed 
would start to pay for fuel but said that "this is a 
commercial issue."  He said that Kuwait and the U.S. were 
involved in discussing a "payment mechanism for future 
supplies" now that there is "a legitimate government in 
Iraq."  He further announced that a high-level Kuwaiti 
delegation would go to the United States soon for discussions 
regarding the fuels issue. 
 
5.  (C) Comment.  In a 19 March meeting with Ambassador, MFA 
U/S Khalid Al-Jarallah said that he found MP Al-Sane,s 
comments "really bad" and that GOK officials, to include the 
Minister of Energy, had made positive public statements to 
ameliorate the controversy.  Privately, however, other GOK 
sources have been somewhat less sanguine about the fuel 
issue.  In his 7 February meeting with Ambassador (Ref B), 
Shaykh Ahmed pushed for settlement of the post-1 January 2005 
fuel deliveries expeditiously and on a 
government-to-government negotiated basis.  He noted that as 
Minister of Energy he also serves as the chairman of Kuwait 
Petroleum Corporation and that in that latter capacity he 
represents a commercial organization.  He indicated clearly 
that in his opinion the lead for the payment negotiations 
resides at Kuwait's Ministries of Defense and Foreign 
Affairs, not with his ministry. 
 
Next Steps 
---------- 
 
6.  (C) Our read -- of what clearly must be GOK leaks to 
members of the National Assembly and the press regarding the 
on-going fuel purchase controversy -- is that time is running 
down.  We believe our best option would be to close now on a 
mutually agreed price (including whatever services/equipment 
barter arrangements DOD has in mind) before the GOK 
negotiators arrive in Washington.  The Kuwaitis have 
stipulated that their inter-ministerial team may have a 
mandate to discuss much of what we believe falls exclusively 
under the DCA.  The fewer the options up for discussion, we 
believe, the better, particularly in light of CENTCOM 
longer-range plans for very significant burden-sharing by the 
GOK.  End Comment. 
 
7.  (U) Baghdad: Minimize considered. 
 
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Visit Embassy Kuwait's Classified Website: 
http://www.state.sgov.gov/p/nea/kuwait/ 
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LEBARON