Afghanistan Analysts Network – English

Economy, Development, Environment

Guest Blog: Big Bucks for Big Players – Logistic fortunes of the Afghan war

Mohammad Jawad 5 min

The logistics business is one of the most lucrative yet murkiest aspects of international security operations in Afghanistan. Involving backroom dealings and hundreds of millions of dollars, the stakes are high, as is the alleged involvement of the Afghan political elite. So who’s running the show, what are the scams, and what will happen as business tails off with foreign troop withdrawals? Mohammad Jawad(*) looks under the tarpaulins.

A female member of the senate; a former minister of agriculture; the son of a recently dismissed security minister. The prominence of the shadowy cast of Afghan logistics magnates is as impressive as the scale of the supply operations that sustain 130,000 foreign troops and more than twice as many Afghan army and police forces.
In the years after the US-led invasion in 2001, the logistics business skyrocketed. Not only because of the sudden demand for fuel, food, water, ammunition, clothing, razor wire, toilet paper – the list is endless – but because the start-up costs in a country with such a large existing commercial trucking base were not prohibitive.

By mid-2012, 3,515 logistics companies had been registered with the Afghan Investment Support Agency (IASA): roughly every sixth company registered with the agency is active in logistics.

Many of the individuals who flourished in the sector were once interpreters, quick-witted young Afghans with good English, whose work brought them close to the opportunities.

‘Interpreters are very well linked with all local companies and sometimes have shares in them, giving them tip-offs to become winners in projects,’ said the director of a regional logistics company. Like most people interviewed for this article, he spoke on strict condition of anonymity.

But people closely connected with the governing elite are said to profit the most. The newly dismissed defence minister Abdul Rahim Wardak, who was sacked by Parliament this month, has been accused of channeling lucrative NATO trucking contracts to his son, a charge he has strenuously denied.

Contracts with the NATO-led International Security Assistance Force (ISAF) are far more profitable than transportation of goods for civilian consumers – hence the fierce competition to supply the foreign forces. And the mark-up for cargo moved for the military ensures swift fortunes for dealers. The fuel sector is a prime example.

The spiralling price of fuel shipped through Pakistan, and then the long closure of this route by Islamabad after a US air strike killed two dozen of its soldiers, has boosted profitability of loads imported via the northern river port of Hairatan.

The amount of fuel needed to power the war machine is vast and it now mainly arrives at Hairatan from Uzbekistan by train in 60-ton or 110-ton wagons. ‘The amounts arriving at night differ, but usually it is 70 to 100 wagons coming for ISAF but only 30 to 35 wagons for civilian use,’ said an Afghan oil trader at the port.

A 16-ton tanker load of fuel moved from Hairatan to Jalalabad for civilian clients earns hauliers 700-800 US dollars, according to insiders. But ISAF pays up to 220 dollars per ton, meaning the same load earns contractors around 3,500 dollars if delivered for the military.

Often shipments are contracted down a chain of companies, however. But the risk of Taliban attack also grows exponentially with greater proximity to ISAF operations they are, so trucking firms try to hide their military connections.
‘Sometimes I also bring ISAF oil from third or fourth contractors and the Taliban do not know whether I am moving it for ISAF or civilians. But it is still extremely risky for me,’ said one driver.

No one has so far managed to monopolize the sector, yet some large firms have emerged as leaders, such as Sadaf Petroleum and the Ghazanfar Group.

Turyalai, the owner of a firm in eastern Afghanistan that moves assorted military cargo, claims that most contracts at the giant US base at Bagram go to a handful of companies, including one run by a former interior minister. ‘Americans and high-ranking Afghan officials dominate big projects, while excluding midsized companies,’ agreed a competitor in the sector.

The military, in turn, says it tries to ensure fair allocation of contracts. Companies seeking work are vetted to ensure they are reputable and properly licensed to conduct business in Afghanistan, ISAF’s media office wrote in response to an inquiry about contracting criteria. If approved, the firms are registered with the Joint Contingency Contracting System (JCCS) and can compete for contracts on the basis of a ‘Low Price Technically Acceptable’ methodology. The vendor “meeting all of the requirements with the lowest fair and reasonable price is awarded the contract.”

But operators still contest claims that the playing field is even for all. ‘Not everyone gets contracts, they go to insiders or people who have internal connections with the Americans,’ insists Kabul-based logistics contractor Fahim.

One director claimed he paid 12,000 dollars a month to a US employee of the Supreme Group, which is the chief commercial supplier of food and food preparation solutions to the US military in Afghanistan. ‘In exchange I received numerous contracts without bidding and auction,’ said the director. His company was blacklisted after the US employee was fired for charging the military 600 dollars for water filters that could be bought for 10 dollars on the local market.

The potential for fraud is evidenced by past cases. Hauliers say a common scam is for transport companies to claim that their trucks and loads were captured or destroyed by insurgents. The firm still charges for delivery, while the goods are sold on local markets.

ISAF acknowledges the problem of cargo not being delivered but says it is closing the gaps for crooked operators. Since the Afghan National Trucking Contract went into effect in September 2011, new language was inserted in the contract that puts the responsibility on the contractor if cargo is missing at the point of delivery.

‘Through these new processes we have seen that this has been a deterrent and events like these have decreased,’ a military spokesman stressed.

Sub-contracting down chains of companies produces arrangements that would appal the western tax payers who ultimately foot the bill. This can include paying insurgent forces not to attack certain convoys.

‘There is no single approach for securing convoys, it varies,’ said a company owner. ‘In some secure areas, no one is paid protection money because companies have shareholders and allies who are warlords, which ensures the convoys safely reach their destinations. In other areas, people use private security companies that have links with the Taliban, and they pay them not to touch the loads.’

In some cases there is no negotiating. ‘Sometimes the Taliban threaten us by telephone, tell us we must stop this business because it is un-Islamic,’ said director Toryalai.

When vehicles fall into the hands of insurgents, drivers can be beaten, executed or ransomed back with the goods. ‘In 2010, the Taliban captured one of my tankers and drivers,’ said another company owner. “They called me to negotiate and asked for 100,000 Pakistani rupees (about 1,200 USD) to release the vehicle and driver.”

Regarding insurgent policy towards the shipments, Taliban spokesman Zabihullah Mujahid said: ‘Sometimes our fighters capture tankers and other logistics containers and we try to sell them. If we can’t, we leave it for the local people to take home, or if that’s not possible, our fighters torch it where it stands.’

Maintaining the projected Afghan security forces of 350,000 personnel will continue to generate good business for select companies after 2014. But for smaller players, signs of recession are appearing already. ‘With the departure of some NATO forces from Afghanistan, our work has slowed down,’ said Farhad, director of the Mouaiz Logistics Company.

Others continue to milk the opportunities and say they will wait and see what happens. ‘We bought a fleet of trucks to transport goods and we make good profits,’ said Toryalai. ‘But if NATO leaves we will have sell our trucks and embark on some other type of work. Because we cannot survive simply by transporting vegetables and cooking oil from province to province.’

(*) Mohammad Jawad is a pseudonym used for security reasons. He is an Afghan journalist based in Kabul and writes for Afghanistan Today. This is where his text originally appeared on 16 August this year. We republish it with the permission of and thanks to Afghanistan Today.

Afghanistan Today is a training project where local journalists, photographers and film-makers are mentored and advised by experienced German, British and Afghan colleagues. Afghanistan Today is financed by the German Ministry of Foreign Affairs, supported in Afghanistan by the German-Afghan NGO Mediothek Afghanistan and produced by MICT (Media in Cooperation and Transition). The reporting is unrestricted and independent.


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