Iran fuel may be part of U.S.-funded Afghan supply deals: report

DUBAI (Reuters) - Fuel purchases made for Afghan security forces using U.S. government funds may have included Iranian petroleum products in violation of U.S. sanctions, investigators said in a report published late on Wednesday.

Afghanistan relies heavily on imported fuel and Iran, Russia, and Turkmenistan are the leading countries of origin, the report by the U.S. Special Inspector General for Afghanistan Reconstruction (SIGAR) says.

But the watchdog said it could not rule out the possibility of sanctions violations in purchases for the Afghan National Security Forces (ANSF) that are financed by the U.S. taxpayer.

"Despite actions taken by the Department of Defense to prevent the purchase of Iranian fuel with U.S. funds, risks remain that U.S. economic sanctions could be violated," Special Inspector General John Sopko said in the report.

U.S. sanctions intended to starve oil-export dependent Tehran of funds for its disputed nuclear program ban nearly all U.S. trade with Iran, including financing Iranian petroleum product purchases.

Since December Sigar, created by Congress to oversee reconstruction activities in Afghanistan, has investigated allegations of potential sanctions violations in fuel purchasing for the ANSF.

TIGHTENING CONTROLS

It concludes that while the U.S. Department of Defense (DOD) has made some progress in tightening controls over fuel sourcing for Afghan security services since November, there remains a risk that U.S. taxpayer dollars could continue to flow to Iran.

"DOD is unable to determine if any of the $1.1 billion in fuel purchased for the Afghan National Army (ANA) between fiscal year 2007 and 2012 came from Iran, in violation of U.S. economic sanctions," Sopko said in his report to U.S. Defense Secretary Leon Panetta and Secretary of State Hillary Clinton.

The multinational Combined Security Transition Command (CSTC-A) currently buys fuel - under contracts administered by the U.S. Central Command's Joint Theater Support Contracting Command (CJTSCC) - for Afghan forces from eight separate Afghan importers.

Between 2007 and November 2012, those vendors were not required to provide information on their sources, or certify that their fuel purchases complied with U.S. sanctions on trade with Iran, the report says.

Since late 2012, they have been required to sign contracts that prohibit purchases of supplies from Iran and to certify the origin of the fuel.

BLENDED FUEL

Earlier this month, CJTSCC provided investigators with certificates from four of the eight vendors which said Turkmenistan and Kazakhstan were the "main sources" of fuel they delivered. But it remains unclear whether there is a system to verify the fuel's origin, Sigar said.

Fuel imported from Russia and Turkmenistan is usually blended and the U.S. Embassy in Kabul told Sigar it is possible that fuel blended in Turkmenistan could contain Iranian fuel.

"It is important that adequate measures are in place to test the validity of the certifications and ensure that subcontractors are abiding by the prohibitions regarding Iranian fuel," Sopko said in his concluding remarks.

Washington may need to increase safeguards on its direct assistance funding — expected to exceed $1 billion for ANSF fuel from 2013-2018 — to prevent funds from reaching Iran, he said.

At the end of 2011, Kabul and Tehran signed a trade deal allowing the Afghan government and private sector to buy about 308 million gallons of fuel a year from Iran.

The U.S. Forces-Afghanistan Task Force 2010 is still trying to establish whether any of the eight vendors supplying Afghan security services through the U.S. government contracting system has registered to import fuel from Iran under the terms of that trade deal, the report notes.

For the full report click:

http://www.sigar.mil/pdf/alerts/2013-01-30-alert-sp-13-2.pdf

(Reporting by Daniel Fineren)

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