Tensions between Lebanon and Iraq are intensifying due to Lebanon's failure to fulfill its financial obligations under the diesel supply agreement for Electricité du Liban. Lebanese authorities, including the caretaker prime minister, the ministry of energy, and the ministry of finance, have been perceived as expecting Iraq to provide fuel without fulfilling their financial commitments or honoring the terms of the agreement.
Against this backdrop, Najib Mikati is scheduled to visit Iraq to meet his Iraqi counterpart, Mohammed Shia’ Al Sudani, and discuss ongoing cooperation in fuel supply for the electricity sector. Iraq has voiced discontent with Lebanese authorities on multiple fronts, primarily citing delays in implementing the mechanism for delivering Lebanese goods and services as stipulated in the fuel agreement.
Currently, more than $500 million in approved funds are held in a special account at the Lebanese Central Bank in favor of the Iraqi Central Bank yet remain unused — a delay for which the Lebanese government is accountable. Furthermore, Iraq has expressed dissatisfaction over delays in transferring $164 million, which has precipitated the recent crisis.
In addition, the Ministry of Energy has launched a tender for purchasing diesel for Electricité du Liban outside the framework of the Iraq agreement, with a payment of approximately $35 million sourced from EDL funds. This move has led Iraqi authorities to question Lebanon's capacity to meet financial obligations under this tender while failing to uphold its commitments under the previous agreement with Iraq.
Regarding the aftermath of the Iraq issue, it appears that the Electricité du Liban (EDL) board has dismissed the Ministry of Energy's tender for diesel procurement outside the Iraq agreement. The ministry’s rationale was to secure additional fuel and extend electricity supply hours. Nevertheless, the EDL board has opted to allocate available funds either to Iraq, which continues supplying diesel to Lebanon at discounted rates, or to Middle East Power, owned by Tahsin Khayat. This move aims to resolve the dispute with Middle East Power and encourage them to operate the Zouk and Jiyeh reverse engine plants, as diesel is available for both installations.
Furthermore, the EDL board has been taken aback by the media buzz surrounding the Franco-Qatari proposal to establish a 100-megawatt solar power plant. Sources within the board view the project as promising in theory but may prove inefficient in practice due to the poor state of the transmission and distribution network. Consequently, a significant portion of the solar plant's capacity could be technically lost.
Moreover, sources within the EDL board suggest that there are discussions about a proposal for Qatar Energy and Total-Energies to abandon the solar power plant project, bringing instead an FSRU gasification vessel to the Deir Ammar facility. This shift would enable the plant to operate at its full capacity of approximately 400 megawatts, which is more cost-effective compared to diesel. Concurrently, Iraq would continue supplying diesel to the Zahrani plant for full-capacity operation, similar to Deir Ammar. This initiative aims to significantly increase electricity supply hours, boost revenue for EDL, and lower fuel costs.
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