Kyrgyzstan: Legislators Seek ‘Special Payment’ For US Military Facility

By Deirdre Tynan

The United States and Kyrgyzstan appear to be on a collision course over potential surcharges on jet fuel consumed at a US military transit facility outside the Kyrgyz capital Bishkek.

A draft law to impose additional charges on aviation fuel used by US and NATO military forces at the Manas Transit Center has cleared its first hurdle in the Kyrgyz parliament. According to the bill, the charge would be collected at a rate of $100 per ton of fuel.

The US government is vehemently opposing the initiative, which was proposed by the opposition Ata Meken and Ar Namys parties. US officials contend the leasing agreement which covers Manas operations stipulates that fuel deliveries to the facility are tax exempt. Mina Corp, the current US contractor at the base, is also safeguarded by the lease agreement, US officials insist.

“This is a standard practice around the world. The US government has similar agreements with many countries throughout the world for fuel to be delivered free of all duties and taxes,” a spokesman for the embassy said on February 24. “The exemption from fuel taxes is a vital part of our ability to carry out the mission of the Transit Center.”

A source familiar with the US policy added; “This is a non-starter. The US will not pay it.”

An Ata Meken MP, Omurbek Abdrakhmanov, told Eurasianet.org that the charge should be considered a “special payment,” not a tax. “This is not an excise tax. It’s just a special payment. It would not even have to be included in the tax code,” he said.

According to the text of the draft bill, the proposal has met “with the consent of the supplier.” However, Mina Corp representatives deny this.

“Mina Corp has never agreed to any special payments or charges on the fuel it supplies to the Manas Transit Center. Nor could it because the draft law violates the longstanding agreement between the governments of Kyrgyzstan and the United States prohibiting the imposition of any tax or duty on fuel supplied to the US military,” Mina Corp’s lawyer, Dean Peroff, said in a statement on February 25.

“The special payment in the draft legislation amounts to a thinly disguised tax that would ultimately be payable by the US military and the US taxpayer,” Peroff continued. “Mina Corp cannot consent, and has not consented, to anything that violates the US-Kyrgyzstan Agreement and certainly cannot do so without the approval and authorization of its customer, the United States Department of Defense.”

The chairman of parliament’s Committee on Budget and Finance, Akylbek Japarov, a member of the Ar Namys party, said on February 24 that the move would allow the impoverished Central Asian state to generate about $40 million in additional revenue in 2011.

At a reading of the draft 2011 budget during a February 24 parliamentary session, Azamat Akeleev, a member of the Supervisory Board of the Ministry of Finance, warned that Kyrgyzstan is facing an economic disaster with a budget deficit of $445 million. “Unless the government finds the funds to cover the deficit, the country can expect serious consequences up to default and hyperinflation,” Akeleev said.

In 2010, the Manas Transit Center, a key US-led air base operating in support of the war in Afghanistan, contributed to $123.5 million to the Kyrgyz economy, $60 million of which was rent payments made directly to the Kyrgyz government. A further $21.9 million was paid to Manas International Airport in “airport fees, land lease and contracts.”

Some observers say the proposed “special payments” may be a “bargaining chip,” a move designed to elicit more money from the US government in the form of increased rent payments, or to enable a Kyrgyz entity to take complete control over fuel supplies at Manas. “The Kyrgyz want 100 percent of this contract,” said a Washington insider.

One Bishkek-based analyst cautioned the Kyrgyz parliament could be overreaching. “The United States is fed up with this already,” the analyst said.

Deirdre Tynan is a Bishkek-based reporter specializing in Central Asian affairs.