Lebanon to Purchase Iraqi Fuel in USD, Altering the Previous Service Exchange Agreement

Lebanon to Purchase Iraqi Fuel in USD, Altering the Previous Service Exchange Agreement

Shafaq News/ The Lebanese government has confirmed plans to purchase Iraqi fuel oil in U.S. dollars, deviating from terms of the former service exchange agreement.

Lebanese Acting Minister of Energy, Walid Fayyad, told meda today, "a new contract with Iraq, approved by the Lebanese Cabinet, stipulates that Lebanon's procurement from Iraq will not be in exchange for services, but for a monetary equivalent in U.S. dollars—deferred payment for a term of six months, under eased conditions."

The minister said that the state-owned Electricité du Liban would be responsible for generating the bills within the six months from its citizens.

After this period, Lebanon would then settle the payment for the fuel oil with Iraq. This arrangement is supplementary to the existing contract of "fuel for services."

Fayyad added that "Lebanese efforts to secure Iraqi fuel supply culminated in success after the recent decision by the Iraqi Council of Ministers."

The resolution authorized an increase in the quantity of fuel oil covered by the "fuel-for-services" contract to cater to the Lebanese Ministry of Energy's needs, raising it to 1.5 million tons per year from the previous one million tons.

This augmentation is slated to commence from the forthcoming fall, coinciding with the expiry of the current contract at the end of October 2023. The move is part of a broader plan to restructure the quantities of fuel oil imported from Iraq to provide additional hours of electricity supply for Lebanese citizens.

It's worth noting that Lebanon had initially signed a pact with Iraq in July 2021 to import one million tons of fuel oil to mitigate the national electricity crisis. The first ship, carrying a load of 31,000 tons of fuel, reached Lebanon on September 16, 2021.

Fuel oil, the heavy distillate left after refining petroleum, is commonly used in furnaces or boilers to generate heat, or to produce electricity or kinetic energy.

Iraq and Lebanon previously agreed on an energy exchange in which Iraq supplied Lebanon—grappling with its worst economic crisis in history—with heavy fuel oil, in return for "services and goods" that Iraq received from Lebanon. The Iraqi Cabinet approved an extension of the fuel oil sale agreement to Lebanon in August 2022, responding to the harsh circumstances faced by the Lebanese people.

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