Lebanon's unpaid electricity debt: Will Lebanon finally honor its fuel agreement with Iraq?

Report by Bassam Abou Zeid, English adaptation by Yasmine Jaroudi  

Iraq has proven to be more lenient toward Lebanon than its own officials. 

Despite Lebanon owing nearly $1 billion for fuel that helped operate its power plants, it has failed to pay Iraq for three years. In contrast, Baghdad has been patient and extended the contract for a fourth year.

Under the terms of the deal, Lebanon was supposed to compensate Iraq with goods and services, including medical treatments, agricultural products, and other Lebanese exports. 

However, in practice, Lebanon has returned little beyond goodwill and empty promises.  

The root of the issue lies in Lebanon's failure to implement a payment mechanism. Officials knew all along that Électricité du Liban (EDL) lacked the funds to pay for fuel, given its outdated tariffs and weak collection system. They were also aware that the Banque du Liban (BDL) was unwilling to lend and that the government itself had no financial capacity to cover the costs. 

Instead of addressing the problem, they resorted to stalling tactics, endless discussions about a payment mechanism, and ultimately, inaction.  

The electricity sector's mismanagement, political infighting, and lack of transparency have cost Lebanon billions of dollars over decades. This latest episode with Iraq is yet another example of poor governance and short-term thinking.  

With recent tariff hikes and improved bill collection, EDL now has the financial resources to fulfill its obligations. A payment mechanism prepared by the Investment Development Authority of Lebanon (IDAL) has been submitted to Iraq for review. 

If approved, Iraq will receive Lebanese goods and services, while Lebanese suppliers will be compensated in lira at the exchange rate of 89,500 LBP per U.S. dollar, using revenues from the power sector.   

Lebanon is under increasing scrutiny from both domestic and international observers. 

Any further mismanagement could jeopardize this agreement and undermine future deals with other nations, further damaging Lebanon's credibility on the global stage.