Pentagon Billions Are Flowing to Middle East Dictators

The tarmac at the Al Dhafra military base in the United Arab Emirates. WITT-SIPA-AP

Officially, the U.S. does not pay other governments for rights to military bases. The logic is straightforward: funneling money to the treasuries of foreign dictators cannot form the foundation of genuine strategic alliances. Yet, to fight wars in Iraq and Afghanistan while staring down the mullahs in Iran, over the last decade the Pentagon has come to rely in an unprecedented way on a web of bases across the Middle East. And a NEWSWEEK investigation of Pentagon contracting practices in Abu Dhabi, Kuwait, and Bahrain has uncovered more than $14 billion paid mostly in sole-source contracts to companies controlled by ruling families across the Persian Gulf. The revelation raises a fundamental question: are U.S. taxpayer dollars enriching the ruling potentates of friendly regimes just as the youthful protesters and the Arab Spring have brought a new push for democracy across the region?

Take a look at Abu Dhabi. The wealthiest of the United Arab Emirates, it hosts a U.S. Air Force base at Al Dhafra, which is a vital refueling hub in the region. As is the case in most Gulf states, Abu Dhabi is ruled by a single family that dominates both government and business. Here it is the Nahyan family, and the emir is 63-year-old Sheik Khalifa bin Zayed Al Nahyan, who is known for his interest in camel racing, is worth $15 billion, and controls the country's national oil company, ADNOC. As it turns out, every drop of fuel America buys for its planes at Al Dhafra—more than 200 million gallons a year, costing $5.2 billion since 2005—is purchased from the Al Nahyan–-controlled ADNOC.

Yet, according to contract documents, that money has bypassed the competitive bidding process that is supposed to accompany any -purchase—of firearms, flak jackets, or fuel—by the Pentagon.

In Abu Dhabi, "we may be essentially buying our presence," says Alexander Cooley, a professor at Barnard College who studies U.S. basing strategy. The U.S. regularly pays rents to foreign landowners, but those payments are separate from base rights, which are government-to-government agreements. On bases, Cooley says, "there is a quid pro quo that is tacit."

Nearly three decades ago, after a spree of spending scandals—there was a $436 hammer and a toilet seat that cost $640—Congress passed the 1984 Competition in Contracting Act requiring competitive bidding. The principle is simple: competition drives down prices and increases quality. According to Charles Tiefer, a member of the federal Commission on Wartime Contracting, "The law mandates competition with very limited exceptions."

Abu Dhabi has exploited one of those exemptions brilliantly. Five years ago, at the height of the Iraq War, an American fuel contractor based in Florida called IOTC challenged a $500 million sole-source contract teed up for ADNOC. The award "must be open to full competition," a contract lawyer, Ronald Uscher, wrote in a protest letter to the federal Government Accountability Office. The Pentagon fought back, citing what it said was U.A.E. law, but IOTC's lawyer says the military "was unable to produce any such law or decree."

Internal Pentagon emails obtained by NEWSWEEK under the Freedom of Information Act show confusion even inside the Defense Logistics Agency (DLA), which handles procurement for the military. After a colonel questioned the sole-source process with ADNOC in 2008, the acting division chief of the agency responded, "Basically, it's the only company we are allowed to source fuel from as per the local gov't." Later, a U.S. contracting officer asked, "Is there any documentation or history" about the Abu Dhabi law? Even the U.S. Embassy in Abu Dhabi said that it could not actually find a copy of the law. Only a few months later, the Pentagon issued another $918 million sole-source contract to ADNOC. In Tiefer's estimation, "you are turning the keys to the treasury over to the sheikdom."

The Pentagon says it did what it had to. "We have an option," a DLA official told NEWSWEEK. "Do you want to be in that country and fly out of the airfield and use the fuel they provide, or not?" (ADNOC would not comment.) As Ronald Neumann, a former ambassador in the Middle East, says, the dilemma is "a potential effect of doing business in nondemocratic countries."

Ruling families hosting other U.S. bases in the Gulf seem to be profiting in the same way. Consider Kuwait, where Arifjan, the major U.S. base, serves as the chief military supply route to Iraq. Like the Al Nahyan family in Abu Dhabi, the al-Sabah clan runs Kuwait, as well as its national oil concern, Kuwait Petroleum Co., which has received some $4 billion in Pentagon contracts since 2005, much of it in sole-source contracts. The DLA explains, "Contracts providing fuel destined for Iraq are sole source due to Kuwaiti restrictions."

Or look at the kingdom of Bahrain, where Arab Spring protests have raged this past month. It's also home to the 60-acre headquarters of the U.S.'s Fifth Fleet. King Hamad bin Isa al-Khalifa rules the country, and as it happens, Bahrain is also host to the regional headquarters for the DLA's energy operations—the office that buys all fuel for the U.S. military in the first place. Every year Bahrain's national oil company routinely wins a chunk of a huge Pentagon contract, called WestPac, to provide fuel to U.S. military operations in the western Pacific. Bahrain's national fuel company has achieved a rare status: the kingdom, which has a population of barely more than 1 million people, has became one of the American military's chief fuel suppliers, taking in billions. The DLA points out that Bahrain's fuel sales are not a sole-source contract like the ones in Abu Dhabi. Instead, the Pentagon says, Bahrain always wins because its bid is low; it offers vast quantities of fuel; and it has few, if any, competitors among the "traditional suppliers" in the region. David Kirsh, a director at the oil--consulting firm PFC Energy, says, "The Bahrain Petroleum Co. probably would not be winning these contracts if not for the base." The official at the DLA says the agency does its best to provide fuel at low cost to U.S. forces around the world.

The question remains whether these strategic alliances are floating on more than a fast-flowing river of taxpayer money.

Roston is an investigative journalist based in Washington, D.C.