Lebanon signs fuel deal with Iraq to boost electricity supply

Iraqi oil will be swapped with fuel required to run power plants, Lebanese power minister says

Iraq will provide cash-strapped Lebanon with fuel in a deal that will help to increase power supply in coming months, Lebanese Energy Minister Raymond Ghajar said on Saturday.

He was speaking on his return from Baghdad where he signed a one-year agreement to purchase one million tonnes of Iraqi fuel, to be paid for in Lebanese pounds. Iraq will spend the sum on Lebanese services, Mr Ghajar said.

Lebanon, on the other hand, will swap Iraqi heavy fuel oil with spot cargoes of fuel suitable to run the country’s power plants.

“At peak [power] production, the deal will ensure the provision of electricity for four months,” , Mr Ghajar told reporters at Beirut airport.

“We hope other Arab countries follow suit and give us this opportunity because it is really a golden opportunity for us,” he said.

The deal with Iraq will enable the state-owned power company, Electricite du Liban, to increase its power supply from the current level of less than two hours daily in many parts of the country once new spot cargoes are purchased and delivered, Mr Ghajar said.

Two weeks ago, EDL had to temporarily shut down two plants after running out of fuel. The plants provide up to 60 per cent of the country’s electricity.

Lebanon’s decades-old power woes have intensified in recent months over shortages of diesel and other fuel. The central bank has reduced its subsidies of oil imports because of falling foreign currency reserves.

Electricity supply has been unreliable in Lebanon since the end of the 15-year civil war in 1990. Since then, EDL has sold power at a loss. The country’s energy troubles have been compounded by the smuggling to neighbouring Syria of diesel used to run private generators that compensate for state power rationing.

Acute shortages in diesel recently forced private generators to cut their power supply, plunging many areas across the country into hours-long daily blackouts that threatened to shut down hospitals among other vital facilities and businesses.

Bakeries in some parts of Lebanon have shut down their ovens. Supermarkets said the lack of power impedes their ability to preserve perishable food.

The cuts have sparked demonstrations and several attempts by protesters to hijack diesel deliveries in the Bekaa area and the northern region of Akkar, prompting the army to intervene to secure shipments.

On Friday, generator operators said they would have to stop operating because of shortage of diesel and the high price of fuel on the black market.

The worsening power cuts have caused frequent internet failures and disruption of water supplies. Unicef issued a warning that more than four million people in Lebanon could lose access to affordable clean water within weeks.

More than half of the population has fallen below the poverty line since late 2019, when the country was hit by its worst economic and financial crisis in decades. The crisis led to the collapse of the national currency, which has lost more than 90 per cent of its market value against the dollar.

The financial meltdown has been exacerbated by political paralysis. Politicians have been unable to agree on the formation of a new government almost a year after the previous one resigned following the massive explosion that hit Beirut port and killed more than 200 people in the capital.

The blast, which wounded and displaced thousands of people, caused property damage in the billions of dollars. Eleven months later, it is not known what triggered the blast or who was responsible for the storage of hundreds of tonnes of ammonium nitrate at the port with the knowledge of the country’s top officials and security chiefs.

The international community, which has provided direct aid to vulnerable communities, has said financial support for the country hinges on the formation of a Cabinet that commits to the introduction of reforms.

President Michel Aoun is expected to hold binding parliamentary consultations on Monday to nominate a new prime minister in place of Saad Hariri. Mr Hariri, who has held the post twice previously, abandoned efforts to form a Cabinet earlier this month after nine months of bickering with the president over its makeup.

Updated: July 25th 2021, 9:38 AM