News Column

Fertiliser company chooses US carrot over stick

June 6, 2014

Atif Khan

Pakistani company Fatima Fertiliser plans to establish one of the biggest fertiliser companies in Indiana, United States, and the consortium, Midwest Fertiliser Corporation, has been sanctioned USD 1.29 billion (approx) worth of Tax Exempt Municipal Bonds to support the project, The Nation has learnt.

The seeds of the investment got germinated in 2010 when United States realised that despite its utmost and best efforts terrorists were using fertiliser for manufacturing Improvised Explosive Devices (IEDs) and that fertiliser was smuggled from Pakistan into Afghanistan.

"We are sweeping more and more of this stuff off the battlefield," Lt-Gen Michael D Barbero, head of US military command was quoted as saying in US media outlets back then. "But it just keeps coming, and it keeps growing," Lt-Gen Barbero said.

The frustrated US officials, complaining of IEDs, said that Pakistani fertiliser is hindering the American efforts in Afghanistan on which billions of dollars of US taxpayers were being spent.

"Calcium Ammonium Nitrate (CAN) is responsible for more than 70 percent of roadside bomb blasts against coalition forces in Afghanistan despite a ban by Kabul on the fertilizer", Lt-Gen Barbero told a Senate hearing.

Barbero, who headed a Defense Department unit that combats the explosive devices and bombs, said the Fatima Group of Pakistan that runs the factories, has been "less than cooperative" in discussions with the United States.

US concerns grew when in 2011 after the casualty figure shoot up to 22 percent. "A plastic jug filled with ammonium nitrate fertilizer, these cheap, hard-to-detect bombs had wounded about 3,200 US soldiers and Marines, up 22 percent from 2010, according to a Pentagon report.

After finding out that some of the fertilizer used in IEDs was manufactured by Fatima Group, Lt-Gen Michael D Barbero called Group Chairman Fawad Mukhtar in August 2010 and asked him for a meeting. Mukhtar replied that Barbero did not need to travel to Pakistan as he was planning to visit the United States to drop off his son at college and promised to stop by Barbero's office in Arlington. The two met for about 30 minutes and Barbero asked for Group's cooperation in return for lucrative business opportunities.

This was reflected in Barbero statement, which he gave after the meeting. "He is not a radical, "I think he wants to be part of the solution." The detail of the meeting was published in Washington Post on November 26, 2011.

Barbero was heading a US military command at that time, with an annual budget of about $2.8 billion that was created to stem US casualties from insurgent bombs. In just few months, he shelled out $24 million for a new hand-held ground-penetrating radar, $33 million for mini-surveillance robots.

Fatima Group is owned by Pakistani business tycoon Arif Habib of Arif Habib Group. The Group acquired Pakarab Fertilizers in 2005 through a privatization process.

In 2004 the Group participated in an investment of $750 million for the establishment of a state of the art fertilizer complex with the name of Fatima Fertilizer. Besides being the Group Chairman, Mukhtar was also Chief Operating Officer of Pakarab Fertilizers Limited, along with heading a number of other businesses.

The US efforts were not restricted to making lucrative offers to Fatima Group but US officials were also lobbying with Pakistani president, prime minister, interior minister and army officials to take stringent measures to minimise smuggling of fertilizer into Afghanistan, where Taliban were using it against Nato forces.

According to interior ministry sources, the Pakistani authorities started maintaining sales records of the fertilizer as a first step and ensured that it was strictly sold on National Identity Cards. But this practice hardly yielded any results.

At that time US Senator Bob Casey, reportedly called for restrictions on the sale of ammonium nitrate and to plant a tracking system that charts the course of chemicals to distributors to buyers.

This suggestion was implemented by Pakistan interior ministry with the help of its allied departments and agencies.

At that time, Rehman Malik was the interior minister. The ministry along with Fatima Group's management and US officials charted out a plan to paint the fertilizer bags with special chemical so it could be traced through aerial surveillance.

But it also yielded not very good results, and then finally trackers were placed in the bags. Through monitoring and surveillance some suspicious dealers were detected, and their deliveries were planted with more trackers. It was learnt that due to these trackers US achieved some high value targets in border areas and inside Afghanistan.

In reward of this cooperation US accommodated Fatima Group in Midwest Fertilizer Corporation, which incorporated in Delawar, US, in 2012. According to Reuters report, 48 percent shares of that plant were owned by Fatima Group.

To further facilitate the Pakistani Company, $1.3 billion incentive package was given by Posey County. The Indiana Economic Development Corporation made the offer to Midwest Fertilizer Corp in November 2012.

Disaster recovery bonds of 2008 were used to support the $2-billion fertilizer plant. The subsidy package included $2.9 billion in conditional tax credits based on the company's jobs and investment plans and up to $700,000 in training grants. In December 2012, Midwest Fertilizer acquired options for 219 acres of land for the facility in Posey County, where infrastructure including rail, road and port were already available.

The Fatima Group was engaged in establishing business in United States and then US realised that it wanted more from this group. Despite planting trackers, US was now asking for permanent measures after the withdrawal of major US force from Afghanistan. To exert more pressure on Fatima Group, Indiana Governor Mike Pence opposed the project and all the incentives were withdrawn. Fatima Group had no choice but to agree on US demands due to their high stakes. The Group implemented US formula in which explosive components were minimised.

US department, Joint Improvised Explosive Device Defeat Organisation, or JIEDDO, along with US military officials tested this new formula in Pakistan in November last year and again in Nevada, US, this year. After the full cooperation of Fatima in Pakistan, all hurdles in US were removed.

Posey County Disaster Relief bonds of $1.259 billion for Midwest Fertilizer Corporation (MFC) project was successfully re-marketed on April 10, 2014 to a call option through Nov 18, 2014.

When Arif Habib, Chairman Arif Habib Corporation, was contacted to comment on this issue, he excused, after a long pause. "I don't want to comment on this. Please talk to CEO Fatima (Group)," he said.

Group CEO Fawad Ahmed Mukhtar admitted that his company has been facilitating US in the war on terror but denied planting of trackers by his company staff. On his request when this scribe sent him questions by email, an email was received signed by Company Secretary Ausaf Ali Qureshi.

Answering a question, "Did Fatima fertilizer on the advice of US, planted trackers and (applied) special paints on the bags to trace terrorists, who are making IEDs", Qureshi admitted supporting government of Pakistan and United States but denied placing trackers.

"Our Fertilizer plants have been cooperating with the government of Pakistan and the US to implement their recommended measures. No trackers have been placed in any bags as we have no such technology available. However, in consultation with the government of Pakistan our Pakarab plant isolated its CAN bag for ease of product identification, as the product under question related to Pakarab.

To the question that did US offered Fatima Group set up a plant in Midwest in reward of their cooperation to US in hunting terrorists, he said the two things were not interlinked. "The two points are not inter-connected in any manner. Fatima Group is part of an international consortium that is setting up the facility in the US and no reward has been offered nor being sought".

Answering a question he admitted that his factory was the only producer of fertilizer with high content of material which is used in IEDs. "Although our plants are the only manufacturers of CAN in Pakistan we are a minor manufacturer of ammonium nitrate (less that 1%) in the Region compared to other countries.

On the request of the scribe to further clarify his answer, CEO Fawad Mukhtar said through an SMS, "We took measures on advice of Govt of Pakistan and US by changing colour of bag and introducing United States Steward Ship Programme." He said Fatima Group has 35 percent stakes in Midwest Fertilizers.

Saying that they have not received any special benefits on their services to US in the war of terror, Secretary Ausaf Ali Qureshi said that figures of subsidy given to them was actually 2.9 million, and not in billions. He said same lucrative offer was also made to Iowa Fertilizer Company owned by Orascom, which is an Egyptian Company.

When US embassy in Pakistan was contacted for their take on the matter, US Embassy Spokeswoman Meghan Gregonis denied any funding to Fatima Group from State Department but lauded the Pakistani company over its support and cooperation to the US in the war on terror.

"Over the past 18 months, Fatima Group has cooperated closely with coordinated efforts by the United States and the government of Pakistan to address the security of fertilizers in Pakistan and to prevent misuse of their products by terrorists and insurgents, Meghan said.

Appreciating Fatima Group's efforts further, she said, "At the request of Indiana State and federal representatives, we have provided detailed briefings on our engagement with the government of Pakistan and the Fatima Group on the issue of IEDs. We have been pleased with the group's active efforts to increase product security. She said that US State Department did not provide any funding to the group, however any incentive provided was the discretion of Indiana State.


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Source: Nation (Pakistan)


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