VZCZCXRO1586
OO RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK RUEHMOS
DE RUEHKU #1031/01 0840636
ZNR UUUUU ZZH
O 250636Z MAR 06
FM AMEMBASSY KUWAIT
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3657
INFO RUCNRAQ/IRAQ COLLECTIVE PRIORITY
RUEKJCS/SECDEF WASHINGTON DC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RHEBAAA/DEPT OF ENERGY WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 KUWAIT 001031 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/ARP, NEA/I 
LONDON FOR TSOU, PARIS FOR ZEYA 
TREASURY FOR BBALDRIDGE, PLANTIER 
BAGHDAD FOR LKIMMEL, KTAECKER 
 
E.O. 12958: N/A 
TAGS: ECON EPET KCOR MOPS KU IZ
SUBJECT: KPC GETTING PAID BY SOMO, TRANSPORTERS ARE NOT 
 
REF: A. KIMMEL - WERBERG EMAILS 03/22/06 
     ¶B. ANKARA 01392 
     ¶C. ANKARA 00775 
     ¶D. BAGHDAD 00936 
     ¶E. BAGHDAD 00766 
     ¶F. BAGHDAD 00750 
     ¶G. KIRKUK 00046 
 
This cable is sensitive but unclassified; please protect 
accordingly.  Not for Internet distribution. 
 
¶1.  (SBU) Econ Officer spoke on March 22 with Kuwait 
Petroleum Corporation EAMD of Marketing Mr. Waleed Al-Hashash 
regarding SOMO payments to KPC for gasoline and diesel fuels 
purchased by Iraq from Kuwait (see all reftels for 
background.)  Al-Hashash made the following points: 
 
-- KPC is definitely getting paid in full by SOMO for the 
purchased fuels. 
 
-- KPC has a Letter of Credit (LC) that guarantees payment. 
When the amount is low KPC asks to have it replenished, which 
it always is. 
 
-- There was only one time, last summer, when KPC had a 
problem getting paid.  KPC was instructed by the Kuwaiti 
Ministry of Energy to continue fuel shipments despite the 
payment problems, and the payments were resumed shortly after. 
 
-- It is Al-Hashash's understanding that SOMO previously had 
authorization from the Iraqi Government to purchase up to 
$500 million in imported fuel each month.  The cap was 
recently reduced to $200 million, forcing SOMO to buy less 
fuel each month. 
 
-- Sometimes the money transfers are slow and there are other 
administrative snafus, but Al-Hashash insisted that KPC is 
getting paid by SOMO in full. 
 
-- He said that it is clear to KPC that there is widespread 
corruption and mismanagement within SOMO.  He also said that 
KPC is aware that there is a significant amount of smuggling 
of fuel products out of Iraq, mostly in the north. 
 
-- While KPC is getting paid, the companies that are hired to 
transport, audit, and secure the fuel are not. 
 
-- These companies have approached KPC and the Kuwaiti 
Ministry of Energy, but there is little that Kuwait can do. 
 
-- These companies are in a position to stop deliveries to 
Iraq, and some have already done so. 
 
-- Instead of paying these companies what they are owed, SOMO 
decided to write off these invoices as "bad-debt" and simply 
hire new companies. 
 
-- KPC previously only released SOMO-purchased fuel to two 
transporting companies authorized by SOMO.  These are the 
companies that have not been paid. 
 
-- Last week, three new companies showed up at KPC all saying 
that they have been authorized by SOMO to accept fuel 
deliveries from KPC for transport to Iraq. 
 
-- The Acting Director of SOMO was in Kuwait last week at the 
same time, talking with KPC about the transport arrangements. 
 
 -- KPC told SOMO that it would prefer for SOMO to delegate 
one "agent" or representative to be responsible for all 
contact with KPC.  KPC does not want to deal directly with 
all of these transport companies, or to sort out which ones 
are really authorized to take the fuel.  KPC needs to know 
who it is dealing with, and expects certain safety and 
security standards to be met by the fuel transporters. 
 
-- SOMO "did not like this idea" of the sole representative. 
 
-- Al-Hashash said that the joke within KPC is to refer to 
these new transport companies as "the new victims" because it 
is likely that they will end up not being paid by SOMO, just 
as happened to the original transport companies. 
 
 
KUWAIT 00001031  002 OF 002 
 
 
 
¶2.  (SBU) The main thing Al-Hashash wanted to convey was that 
SOMO "needs to have its financial affairs in order, including 
payments to the transport and security companies," and that 
it needs to be "very clear about who is authorized" to 
receive fuel deliveries.  He emphasized that, while KPC is 
getting paid, all of these problems that SOMO is creating by 
not paying the transport and security companies are making 
things very difficult for KPC and KPC has no way to secure 
and transport fuel to Iraq itself if SOMO doesn't make good 
on the payments to the transporters and they all refuse to 
make the deliveries. 
 
********************************************* * 
For more reporting from Embassy Kuwait, visit: 
http://www.state.sgov.gov/p/nea/kuwait/?cable s 
 
Visit Kuwait's Classified Website: 
http://www.state.sgov.gov/p/nea/kuwait/ 
********************************************* * 
LEBARON