Economic Developments – Baghdad
Lebanon has reached a new agreement with Iraq to import crude oil, shifting from its previous arrangement for fuel supplies.
An official government source in Lebanon confirmed that a delegation was sent to Iraq, where they successfully negotiated the renewal of a supply contract for approximately 2 million tons of crude oil, moving away from the former fuel agreement.
The updated contract stipulates a modification to the quality of the shipments, now designated as crude oil rather than fuel oil. In addition, a new payment mechanism has been established, requiring immediate cash payments. This transition means that payments will be made in dollars through transfers from the Bank of Lebanon to accounts abroad.
Negotiators from Lebanon faced significant challenges, with the Iraqi government emphasizing the need for assurances of Lebanon’s commitment to payment due to previous delays. The agreement stresses cash payments to ensure a smoother transaction process moving forward.
The term “fuel oil” refers to a heavy oil mixture remaining after the distillation process in refining, typically employed for heat generation or energy production in electric or kinetic forms.
In July 2021, Lebanon had initially signed an agreement with Iraq to import one million tons of fuel to address its electricity crisis, with the first shipment of 31,000 tons arriving on September 16, 2021.
Lebanon currently grapples with substantial debts to Iraq, exceeding one billion dollars. This figure includes payments for crude oil supplied since 2021, as well as historical debts predating 2003.
Despite Beirut’s inability to fulfill these financial obligations, Iraq has continued its oil supplies, showing consideration for Lebanon’s challenging economic circumstances.
As the new Lebanese government forms and with projections extending through the end of 2024, Lebanon’s accumulated debt for fuel shipments is substantial, with only $118 million paid out of a total of $2 billion. This outstanding balance spans multiple renewed contracts between the two nations.
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