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Iraq refuses to renew fuel oil sale agreement to Lebanon, plunging all its regions into darkness
8/18/2024
Senior Lebanese sources revealed that Baghdad refused to renew the agreement concluded with Beirut, which stipulates supplying Lebanon with quantities of "fuel" in exchange for services provided by Lebanon to Iraq, according to what was reported by the Leb Economy website.
Lebanon signed an agreement with Iraq in July 2021 to import one million tons of fuel oil to alleviate the country's electricity crisis, and the first ship arrived in Lebanon carrying 31,000 tons of this material on September 16, 2021.
The website quoted those sources as saying that the failure to renew the agreement is due to purely financial reasons, and is directly related to the refusal of the Bank of Lebanon to open a credit to provide services to Iraq worth 700 million new dollars without real guarantees that the state will pay these amounts.
She explained that Lebanese President Najib Mikati went to Baghdad hoping that the Iraqi side would accept the cancellation of the funds owed by Lebanon as a result of this agreement ($700 million), which Lebanon committed to providing in the form of services to the Iraqi side.
Fuel oil is a mixture of oils that remain in the oil refining unit after distillation (heavy fuel) and is burned in a furnace or boiler to generate heat or to generate electrical or kinetic energy.
According to the sources, Prime Minister Mohammed Shia al-Sudani agreed to renew the agreement for an additional $700 million under the same conditions, without canceling the effects of the first agreement. Therefore, the total value owed by Lebanon to Iraq amounted to $1.4 billion.
She also pointed out that the Central Bank of Lebanon rejected the government's request to open a second account for the government worth $700 million to cover the service requirements of the Iraqi government in exchange for Iraqi fuel.
The sources continued by saying that the acting governor of the Central Bank of Lebanon, Wassim Mansouri, insisted on rejecting this issue, considering that the services that will be provided to the Iraqi side by Lebanon will be paid for by the Lebanese parties that will carry them out in cash, either in lira or dollars, and this means arranging expenses worth 700 million dollars for the Central Bank of Lebanon, "and this is absolutely unacceptable, as it violates the Monetary and Credit Law, as well as the Central Bank of Lebanon's decision not to grant any loans to the Lebanese state."
Iraq and Lebanon agreed to exchange energy, under which Iraq will provide Lebanon, which is going through the worst economic crisis in its history, with heavy fuel oil, in exchange for “services and goods” that Iraq will obtain from Lebanon.
In August 2022, the Iraqi Council of Ministers approved the extension of the agreement to sell fuel oil to Lebanon, explaining that this decision comes in response to the difficult circumstances that the Lebanese are going through.
Meanwhile, the website said in a report published today, Sunday, that the electricity was completely cut off in all Lebanese regions after the Electricité du Liban announced yesterday afternoon, Saturday, that “the last remaining production unit of the Zahrani plant on the electricity grid was forced out of service completely due to the plant’s stock of gas oil being completely depleted, which resulted in a complete cessation of the electricity supply to all Lebanese territories, including the basic facilities in Lebanon (airport, port, water pumps, sewage, prisons, etc.).”
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