Global Policy Forum

Halliburton May Have Been Pressured

New York Times
November 11, 2004

American diplomats pressured the Halliburton Company in late 2003 to keep using a Kuwaiti subcontractor to truck fuel into Iraq, despite evidence that the company was charging exorbitant prices, newly released State Department documents show. The documents - a handful of e-mail messages and memorandums to and from American diplomats - raise yet more questions about the post-invasion fuel imports to Iraq, which are already the subject of federal inquiries into possible overbilling and fraud.

They indicate that the Kuwait government secretly demanded that only one company - a Kuwaiti company, Altanmia - be selected to handle fuel sales to Iraq. And they show behind-the-scenes efforts by the American-run Coalition Provisional Authority and the American Embassy in Kuwait to ensure that demand was met, both to speed delivery and foster Kuwaiti support in Iraq. The documents, however, do not clarify the central questions about the imports: why the Americans went along with such high costs and which parties to the transactions may have benefited most. The documents were released Wednesday by Representative Henry A. Waxman, a California Democrat and ranking minority member of the House Committee on Government Reform, as he asked for new Congressional hearings on the matter. The committee has gathered hundreds of documents related to the issue.

Soon after the American invasion in March 2003, with gasoline lines lengthening in Iraq and public order crumbling, the Pentagon asked the Halliburton subsidiary Kellogg Brown & Root to import consumer fuels on an urgent basis. KBR hired a Kuwaiti conglomerate, Altanmia Commercial Marketing Company, to secure the fuels from the Kuwait government and arrange for their delivery.

Critics in Congress and elsewhere soon questioned the prices KBR was paying and passing along - with a markup for itself - to the Army. On Dec. 11, 2003, Pentagon auditors concluded that the KBR-Altanmia fuel prices, including gasoline delivered at $2.64 per gallon, were more than double the cost of available alternatives. They said that through September of that year the Army had been overbilled by $61 million. Executives of Halliburton and KBR have defended the fuel charges, saying they were reasonable under the demanding conditions of the time. The Pentagon is still debating whether to demand a refund from KBR, and the F.B.I. is examining the fuel transactions.

In December, as a new round of contracts were to be issued, the debate over whether to continue using Altanmia grew stronger. Some documents suggest Kuwaiti pressure. A letter sent to KBR by the contracting officer for the Army Corps of Engineers in Kuwait, Mary C. Robinson, on Dec. 6, 2003, states, "I will not succumb to the political pressures from the GoK or the US Embassy to go against my integrity and pay a higher price for fuel than necessary." GoK is the government of Kuwait.

Ms. Robinson was overruled, and just 13 days later, the Army Corps of Engineers headquarters in Washington issued an unusual waiver declaring that the KBR fuel prices had been "fair and reasonable," and that the company would not be required to provide detailed cost data to justify the expenditures. The senior contracting official of the Corps, Bunnatine H. Greenhouse, said in a recent letter that the waiver was improperly adopted by Corps officers who went behind her back.

Another document, an e-mail message from the United States ambassador to Kuwait, shows the urgency American diplomats felt. On Dec. 2, 2003 - shortly before Pentagon auditors questioned the fuel prices but well after the issue had been raised in Washington - the ambassador, Richard H. Jones, who also served as deputy administrator of the coalition authority in Iraq, wrote to a colleague: "Please, tell KBR to get off their butts and conclude deals with Kuwait NOW! Tell them we want a deal done with Altanmia within 24 hours and don't take any excuses."

Other documents suggest that American diplomats were so eager to bolster fuel supplies and to cultivate Kuwait's wider cooperation in the Iraq struggle that they rejected questions being raised about the propriety of the KBR-Altanmia arrangements. "The Government of Kuwait is ready to do whatever is necessary to get fuel to Iraq," a Dec. 3 memo addressed to Mr. Jones reads. But KBR's reticence to sign further contracts at that time, it said, not only threatens the fuel supply but "is undermining our ability to get other very high priority items from the Government of Kuwait."

Greg Sullivan, a State Department spokesman, said Wednesday: "The role of the embassy was restricted to facilitating dialogue so that badly-needed fuel supplies would be available in Iraq. Neither Embassy Kuwait nor Ambassador Jones played a role in the selection of the Kuwaiti supplier Altanmia, which was the exclusive purview of the Corps of Engineers and the U.S. contractor." But Representative Waxman said, "The mystery around these fuel imports continues." "How did Altanmia get this contract, and why did they charge so much?" he asked. "Why did the State Department weigh in on their behalf in such an aggressive way?"

Mr. Waxman has asked for new Congressional inquiries into the fuel imports and the roles played by KBR, the State Department and the Army Corps of Engineers, which managed the fuel contracts. Other State Department documents released Wednesday indicate that KBR and Altanmia argued bitterly over performance and payments under the fuel contracts. Altanmia's general manager, Waleed Al-Humaidhi, told American diplomats in Kuwait that his company was being shut out of one new deal with KBR because "he and his employees were pressured to provide unnamed KBR executives with 'kickbacks' on the humanitarian fuel contract," according to an embassy memorandum dated June 29, 2003.

But Mr. Humaidhi never provided details of the corruption charges and later told American diplomats that if asked in public, he would deny making them, another embassy memorandum said. Wendy Hall, the Halliburton spokeswoman, said the company had never heard of those allegations and added, "It is important to the company that clients, suppliers and host countries know Halliburton's Code of Business Conduct is expected to be followed in every country in which the company operates."

Earlier this year, the Pentagon began buying fuel for Iraq directly from refiners, without using KBR as a middleman and at lower final prices.

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