Iraq has brought Lebanon a critical lifeline by granting the latter a six-month exemption from Iraq’s suspension of fuel supply to Lebanon. This extension is expected to aid Lebanon’s failing power sector, which is suffering under the weight of economic and financial crises.

According to the Iraqi officials who disclosed this information, the deal allows Lebanon to continue accruing debt on the fuel supplied by Iraq, meaning the payment does not have to be received simultaneously with the fuel shipment. This shows, if anything, that Iraq has not given up on Lebanon and is willing to aid in their struggle through all the economic turmoil faced by the region. Lebanese officials have also expressed their approval of this extension stating that the country will be able to augment electricity production, putting a welcome relief to millions of citizens who are deprived power for long periods of time.

Lebanon’s Energy Struggles

As the world approaches 2023, Lebanon is already years deep into the dire energy crisis where citizens enjoy electricity for only 2 hours a day in certain areas. Électricité du Liban (EDL), Lebanon’s government owned electricity company, namely a monopoly, cannot obtain sufficient fuel for the electricity generating facilities.

The economic crisis which commenced in 2019 has further complicated Lebanon’s ability to import necessary goods such as fuel and natural gas. To provide some relief, Iraq made an agreement in which it would supply fuel to Lebanon, allowing them to continue limited electricity generation. This six month extension guarantees that Lebanon will continue getting Iraqi oil until at least late 2025.

Fuel Agreement Details

The initial contract signed in 2021 had Iraq sending heavy fuel oil to Lebanon, which then was sold by Beirut as usable fuel through intermediary contract deals. This strategy aided to evade Lebanon’s dire fiscal situation, as the country does not have the financial capabilities to purchase fuel from the international market.

With the most recent extension, Lebanon will still receive around one million tons of fuel every year from aid which allows for limited electricity generation through the national grid. While these measures put into effect are unsustainable in the long run, they do ease the power deficit for the mean while.

While Iraq’s decision does not appear to be politically motivated, there is still some geopolitical context. With Lebanon facing an energy deficit, the nation becomes more reliant on international aid making Iraq a crucial country to help balance the situation.

The deal also underscores the broadened economic diplomacy activity of Iraq. With the provision of economic assistance to Lebanon, Iraq enhances its bilateral relations while establishing itself as a dependable partner within the Middle East.

While some experts remain skeptical, Lebanon’s fundamental structural issues in energy remain unsolved. Without far-reaching reforms within the electricity domain that aim to mitigate corruption and inefficiency, Lebanon will depend on quick fixes, like the Iraqi fuel deal, for the foreseeable future.

Is This The End of the Line for Lebanon’s Energy Sector?

The extension of the six-month period of fuel supply alleviates moderate tension, but Lebanon’s long-term energy problems persist. The country will require significant amounts of financing to address infrastructural and substitute energy needs, as well as an entirely new governance system for the energy sector.

As it is, the support from Iraq serves to buy time for the Lebanese authorities to come up with plans that are viable in the long-term. If Lebanon is able to take advantage of this window opportunity, Lebanon’s willingness to take the necessary reforms is yet to be determined.