Debt dispute with Iraq: Lebanon faces electricity shortage

Report by Petra Abou Haidar, English adaptation by Yasmine Jaroudi

Lebanon is facing a new challenge with increased electricity rationing starting Thursday unless it finds a quick solution to settle its $164 million debt to Iraq, accumulated since 2022. 

Since 2020, Iraq has been supplying Lebanon with fuel oil, which Sahana Energy Company exchanges for diesel based on a tender by the Energy Ministry to operate power plants.

However, after years of this arrangement, Iraq has refused to deliver Lebanon's fuel oil quota for June. Lebanon will have to replace this quota with 60,000 tons of gas oil if it does not pay part of its debt. Two fuel ships remain anchored at sea awaiting an Iraqi decision. 

Meanwhile, the Deir Ammar power plant has stopped working due to a lack of diesel, and the Zahrani plant only has enough fuel to last until Thursday, currently providing 200 megawatts instead of the 600 needed to operate essential facilities like the airport, port, and water utilities.

Prime Minister Najib Mikati has promised to find a solution to what he called developments in the electricity sector. The Energy Ministry is awaiting a response from the Iraqi government after sending a letter requesting permission for the ships to unload their cargo and explaining Lebanon's difficult circumstances.  

The response is currently stalled between the Iraqi Prime Minister’s office and the Oil Ministry.  
 
The Prime Minister's office had asked the Oil Ministry to hold off on loading the fuel until Lebanon fulfills its commitments, confusing whether this meant delaying loading or just delaying a decision to stop loading.

Can Lebanon meet its commitments or at least part of them? 

Banque du Liban (BDL) is still refusing to transfer any money to the Iraqi central bank's account at BDL without a law passed by the Lebanese Parliament to authorize it. 

Sources from the Energy Ministry confirm that two draft laws have been sent to Parliament, but they have not been added to the agenda for approval.