Lebanon looks to Iraq for oil product supplies

Lebanon is hoping to add Iraq to its list of fuel oil suppliers in exchange for agricultural products as the country struggles with a financial crisis that has forced it to seek billions of dollars in aid.

Lebanese prime minister Hassan Diab hosted a delegation of Iraqi ministers on 3 July to discuss boosting bilateral ties between the two states, including a potential mechanism to import Iraq's excess oil products.

Iraq's delegation included the newly-appointed oil minister Ihsan Ismael.

"We discussed the possibility of concluding an agreement between the Lebanese and Iraqi governments to export this product in order to achieve a higher surplus for both governments," Ismael said. This will enable the Lebanese government "to obtain good prices without intermediaries' intervention, and enable the Iraqi government to secure a permanent market for the consumption of its products."

One of the most indebted countries in the world with sovereign debt of more than 170pc of GDP, Lebanon has suffered chronic fuel shortages resulting in daily power cuts since the end of the civil war in 1990. It currently relies on fuel oil imports from Algeria and Kuwait for Electricite du Liban (EDL), the main power provider.

Algeria's Sonatrach signed a contract to supply diesel and fuel oil to EDL from 1 January 2006. This contract has been renewed every three years. But in April, Lebanon accused Sonatrach of delivering sub-standard fuel for EDL's Jiyeh and Zouk power plants. Prosecutors have since made several arrests related to the fuel shipment which arrived in March.

"Contracts will expire at the end of the year and we are preparing the rulebooks so that other companies can apply for this offer," Lebanon's energy minister Raymond Ghajar said.

"A group must be created by the presidency of the council of ministers to keep track of the continuous developments. They will determine the price of oil and we will give them agricultural supplies and pay the remaining difference in cash," he added.

By Adal Mirza