Manas Operations Hit By Fuel-Tax Row

Eurasia.net ^ | june 2, 2010 | Deirdre Tynan

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A tax dispute is disrupting operations at the Manas Transit Center in Kyrgyzstan. The Kyrgyz interim government is charging tax on fuel imports for Manas, and the US government is refusing to pay, in what has the potential to develop into a major diplomatic standoff between Bishkek and Washington.

Under the terms of the Manas Transit Center leasing agreement, fuel suppliers to the base are exempt from Kyrgyz customs and taxes. Article 7 of the agreement signed last year states: “Purchases of goods and services in the Kyrgyz Republic by the US government or on its behalf to implement this agreement are not subject to any taxes, customs fees and similar payments on the territory of the Kyrgyz Republic.”

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However, Edil Baisalov, the provisional government’s chief of staff, confirmed to EurasiaNet.org that Kyrgyz customs are charging tax on all fuel imports into Kyrgyzstan without exception. Baisalov said US military contractors and local companies involved with fuel supplies to the base would no longer enjoy special privileges.

“We have been discussing the issue for several weeks with the United States, Kyrgyz customs and with our local companies that supply fuel, and it’s clear that something has changed in Kyrgyzstan. … The local companies that used to solve everything with one phone call can’t do that anymore,” he said on June 2.

“There are real laws in Kyrgyzstan now, rules that apply to everybody,” Baisalov continued. “At this point, it’s an issue of change they [fuel suppliers] have to resolve with customs.”

The US Embassy in Bishkek is refusing to comment on their negotiations with the provisional government. “There are ongoing conversations between the Department of Defense and the provisional government regarding Transit Center issues. We cannot speculate on the outcome of these discussions,” a spokeswoman said on June 2.

The impact on operations at the Manas Transit Center, a key logistics hub using up 12 million gallons of jet fuel per month, has already been felt. The Pentagon confirmed on June 1 the base is no longer being used to re-fuel the US Air Force’s giant KC-135 tankers. Pentagon spokesman Bryan Whitman indicated fuel pricing was at the heart of the issue.

“It’s sufficient to say they’re not proposing reducing the cost of fuel,” Whitman is quoted as saying.

Maj. John Elolf, a spokesman for the Manas Transit Center, said measures are now in place to “conserve” jet fuel. “We are currently in discussions with the interim government to determine the optimal way to procure fuel in the future. We have taken steps to conserve fuel at the Transit Center until the discussions are complete. In the meantime, we continue to provide logistics support to coalition efforts in Afghanistan,” Maj. Elolf said on June 1.

An announcement on the Notice to Airmen (NOTAM) Service distributed by the Pentagon stated on May 27; “Fuel availability limited: Do not use [Manas] as an alternate aerodrome or as a primary divert location.” The notice is valid until June 27. A NOTAM listing posted on May 26, in coordination with the US Air Force’s Tankers Airlift Control Center, warns commercial carriers to arrange fuel with local suppliers in advance until August 22.

In the aftermath of the ouster of President Kurmanbek Bakiyev in April, the provisional government said it would renew the Manas lease for one year. [For background see EurasiaNet’s archive].

But analysts say the current standoff over taxation could be a precursor to yet more money-orientated negotiations between the United States and Kyrgyzstan over the future of the facility.

Last year, after declaring he would close it, Bakiyev went on to secure three times more rent than Washington had previously been paying for the facility. [For background see EurasiaNet’s archive].

Alexander Knyazev, a consultant with the Institute of Political Decisions in Almaty, Kazakhstan, said economic concerns are driving the latest round of US-Kyrgyz discussions. “I think the provisional government is just trying to earn some capital considering the financial crisis it is going through right now,” he said on June 2.

“I think it will all come down to negotiations again, because the United States will want keep the base here, as it necessary for them to do so,” he added.

On April 30, Kyrgyz prosecutors launched an investigation into alleged excise fraud conducted by six Kyrgyz companies providing Russian-origin TS-1 jet fuel to Mina Corp and Red Star Enterprises Ltd. -- the current and previous contract holders for fuel at the air base. [For background see EurasiaNet’s archive].

Separately, the US House of Representatives subcommittee is conducting an investigation into fuel contracting practices at the base. [For background see EurasiaNet’s archive]. Editor's note: Deirdre Tynan is a Bishkek-based reporter specializing in Central Asian affairs.