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THE WALL STREET JOURNAL.
Wednesday, February 25, 2015 | A7
**
WORLD NEWS
Afghan Deal Probe Tests President
Ashraf Ghani cancels big
contract to supply fuel
to the army after fraud
allegations surface
BY NATHAN HODGE
AND SAEED SHAH
Reuters
BY MARGHERITA STANCATI
KABUL—Early this month, a
group of businessmen and U.S.
officials gathered at the residence of Afghan President
Ashraf Ghani for an important
meeting. On Mr. Ghani’s agenda
that day, according to people
who were in the room with him,
was a controversial contract for
more than $800 million, signed
weeks before he took office in
the fall, to supply fuel to the Afghan army for three years.
Two companies that had prepared a joint bid on the contract
were deliberately kept out of the
bidding process, executives with
one of the companies alleged.
Their complaint had prompted a
preliminary investigation into
the deal by a team Mr. Ghani had
appointed to review big procurement contracts.
Mr. Ghani wanted answers,
said U.S. Army Maj. Gen. Todd
Semonite, head of the U.S.-led
coalition’s Combined Security
Transition Command-Afghanistan, who attended the meeting.
“He went right around the room.
Everybody laid their cards on
the table, even the contractor
who won the bid.”
The probe had found signs of
unspecified procedural irregularities in the fuel tender, as well as
what investigators said were
several bids submitted above the
market price, according to Afghan officials familiar with the
matter.
Those findings and the complaint raised suspicions among
the investigators that the bidding might have been rigged, the
officials said.
After the meeting, Mr. Ghani
canceled the contract and ordered a second team to conduct
a more sweeping probe into potential procurement fraud surrounding the deal, officials said.
That probe is now seen as a
test of the Afghan government’s
resolve to combat official corruption. For the U.S. and other
countries that fund much of the
Afghan President Ashraf Ghani inspects the honor guard at a ceremony to introduce his new cabinet to the parliament in Kabul last month.
Afghan government’s operations,
it signals Mr. Ghani is serious
about the crackdown.
“This is about donor confidence,” said Gen. Semonite.
According to people familiar
with the probe, investigators are
looking into whether Afghan defense officials colluded with the
winning bidder, Ghazanfar Neft
Gas Ltd., a fuel-supply and trading company based in the northern Afghan city of Mazar-e
Sharif, to award the contract to
the company at an inflated price.
Among the issues being examined is whether the group that
intended to place the competing
bid was deliberately thwarted.
The government suspended
five senior military officers and
a civilian ministry official pending the outcome of the probe,
according to Afghan officials. No
one has been charged.
A U.S. government watchdog
said it also is looking into alleged wrongdoing in the awarding of the contract.
Mohammad Ismail Ghazanfar,
the CEO of Ghazanfar Neft Gas,
denies any wrongdoing in the
bidding process. “It was 100% legal....This is just pure jealousy”
from the losing bidders, he said,
adding he is cooperating in the
investigation. Mr. Ghazanfar said
his bid price was reasonable.
Afghan Army Brig. Gen. Abdul
Rahman Ghori, the head of the
Ministry of Defense’s procurement unit who signed the contract, said the bidding process
was transparent and he welcomed the investigation. “I see
no legal issue in how the fuel
contract for the Afghan National
Army was processed,” he said.
Gen. Ghori is one of the suspended military officers.
Under terms of the contract, a
copy of which was viewed by
The Wall Street Journal, the
Ministry of Defense formally
awarded the deal to Ghazanfar
Neft Gas for $806.3 million. Ghazanfar received five of the seven
supply lots on which it had bid.
Afghan National Petroleum
Ltd. and Dubai-based BB Energy (Gulf) Dmcc also had prepared a bid for all seven lots.
For the same five lots that Ghazanfar Neft Gas was awarded,
the group’s proposed competing bid amounted to $629.5
million, according to the documents.
On the morning of May 25, as
representatives of the group
were en route to the procurement office to submit their bid,
their car was stopped by police
and they were then briefly detained at a police station, according to members of the group
and police records of the incident. As a result of that delay,
they said, they arrived at the office 15 minutes after the bidding
deadline, and their bid was rejected. Executives at the companies said they believe the diversion was intentional. A Ministry
of Interior official rejects that
claim.
Although the contract was
formally canceled, Ghazanfar is
supplying one more month’s
worth of fuel to avert a supply
shortage for Afghan troops on
the front lines. The Afghan government and the U.S.-led coalition meanwhile are discussing
short-term alternatives before
scheduling another tender.
The government also is forming a new procurement department that will process big public
contracts and report to the president’s office, according to the
official overseeing that project.
—Nathan Hodge
contributed to this article.
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© 2015 Morgan Stanley Smith Barney LLC. Member SIPC. CRC1090491 02/15
KARACHI—Former Pakistani
President Pervez Musharraf,
whose administration once
backed the Taliban in Afghanistan, said Kabul must share
power with the extremist group
and block Indian influence if it
wishes to see peace.
The former military ruler told
The Wall Street Journal in an interview this week that Afghan
President Ashraf Ghani’s September inauguration presents a new
opportunity for reconciliation
between Kabul and the Taliban
and related insurgents.
“Ashraf Ghani is a balanced
man,” he said. “I think he’s a
great hope. And Pakistan and India both must stay away, and not
to have this kind of a proxy war
going on there.”
Given his close links to defense and intelligence officials,
Mr. Musharraf’s remarks offer a
window into official Pakistani
thinking on the peace process, a
policy that is often obscured by
careful diplomatic language.
Mr. Musharraf also acknowledged—rare for a top Pakistani
official, even a former one—that
India and Pakistan had been engaged in a long-running proxy
war on Afghan soil that fed the
conflict. But he said his and Islamabad’s role in nurturing the
militant groups in Afghanistan
were a legitimate counterweight
against its rival India there.
“There are enemies of Pakistan that have to be countered,”
Mr. Musharraf said. “Certainly if
there’s an enemy of mine, I will
use somebody to counter him.”
A spokesman for India’s Ministry of External Affairs, said:
“We don’t need to respond to
voices from the wilderness.”
Afghan and international officials say Pakistan will be instrumental in any deal to bring the
Taliban into peace negotiations.
The insurgents maintain their
headquarters and recruiting base
in Pakistan.
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