Lebanon signs fuel deal with Iraq to ease crisis crippling nation that led to 23-hour blackout

Lebanon has signed a new deal with Iraq in an effort to alleviate the crippling financial and energy crisis that has led to power outages and political unrest in the Mediterranean country for 23 hours.

Under the agreement, Beirut will be able to resell one million tons of Iraqi heavy fuel oil — fuel that Lebanon cannot use in its own power plants — to companies that would then supply usable fuel to Lebanon over the next year.

The country has been gripped for 21 months by an economic collapse that threatens its stability.

It has almost run out of foreign reserves and faces a growing shortage of fuel, medicines and other basic commodities. Most Lebanese suffer power outages for many hours a day.

The shortage has resulted in huge hour-long queues for basic goods walking into the streets in what the locals call ‘queues of humiliation’.

Lebanon has signed a new deal with Iraq to alleviate its crippling financial and energy crisis. Pictured: People queuing for bread in Beirut

People on their scooters and motorcycles wait in line for petrol amid the shortage as Lebanon strikes a deal with Iraq

People on their scooters and motorcycles wait in line for petrol amid the shortage as Lebanon strikes a deal with Iraq

The Lebanese lira has now fallen to a tenth of its original value against the dollar, as citizens struggle to pay for their groceries during the crisis.

The country, which has struggled to meet electricity demand at the best of times, has imposed increasingly longer power cuts across the country as fuel supplies ran out during the crisis that erupted in late 2019.

Many Lebanese rely on private generators that use diesel, which is also in short supply.

The shortage has led to huge hour-long queues for basic goods taking to the streets in what has been branded by locals as 'queues of humiliation'

The shortage has led to huge hour-long queues for basic goods taking to the streets in what has been branded by locals as ‘queues of humiliation’

Doctors move beds as patients wait on benches in a corridor of Rafic Hariri University Hospital as pressure on hospitals mounts

Doctors move beds as patients wait on benches in a corridor of Rafic Hariri University Hospital as pressure on hospitals mounts

Hospitals said this week their generators were at risk of running out of fuel, putting critical patients at risk.

“All hospitals… are less prepared now than they were during the wave at the beginning of the year,” said Firass Abiad, the manager of the largest public hospital in the country fighting Covid.

Government officials have also complained about widespread smuggling to neighboring Syria, which is also facing an economic crisis after a decade of war.

Lebanon defaulted on its foreign debt last year and struggled to pay suppliers. The Central Bank has limited the credit to purchases of basic necessities, including fuel and medicines.

Generator makers warned Friday that they would have to shut down their engines as diesel shortages worsened and black market prices hit exorbitant levels.

Meanwhile, UNICEF warned that most water pumps across the country will gradually shut down over the next four to six weeks, putting more than four million people, including one million refugees, at immediate risk of losing access to safe water.

The country has faced an economic collapse for the past 21 months that threatens stability

The country has faced an economic collapse for the past 21 months that threatens stability

Under the new deal, Lebanon would offer Iraq services in exchange for the fuel, Energy Minister Raymond Ghajjar said, without giving details. Local media said Iraq would benefit from Lebanese health services and agricultural advice.

The swap, which Ghajjar estimates is valued at between $300-400 million, could provide a breather from the worsening power outages in Lebanon and provide money for the struggling government. But a structural power solution, in an industry steeped in corruption and political interference, is far from sight.

Blackouts have been a fixture in Lebanon since the end of the 15-year civil war in 1990, and the small country relies on imported fuel. But the problem has worsened as the government grapples with unprecedented financial difficulties and considers lifting fuel subsidies.

“The Iraqi state agreed to open an account with the central bank of Lebanon in exchange for this fuel. This account is administered by the Iraqi Ministry of Finance, through which it buys services in Lebanon… in Lebanese pounds,’ Ghajjar said. Lebanon then resells the fuel in exchange for fuel to use in its factories.

“We hope other Arab countries follow suit and give us this opportunity, because it really is a golden opportunity for us,” Ghajjar said at Beirut International Airport on his return from Baghdad.

A statement from the Iraqi prime minister’s office said the 1 million barrels of fuel oil would be offered to Lebanon in exchange for services and products, although neither side immediately stated what these were.

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