Lebanese citizens endured long hours of waiting to learn the fate of the Iraqi fuel agreement before the caretaker Prime Minister announced that the Iraqi authorities had agreed to renew the contract. However, the details regarding the execution of the agreement seem unclear, facing popular opposition in Iraq.
In a report prepared by Iraqi journalist Karim Idhib, published on the "Daraj" website, there are numerous questions regarding the agreement between Lebanon and Iraq, where Iraq is set to export "one million tons of black oil to Lebanon in exchange for 2.4 billion kilograms of Lebanese apples." This raises concerns of saturating Iraq with apples, as it is implausible for Iraq to consume about 7 million kilograms of imported apples daily when the annual fruit consumption of Iraqis does not exceed 2.5 billion kilograms.
The report further points out that by the end of August, the contract established between the Iraqi and Lebanese governments for supplying Lebanon with around one million tons of fuel to support the dilapidated electricity plants will expire, leading to minimal power supply for Lebanese citizens living in near-total darkness. The Electricite du Liban company announced that Lebanon is heading toward a complete blackout by the end of August due to the failure to renew the contract with Iraq for fuel supplies. The contract is supposed to stipulate the provision of black oil to Lebanon in exchange for goods and services from Lebanon to Iraq. However, until now, there has been no agreement on what Iraq will receive in return for the oil.
The Lebanese government announced that Iraq had agreed to extend the supply of fuel to Lebanon for one year under the same terms previously applied. The media office of Prime Minister Najib Mikati noted that "the Iraqi government agreed to the request Mikati made to supply Electricite du Liban with fuel for a year under the conditions that have been followed until now." Yet, what are these conditions? No one from either the Iraqi or Lebanese side has disclosed them, especially since the initial contract that has just lapsed did not yield any services, cash, or in-kind compensation for Iraq in exchange for the oil delivered to Lebanon—a situation that angers the Iraqi street, which sees its government distributing oil for electricity while suffering from significant power outages due to corruption and waste.
The previous Iraqi-Lebanese agreement included selling fuel oil at a rate of one million tons annually, according to the price set by the Iraqi Oil Marketing Company (SOMO) at the time of shipment. The heavy fuel oil is either used directly in electricity generation in Lebanon or refined by the Lebanese government into oil byproducts or swapped with a third party to change specifications for use by the Lebanese government. The sale process is regulated by what is signed between the Iraqi Oil Marketing Company and the Lebanese government entity, with the buyer being an entity belonging to the Lebanese state.
Iraq has not received any services or financial or in-kind compensation from Lebanon for the oil sent, meaning that the issue will be even more embarrassing for the Iraqi government in front of its people.
The Iraqi Ministry of Finance allows the Central Bank of Iraq to open and manage a dollar account at the Bank of Lebanon specifically for the agreement's purposes, in addition to supplying heavy fuel oil after opening a documentary credit in the name of one of the Lebanese government entities or Electricite du Liban through the Bank of Lebanon for the benefit of the Central Bank of Iraq, on behalf of the Iraqi Oil Marketing Company to supply one million tons of this material under a deferred payment mechanism. This happens one year after the acceptance of shipping documents when the full value of the documents must be paid in the Central Bank of Iraq account opened at the Bank of Lebanon.
The balance of the Central Bank of Iraq with the Bank of Lebanon will be converted into a bank deposit for one year, automatically renewed by agreement of both parties, and interest on the balance is paid according to the practices of the Bank of Lebanon. The Iraqi side exclusively uses the above account balance wholly or partially depending on the agreement with the Lebanese side to purchase goods and services for the benefit of Iraqi ministries and institutions, with the Bank of Lebanon ensuring that Lebanese entities providing services to the Iraqi side receive their dues using cash payment orders in local currency upon request, from the accumulated balance in the Central Bank of Iraq account opened to execute this agreement at the Bank of Lebanon, according to the accepted market price or parallel market rate approved by the Bank of Lebanon.
Before the renewal of the agreement, the Lebanese side had proposed to "export apples to Iraq in exchange for black oil," a proposal made by the Lebanese Authority for Development Affairs in the North during a meeting with Lebanese Prime Minister Najib Mikati. The authority stated that it had submitted "a proposal to buy Lebanese apples from farmers and export them to Iraq in exchange for supplying us with fuel as an initial step, which would have positive effects on the Lebanese economy in general and on farmers in particular."
According to figures analyzed by Iraqi economic academic Nabil Al-Marsoumi, the proposed Lebanese formula seems unachievable. The amount of black oil requested by Lebanon is one million tons, with the price per ton at $600, meaning that the value of the black oil exported to Lebanon amounts to $600 million, while the price of a kilogram of Lebanese apples exported is 25 cents, and the price of a ton of Lebanese apples is $250. Al-Marsoumi adds in an interview with "Daraj" that "Iraq will export one million tons of black oil in exchange for 2.4 billion kilograms of Lebanese apples, which means saturating Iraq with apples as it is implausible for Iraq to consume around 7 million kilograms of imported apples daily, while the annual fruit consumption of Iraqis does not exceed 2.5 billion kilograms."
Thus, the Lebanese proposal appears impractical and unfeasible according to Al-Marsoumi, who believes it is better to continue with the previous agreement if Iraq indeed received compensation for the oil it previously exported to Lebanon. Economic expert Abdul Amir Al-Miyali comments on the proposal to barter oil for apples, suggesting that it likely aims to cover Iraq’s provision of petroleum products to Lebanon at high prices or for free, which has sparked controversy and objections on the Iraqi street, especially since Iraq, despite being an oil-rich country, faces a power crisis.
Al-Miyali pointed to the necessity of imposing customs duties on Lebanese agricultural products (apples in this proposed case) to prevent negatively impacting Iraqi agricultural produce. In any case, this barter seems unlikely to succeed; "Daraj" has learned from government sources that Iraq has not received any services or financial or in-kind compensation from Lebanon for the oil sent to it, which would make the situation even more embarrassing for the Iraqi government before its people upon signing the new contract and sending one million tons of oil to a country whose government is corrupt and fails to meet its obligations both to its citizens and internationally.
