Iraq agrees to supply Lebanon with crude oil, provided that payment is made in cash and immediately
Independent / – Lebanese media sources quoted informed sources as saying that the Lebanese delegation to Iraq (composed of the Chairman of the Board of Directors of Idal Mazen Swaid and Brigadier General Hassan Shuqair) agreed with Iraqi officials to renew the contract for the supply of fuel to operate the laboratories of the Lebanese Electricity Corporation with some amendments to the mechanism of its implementation.
The sources indicated that Iraq will supply about 2 million tons of crude oil after it was supplying the fuel, in exchange for paying for the shipments in cash and immediately, unlike the previous three versions of the contract, which included Lebanon paying for shipments through services provided in Lebanon to Iraqis, provided that the previous arrears of $2 billion are treated through the platform between the two countries to provide agreed services.
Until the end of 2024 and until the formation of the new government, a huge amount has accumulated on Lebanon for the price of fuel shipments. Lebanon has paid only $118 million out of $2 billion. This accumulated amount is the fruit of three copies of the renewed contracts between the parties.
The fourth version of the contract includes the supply of 2 million tons of crude oil and payment in cash
These renovations took place with “montar” and “tatef” although Lebanon did not pay the consequent price of the shipments. Despite the Iraqi facilities, Lebanon could not pay the bills.
These facilities required Lebanon to pay for fuel in Lebanese pounds, provided that the amounts are placed in the account of the Iraqi government in the Bank of Lebanon and will be spent on special services for Iraqis (including hospitality and medicine for Iraqis in Lebanon) in Lebanon exclusively.
The Lebanese “Al-Akhbar” quoted the sources as saying that the platform for these services is nearing completion and will be put into practice soon, and therefore Lebanon can no longer search for justifications and pretexts for default. This default was reflected in the renewal of the contract for the fourth time.
She pointed out that Lebanon’s representatives faced great difficulty in the negotiations, as the Iraqi government needed to prove Lebanon’s good faith in paying, especially after all these facilities and delays. Therefore, it was agreed that the payment of the price of shipments this time would be in cash and immediately, not on the platform, that is, the payment will be in dollars via transfer from the Bank of Lebanon abroad.
Lebanon’s dependence on Iraqi shipments is very vital. In the past four years, Lebanon has been producing electricity mainly by Iraqi fuel, along with water plants and some shipments purchased by the Ministry of Energy recently.
The contract with Iraq is a mutual contract, under which Lebanon obtains unusable fuels in electricity plants but exchanges it with a foreign company in usable quantities in the plants. On average, he received a usable ton for every 2 tons of Iraqi cargo. The equation changes with the change in prices and quality. In this sense, the price of shipments is not the only amount incurred by Lebanon, as he had to pay for the exchange as well, but the payment mechanism was also in ways that did not impose a direct price on it, that is, he was paying the cost from the quantities of crude oil that he did not pay for.
The amount paid by Lebanon to Iraq in the amount of $118 million was in 2023, as in that period the Central Bank of Lebanon stopped transferring the funds due for four shipments worth $132 million for 2023, and the implementation of transfers required the issuance of a law by the House of Representatives to cover them, and the inclusion of the necessary appropriations to cover the price of shipments in the 2024 budget, noting that the number of shipments received and due for payment for 2023 reached 8 shipments and there are 12 other shipments for 2024 that arrived all.
Now, Lebanon renewed the contract after an adjustment in the quality of the quantity that became crude oil instead of Feol, and after an adjustment in the payment mechanism. The matter is a challenge to the Lebanese government, as the price of shipments must be paid through the Bank of Lebanon, knowing that the Electricity Corporation of Lebanon has about $300 million of the leves it retains to purchase the necessary fuel for the laboratories under public tenders that take place periodically.
The newspaper wondered if the Bank of Lebanon would agree to pay for the accumulated shipments and the following shipments, or whether it would say that this would create a cash problem because it arranged a pump in the lira in the market?
Or will he inform officials that there are no appropriations in the budget that cover the payment of these shipments, and that he does not lend to the state to pay them? Noting that this joint has always been the main joint in dealing with the electricity problem in the past five years, that is, since the monetary and banking collapse at the end of 2019 until today. Everyone who claims that the options available are otherwise, is the most important.
The problem is that Lebanon is not able to operate the existing electricity plants, that is, the problem is not in the regulatory bodies nor in investing in the sector.
