Beirut’s complex import scheme to be extended until 2028, further delaying green transition
Lebanon could become reliant on a complex arrangement to import Iraqi fuel for its electricity needs, despite the lack of an agreed repayment plan.
The scheme, which experts say is fraught with problems, could lock the country into an unstable arrangement while delaying its transition to renewable or affordable energy sources, new documents and interviews reveal.
Lebanon, a country which has few natural resources and is suffering from an economic crisis, imports heavy fuel oil from Iraq under a swap deal signed in 2021.
Because the heavy fuel supplied by Iraq does not meet Lebanon’s fuel specifications, the deal allows Beirut to swap it on the international market for other types of oil suitable for its power plants, through traders who make a profit.
But three years after the deal was signed, Lebanon has yet to pay Iraq for the oil received. This is partly due to the unclear terms of the agreement.
The contract, seen by media under a freedom of information request, states that Lebanon will deposit funds in a dollar account that Iraq can withdraw in Lebanese pounds to spend on “goods and services” for its ministries, such as medical services.
But the exchange rates at which Iraq will access the funds as well as the exact nature of services are unclear.
As a result, Iraq has yet to access the $550 million worth of goods or services, the value of the first year’s imports, deposited in Lebanon’s central bank.
The deal also leaves Lebanon reliant on fossil fuels as it swaps the Iraqi heavy oil for gas oil and low-sulphur fuel oil, rather than cheaper alternatives such as natural gas, or cleaner renewables.
Despite these issues, new documents suggest that Lebanon plans to rely on the Iraqi fuel deal being renewed for its energy supply until at least 2028.
media has seen Lebanon’s National Emergency Plan for the Electricity Sector, written by the Ministry of Energy and Lebanon’s state electricity company, Electricite du Liban.
It was put together as an alternative to the country’s 2022 energy plan, which has not yet been implemented amid delays in the wider package of reforms to Lebanon’s governance and economy demanded by international lenders in return for vital funding.
The plan reveals that EDL intends to increase the volumes involved in the deal with Iraq to $772 million per year. This is part of its plan to boost capacity production from four hours to eight hours per day by 2028.
According to calculations, this will increase the total bill owed to Iraq to $5.45 billion by 2028, and leave Lebanon mainly reliant on fossil fuels, without guaranteeing 24-hour electricity for residents.
This comes despite the Iraqi government not having committed to extending the contract.
“The Iraqi fuel deal is a ticking time bomb with no alternative fuel source. The contract is due to end in October and the Iraqis will want to know why they haven’t received anything in return,” said a Lebanese energy professional and former ministerial candidate, who did not want to be identified.
Even if Lebanon were able to pay and secure an extension of the deal, experts have expressed concern over the lack of planning to secure alternative, cheaper and greener sources of fuel.
Lebanese households, despite being promised reliable electricity for more than a decade, continue to face daily blackouts and are forced to pay for expensive and polluting diesel generator subscriptions.
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