Lebanon renews fuel supply deal with Iraq

Iraq's government has agreed to continue supplying Lebanon's electricity company with heavy fuel oil for another year, in a bid to help partially alleviate the acute power shortage the latter is experiencing.

Lebanon's caretaker prime minister Najib Mikati said on 12 August he had made the request to Iraqi prime minister Mustafa Al-Kadhimi, who agreed to extend the same terms of the agreement signed last year.

The deal allows Lebanon to buy 1mn t/yr of heavy fuel oil from Baghdad and resell it for the products it needs. The Lebanese government buys and resells the heavy fuel oil through monthly spot tenders issued by Lebanon's Directorate General of Oil — in cargoes of 75,000-85,000t — on behalf of Lebanon's main power provider Electricite du Liban. Iraq in theory would receive in return services including health care for its citizens. it is unclear if Lebanon is maintaining its side of the deal.

Lebanon's power plants run certain grades of fuel oil and gasoil, but not the sort that Iraq provides. Lebanon sells that fuel to private-sector companies, which in return provide on-spec spot cargoes for the Lebanese power sector.

The country's acute power shortage reached crisis level last summer, which prompted the government to remove subsidies on fuel import. This created another domestic crisis of extremely expensive fuel prices. Russia's invasion of Ukraine further exacerbated the crisis by bumping up international energy prices.

Despite the deal with Iraq, most Lebanese households are left without state-provided electricity for around 22 hours every day.

By Bachar Halabi