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Waste and Corruption: The Pentagon's $43 Million Gas Pump


November 4, 2015
Avi Asher-Schapiro / Vice.com & VICE News

The US has spent around $110 billion to rebuild Afghanistan since 2002 yet the Stockholm International Peace Research Institute reports that "the Afghan private sector has thus far failed to fulfill its potential as an engine of economic growth or an instrument of social inclusion." Meanwhile, in the Afghan province of Jowzjan, the US has managed to install a simple gas station with just a handful of pumps. It cost $43 million to build -- and US taxpayers footed the bill.

https://news.vice.com/article/the-pentagon-blew-43-million-on-the-worlds-most-expensive-gas-station

The Pentagon Blew $43 Million on 'The World's Most Expensive Gas Station'
Avi Asher-Schapiro / Vice.com

(November 2, 2015) -- Somewhere in Sheberghan, a medium-sized Afghan city in the northern province of Jowzjan, lies a simple gas station with just a handful of pumps. The humble facility, which was supposed to provide cheap natural gas to local Afghan drivers, cost $43 million to build -- and the US Department of Defense footed the bill.

The station was conceived of and paid for by the Task Force for Business and Stability Operations (TFBSO), a Department of Defense program that has since been disbanded. "We do capitalism," said Paul Brinkley, the program's former head. "We're about helping companies make money."

In the case of the Sheberghan station, "doing capitalism" meant going over budget by $42.5 million to build a little-used gas station. An equivalent facility just across the border in Pakistan cost just $500,000.

Why the project cost so much -- and where that money went -- is still a big mystery. The latest report from the Special Inspector General for Afghan Reconstruction (SIGAR) singled out the facility as an example of profligate Pentagon waste.

"The Department of Defense charged the American taxpayer $43 million for what is likely the world's most expensive gas station," said John Sopko, the head of SIGAR.

According to SIGAR, nobody at the Pentagon wants to talk about the gas station, or the $800 million TFBSO program that has been offline for just over a year. SIGAR has repeatedly asked the Department of Defense to explain why the Sheberghan facility cost $42.5 million more than was required, and the agency is now accusing the Pentagon of stonewalling.

"[The Pentagon] now says it knows nothing about the project," Sopko told VICE News.

The Pentagon, for its part, does not dispute the charges of waste, but said Sopko and his team have full access to the cache of documents associated with the project. "I don't have basis to dispute the dollar figures in the SIGAR report," said a senior Defense Department official, who agreed to speak about the program on the condition of anonymity. He noted that SIGAR can pull the files on the station at any time at a secure "reading room" in Washington, DC.

Meanwhile, the money pit is drawing the attention of lawmakers on both sides of the aisle.

"There's few things in this job that literally make my jaw drop," Missouri Senator Claire McCaskill told VICE News after she saw the SIGAR report. "But of all the examples of wasteful projects in Iraq and Afghanistan… this genuinely shocked me. It's hard to imagine a more outrageous waste of money than building an alternative fuel station in a war-torn country that costs more than 8,000 percent more than it should."

'It's hard to imagine a more outrageous waste of money.'

On Monday, McCaskill sent a letter to Defense Secretary Ash Carter asking him to cooperate with the SIGAR investigation to get to the bottom of the waste. She also demanded that the Defense Department make Joseph Catalino, the most recent head of the TFBSO, available for questioning by the Senate Subcommittee on Investigations.

The senior defense official told VICE News that Catalino already spoke to SIGAR during his tenure as head of the Pentagon task force, but that he has little knowledge of the project because it was completed before his tenure.

Chuck Grassley, a Republican senator from Iowa, was also pissed off reading the SIGAR report. "This is shocking in multiple ways," he said after viewing the report. "The cost of an unnecessary gas station in Afghanistan skyrocketed to a ridiculous height. Now, the Department of Defense is blocking access to documents and personnel that would shed light on how the money was spent."

When VICE News asked the Pentagon if it could provide any more details about the funding for the facility, the senior official said such information wasn't immediately available.

What we do know is that the Department of Defense awarded an initial $3 million construction contract to Central Asian Engineering -- a multi-national construction firm that describes itself as doing "the hardest jobs" in "the toughest places" with "the best people." The company failed to respond to repeated requests from VICE News for comment, and the phone in their DC office did not have an answering machine.

When Central Asian Engineering finished the project in May 2014, it turned over operations to Qashqari Oil and Gas Services, a business that is not registered at all with any Afghan government agency and has no discernable presence in Afghanistan. According to SIGAR, the company's business license has lapsed.

To Watch Shane Smith Interview Ashton Carter, Click here.

The Pentagon, SIGAR said, did not perform a feasibility study on the gas station project before it broke ground in 2011.

But defense officials did tell Congress in January 2015 that demand for natural gas filling stations had convinced Qashqari Oil and Gas Services to construct a "sister station" in the nearby city of Mazar-i-Sharif. No such station has yet been built.

One possible reason for this, SIGAR noted, is that the type of natural gas vehicles that would fill up at the station are too expensive for most Afghans to afford. Converting a car to run on natural gas costs around $800; the average Afghan makes $690 per year. The Pentagon itself paid to have about 120 vehicles converted, and it's possible paying for these vehicle conversations contributed to the bloated bill for the project.

But aside from the $3 million worth of construction contracts, there's no paper trail to explain what happened to the rest of the Pentagon's money.

Since SIGAR and the Pentagon were short on details, VICE News called up the filling station in Sheberghan and asked to speak to the manger. He'd never heard of Central Asian Engineering, or Qashqari Oil and Gas Services. He said the station is operational and owned by Afghan Gas Company. The manager estimated that the station now serves around 250 natural gas-converted cars in the province of 500,000.

It's unclear how or when the ownership of the station was transferred to Afghan Gas Company. SIGAR was unable to visit the facility because of security concerns, and the Pentagon has not turned over any information related to the transfer of ownership.

'Handing over large sums of money to powerful local warlords has been a norm rather than an exception.'

"There are methods people use for budget tracking, and budget monitoring, so it's a fair question: why are those tools not being used?" said Rukshana Nanayakkara, the regional outreach director for Transparency International, a leading corruption and waste watchdog group. "Are there other external circumstances? Did you not use those tools because of the complications involved on the ground level?"

In other words, Nanayakkara suspects that the contractors may have paid bribes. Integrity Watch Afghanistan, the country's leading corruption watchdog, estimated that 50-90 percent of foreign aid is siphoned off into somebody's pocket. "You may have to pay intermediaries to have access to certain ground level deals," Nanayakkara explained.

Sayed Ikram Afzali, executive director Integrity Watch, claimed that the Pentagon's task force was known to grease palms. In 2011, Afzali exposed how the TFBSO's chromite mining initiative, a program that spent hundreds of millions of dollars to encourage Afghans to extract and export the valuable minerals, funnelled money into the hands of militiamen in Kunar province.

"TFBSO does not have a good track record in Afghanistan," Afzali said from Kabul. "Their inefficiency is well known to many people. In addition, they have facilitated corruption and misuse."

Afzali speculated that the money for the gas station could have found it's way into the hands of some unsavory characters, which could explain why the Pentagon is so reluctant to get into the details. "Handing over large sums of money to powerful local warlords has been a norm rather than an exception," he said.

In the end, Afzali seems unfazed by the Sheberghan fiasco. "We have heard of even worse stories," he said. "Such as paying millions of dollars for buildings that were built only on paper."

Aleem Agha contributed reporting from Afghanistan
Follow Avi Asher-Schapiro on Twitter: @AASchapiro



US Aid to Afghanistan Has Largely Been Wasted and Stolen, Report Says
VICE News

(October 14, 2015) -- The United States has spent around $110 billion to rebuild Afghanistan since 2002, the year after American troops invaded the country in the wake of the September 11th terror attacks, according to the US government.

That's enough money to dig a new train tunnel under the Hudson River between New Jersey and Manhattan, lay a high-speed rail link from San Diego to Sacramento, reconstruct New Orleans' levees after a storm like Hurricane Katrina, and still have around $10 billion left over to construct a few hundred schools from Chicago to Houston.

Yet the Stockholm International Peace Research Institute issued a report on Monday saying that Afghan businesses have failed to capitalize on the loads of greenbacks that have rained down on the country in the past 13 years.

"The Afghan private sector has thus far failed to fulfill its potential as an engine of economic growth or an instrument of social inclusion," the report found. "While there is a prospect of tapping this potential, the country's economy is currently mostly deadlocked."

The Institute's report is a cautionary tale for American taxpayers as well as foreign aid groups that were dumping around $15.7 billion a year into the country annually -- providing around 98 percent of the Afghan gross domestic product, according to a 2010 World Bank report -- before the international community and American troops began pulling out in recent years.

The report found that only around 10 percent of the Afghan economy is legitimate. The rest is black market commerce that discourages entrepreneurs from investing and hiring.

"Popular dissatisfaction with unequal access to economic resources, flawed public services and goods, the adverse security situation, and predatory government activity undermine an effective and sustainable private sector," the report said

Among their findings, the Swedes blame foreign governments and aid groups for giving Afghans too much money, which they couldn't spend wisely even if the country weren't riddled with corruption. Intended to improve government and grow businesses, the aid became a crutch that sustained kleptocrats and stifled entrepreneurship, the report said.

Gregg Willhauck, who has been advising Afghan businesses for years with the US Chamber of Commerce-affiliated Center for International Private Enterprise, said that he's seen firsthand the problems outlined in the Swedish report.

"It's been a war and/or contract economy," said Willhauck, referring to contracts for one-off projects that didn't result in long-term jobs. "Not enough has been done to build and sustain an indigenous Afghan economy.

"All those military bases and outposts that were built are now basically empty. The Afghan construction companies that were often brought in as subcontractors or primary contractors -- those businesses aren't sustainable anymore."

Willhauck largely agreed with the Swedish report's recommendations that included targeting businesses in rural areas and women-owned businesses, improving infrastructure, and nudging Kabul crack down on bribery, nepotism, and other corruption.

He also noted that defeating the Taliban -- while crucial -- was not the number one priority for Afghan business owners. Bad politicians, complicated tax rules, and the unclear future role of American troops in the region were bigger problems, he said.

"The Afghans have been dealing with insecurity for 30 years," said Willhauck. "Afghan business people have figured out how to navigate the insecurity. The uncertainty is a much bigger problem."

The country sits on massive untapped mineral reserves, but Willhauck noted that mining would not be a cure-all. China purchased the rights to a massive copper deposit in Mes Aynak in 2007, for example, he said, but they have yet to break ground.

There are no railways to the site and Beijing and Kabul have squabbled over royalties. The Taliban have also been active in the area, which is around an hour's drive from the Afghan capital. Those problems must be surmounted before miners can get to work, Willhauck said.

"If I see another newspaper article about how the US Geological Service believes there is $3 trillion worth of precious minerals in Afghanistan waiting to be extracted, I am going to throw up," said Willhauck. "That's not what we should be focusing on right now."

Follow John Dyer on Twitter: @johnjdyerjr

Posted in accordance with Title 17, Section 107, US Code, for noncommercial, educational purposes.

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