Corruption thrives on secrecy

Red Star Enterprises Limited was given a multi-year contract to deliver fuel to Bagram Air Base, Afghanistan from 1 September 2008 to 31 August 2011. The contract was extended for 6 months.

In early March 2012 Defense Logistics Agency extended this contract again for Two Months with an Option for an Additional Two Months ( Justification and Approval for Other Than Full and Open Competition to Extend Contract SP0600-08-D-1017). For 2 months we are talking about 27 million gallons. The cost?  Good look if you can see it in the document, most of which is painted with black.

If it continues like that exception will become a rule.

Mina and its affiliate, Red Star Enterprises, were the subjects of a US Congressional probe into contracting practices in fuel supply to the Manas Transit Cente) in Kyrgyzstan, a logistics hub for US and NATO forces serving in Afghanistan. (see the report here).

I wrote a few pieces about the Manas fuel contracts and Red Star: see, Tragy-Comedy of the Manas Fuel Contracts, Manas Fuel Supply Contract Stinks and Fuel Logistics Pain in Afghanistan.

Many other people also paid attention to the subject. See for instance Is The Pentagon The World’s Biggest Sucker?, Did an American contractor get Kyrgyzstan's president kicked out of office?, and Eurasianet.org.

Anyway, what has happened after the Congressional investigation? Nothing!

When Kyrgyz President Bakiyev was overthrown in 2010, he was replaced for a while by Roza Otunbayeva, who accused Mina Corp and Red Star of trying to carry on the tradition of bribing presidential family members. "The corruption is endless. All these dark corners. It is like trying to clean the Augean Stables," she told the Washington Post.

In a statement issued on 17 December 2010, Mina Corp accused Kyrgyz authorities of trying to "shut down its business."

Later on, a Kyrgyz-Russian joint enterprise was set up specifically to break the Red Star monopoly.

A Eurasianet.org article reported that “The US Defense Logistics Agency placed its first order for fuel with Gazpromneft-Aero-Kyrgyzstan on September 26, 2011 and the company now has 45 days to deliver. US Ambassador to Kyrgyzstan Pamela Spratlen said the new contract prioritized transparency and security of supply.”

Another Eurasianet.org article reported that on October 26, 2011 the Pentagon announced that a competitor, “World Fuel Services Europe (WFSE)[1] was the recipient of a contract, worth a maximum of $938.4 million, for a minimum of 10 percent of fuel supplies at Manas. The announcement leaves Mina with no supply role at Manas. WFSE will partner with a Kyrgyz-Russian enterprise, Gazpromneft-Aero Kyrgyzstan (GAK), which is already positioned to provide as much as 90 percent of the TS-1 fuel needed to maintain Manas operations. But should GAK, for whatever reason, fall short of the 90 percent delivery target, WFSE will have the opportunity to cover any shortfall, up to the facility’s full 100-percent supply needs.

A statement issued by the US Embassy in Bishkek said the WFSE award “complements another contract announced in September 2011 to Gazpromneft-Aero Kyrgyzstan. […] With the announcement of this contract, we seek to ensure a stable, secure, and uninterrupted supply of fuel, under the dual-contract arrangement we announced on September 27, 2011.”

Kyrgyzstan's new President Almazbek Atambayev was sworn in on December 1, 2011.

Mina Group press release on 7 March 2012 reads: Mina Corp has successfully completed deliveries of jet fuel to the Manas Transit Center (MTC) in Kyrgyzstan under a United States Department of Defense contract.

Another Mina Group press release on 27 March 2012 reads: The U.S. Department of Defense’s Defense Logistics Agency today awarded Red Star Enterprises Limited (“Red Star”) a two-year contract for jet fuel supplies at Bagram Air Base in Afghanistan. The new contract will run for two years and includes an option to extend the contract for up to four months. Under the award, Red Star won part of the solicited volume.

Why was Mina Group again given a contract after so many allegations?  

Remember that Secretary of State Hillary Clinton was asked the following question on December 2, 2010: Why has the United States risked putting the base's future in jeopardy by defying the clear and persistent calls by Kyrgyz leaders for the Pentagon to stop dealing with the fuel contractors Mina and Red Star?

Her answer was clear: “We are committed to transparency. The fuel contract was a result of an open bidding process.”

She is right, everything was in line with the legal procedures.

Mina Group says the same for the March 2012 contract: “The award was the result of an open and competitive tender process conducted in accordance with the U.S. Federal Acquisition Regulation (FAR), the rules governing procurement initiatives of U.S. government agencies.”

The words “in accordance with the U.S. Federal Acquisition Regulation” tell a lot. In most developing countries when someone is accused of corruption you hear always similar sentences like that. Everything was done according to the rules! Have you heard any corruption case in which things weren’t done according to the rules? People tend to forget that it is people who make the deals, not the papers. If you dare to really investigate and can prove the connections between contract givers, takers and the middle men, then you have a corruption case. Usually you wouldn’t dare because you would be in trouble. But you cannot fool the people all the time. This was one of the main reasons of the so-called Arab Spring.

Any person who grew up or lived in such a country would ask the following question: How come a secretive company with a decade long history has been getting most, if not all, of the lucrative contracts in Afghanistan and Kyrgyzstan? Are the contracts awarded to Red Star are indeed properly justified? Something is very fishy. Who are this company’s supporters or promoters in the DOD and the US congress? Who are the Red Star employees really? Do they have any connection to the DoD or the congress?

In a developed country like the US one would expect at least DOD Inspector General and Committee on Oversight & Government Reform (House of Representatives) to make a deeper investigation than a developing country government body. Don’t get me wrong. I am not blaming anybody. I just remind that corruption thrives on secrecy.

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[1] World Fuel Services Europe is a division of World Fuel Services, a Miami-headquartered company listed on the New York stock exchange.