Lebanon’s energy sector faces a punishing hit amid surging oil and gas prices stemming from Iran blocking of the Strait of Hormuz, Beirut’s Energy Minister has warned.
Joe Saddi said Lebanon had been slowly starting to rebuild its economy and other sectors, including energy, shattered by years of neglect, war and economic crises – but faces yet another setback following the latest eruption of conflict in the region.
“Lebanon imports all its petroleum needs from abroad. So any increase in price is reflected within the country,” he told The National on Saturday.
“This means that, for instance if you take the electricity sector; prices have almost doubled in terms of fuel prices. And so the quantities that [Lebanon] can buy are obviously impacted.”
“For the same budget you can afford half the quantities three months ago that it was able to afford. And we’ve seen this phenomenon all across the world.”
The Strait of Hormuz, a vital route for the global oil trade, has effectively been shut by Tehran in its response to joint US-Israeli bombardments of Iran that began last month.
While surging electricity prices have struck globally, Lebanon's population was already reeling from the impact of two wars in two years and a 2019 economic crisis whose effects are still reverberating across the country.
Mr Saddi conceded this surge in electricity and fuel prices would hit Lebanon disproportionately hard, given the economic situation and Israel's relentless bombardment of the country.
Israel has also attacked vital power substations in south Lebanon, as part of its expanding assault on state infrastructure.
“We were slowly starting to rebuild our economy to gain some traction in various sectors, to start implementing various reforms, particularly in the power sector,” Mr Saddi said.
“Most importantly we are obviously in need of attracting private investments, local or foreign. Not only in the power sector obviously. This is going to be a setback and cause delays.”
Lebanon’s dilapidated energy infrastructure, heavily damaged in the 1975-1990 Civil War, has limped on for decades, unable to supply the amount of electricity that is demanded.
But since the start of the economic crisis in 2019, described by the World Bank as one of the worst in modern history, the problem has become more acute. The real value of salaries plummeted as the local currency lost about 98 per cent of its value.
State electricity typically is only available for a few hours a day, if that. Those who can afford it have to turn to expensive diesel-guzzling private generators.
Generator operators have already warned that consumers in April will face a steep hike in prices because of the surge non the cost of fuel.
Elsewhere the Minister said the landmark 2023 maritime border deal between Lebanon and Israel was still valid, at least from the side of Beirut.
Lebanon and Israel have technically been in a state of war since the latter's creation in 1948 and US-led negotiations over their maritime boundary were fraught with sensitivities preceding the 2023 deal.
The maritime agreement was an unprecedented understanding between Israel and its northern neighbour Lebanon and ended years of tense negotiations.
“For the time being Lebanon has had an agreement with the maritime border with Israel and recently a couple of months ago finalised its maritime border agreements with Cyprus,” Mr Saddi said.
Pushed if, despite the Israeli onslaught on Lebanon, it meant the two countries maritime deal was still being respected, he responded: “From our side it still stands.”
