The Zouk powerplant in Kesrouan. (Credit: Philippe Hage Boutros/L'Orient-Le Jour)
BEIRUT — Minister of Energy and Water Joe Saddi signed a contract renewing the agreement between Iraq and Lebanon in which the former will supply Électricité du Liban (EDL) with fuel, amid Lebanon's ongoing economic crisis and struggling energy sector.
A source privy to the matter confirmed to L'Orient-LeJour that the contract was signed on Feb. 12, the day before Saddi officially took office, replacing former caretaker minister Walid Fayad. The deal's renewal was approved by Iraq on Nov. 19, 2023, and then by former caretaker Prime Minister Najib Mikati's Cabinet on Dec. 17, 2024.
Walid Fayad was supposed to sign it before the formation of the new government, but the contract was delayed in being sent to him, according to the same source.
The new contract takes effect on March 1 and covers a quantity ranging from 1.5 to 2 million tons over a year, which is 500,000 tons more than the range specified in the previous contract. Fayad approached Iraqi authorities with a request for the deal to be extended last August.
Lebanon can still rely on 120,000 tons of Iraqi fuel from the previous contract that has not yet been delivered, the source explained. Payment, which will be deferred, will be made under the same conditions as in previous contracts.
This deal was first established in the summer of 2021 in exchange for services from Lebanon including health care for Iraqi citizens, and has been renewed several times, with significant increases in the amount being supplied. The contract stipulates that Iraq, via SOMO (the state agency responsible for marketing Iraqi oil), supplies a shipment of crude oil each month to a third-party company that then delivers to Lebanon a volume of fuel compatible with EDL plants and whose value is equivalent to that of the crude oil received.
The agreement was born from a situation in which EDL's rates were still frozen at their 1994 level and the state-owned company could no longer rely on Treasury advances as result of the crisis that crippled the Lebanese financial system. EDL, which controls over 90 percent of the Lebanese electricity sector, found itself unable to obtain fuel.
Since then, EDL's rates have been adjusted to current fuel prices, allowing it to straighten out its finances, although it is still unable to do so without the support provided by Iraq.
The electricity sector in Lebanon is hampered by structural deficiencies and insufficient capacity to meet the country's needs. Much of the Lebanese public relies on solar panels and privately owned generators to fill the gap left by EDL shortcomings.
