Fueling the Afghan War
Whatever the legal basis for the contract, not only the fuel pipeline but the land underneath it was owned by Red Star. Indeed, trucks would be able to gain access to the pipeline only through Red Star property. Red Star, in other words, controlled all access to the pipeline that would bring fuel to the thirsty US air base. It was as if the company offered to build a door to a US base and then controlled anything that went through the door. "I think it is pretty clever, if you want to say that," says Ives. "It is shrewd business," he added, a bit ruefully. He says he thought the pipeline was a good idea because it limited fuel trucks' access to the base and made things safe. He didn't realize, he says, that the pipeline Red Star built would give it a monopoly.
But that's what it did. Within four months of that memorandum of agreement, the United States announced it planned to offer a sole source contract to Red Star for 194 million gallons of fuel over two years. There were some complaints by a potential competitor, but it had no access to the pipeline. That summer, in August 2008, Red Star was awarded the contract for $720 million. It had locked in the monopoly.
On March 4, 2009, barely six weeks in office, Barack Obama pledged to crack down on government procurement waste and fraud, and "to dramatically reform the way we do business on contracts across the entire government." Standing next to Senator John McCain, his adversary in the election but an advocate of contract reform as well, he said, "We need more competition for contracts and more oversight as they are carried out." That day he sent out a memo asking all federal agencies to work on a way to end sole source contracts.
But when it came to Red Star and Mina, things stayed very much the same. On July 29, about five months after the president's speech, the Defense Department did not bother issuing a solicitation or requesting bids for the fuel contract. Instead, it quietly issued a new, $243 million contract to Mina to keep selling fuel to the base at Manas. The government used an unusual clause in the federal rules to justify this: the "national security" exemption. Under that provision, "Full and open competition need not be provided for when the disclosure of the agency's needs would compromise the national security."
"It went from competitive to sole source," says lawyer Ronald Uscher, who represents a competitor to Red Star and Mina called IOTC. In 2007 Mina had actually won the contract through a process that ostensibly included competitive bidding--though it beat out IOTC, whose bid had been almost 3 percent lower. Using the Freedom of Information Act, Uscher tried to obtain information about Mina's bid, but the Defense Department refused to tell him how Mina and Red Star gauged their price changes. Normally these are based on worldwide fuel prices, but not in Kyrgyzstan. Here it would be kept a secret. "There is nothing secretive about the price of jet fuel in 99.9 percent of the world," says Uscher, "except at Manas Air Base in Kyrgyzstan, apparently!" Then, in 2009, Uscher complains, "You have a sole source secret contract to supply fuel to Manas awarded to Mina with no other competitors having oversight and no citizens having oversight."
Why the secrecy? And what was the national security requirement that dictated avoiding competition? Did Mina's source for fuel have anything to do with it?
Officials in Kyrgyzstan's provisional government say it straight out: Mina Corp., the affiliate of Red Star, was paying funds to Maksim Bakiyev, the president's son. The new government's chief of staff Baisalov says that in order to keep the air base secure and supplied with fuel, the United States essentially "bribed the Kyrgyz ruling family. First it was Akayev and then it was Bakiyev. On one hand, the White House and the US State Department, they announce these noble goals, democracy, good government, and on the other hand, the military comes in and overrides everyone else." The Defense Logistics Agency, which oversees the Defense Energy Support Center, wouldn't comment specifically on that, even to deny it. "We can't speak to that," said DLA spokesman Dennis Gauci. "You'll have to speak to Mina Corp."
A representative of Mina, who asked not to be named, denied any wrongdoing. "There was no consideration given to the ownership interests of any supplier." If Maksim Bakiyev did have any ownership interest, he said, Mina didn't know about it. The company, he told me, was reaching out to the interim Kyrgyz government to try to explain it to them. (Mina emphasizes it does vital work "by providing mission-critical fuel supplies to the troops and civilians that are carrying out the mission in Afghanistan.")
With the collapse of the Bakiyev regime, a whole web of money and power has been exposed. That bank, AUB, on whose board sat ex-Senators Dole and Johnston? Its accounts have been frozen, and the new government says it was laundering money.
The provisional government in Kyrgyzstan says it will leave the base open for now. And the United States, with the Afghan surge under way, needs that base now more than ever. But the Kyrgyz government is making a new demand: it is launching a criminal investigation of the Bakiyev regime and its profits--and it wants the US government to help.