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Lebanon Signs Deal to Sell Iraqi Fuel  07/25 08:30


   BEIRUT (AP) -- Lebanon signed a deal Saturday to broker Iraqi fuel sales in 
hopes of alleviating a crippling financial and energy crisis in the small 
Mediterranean country, Lebanese and Iraqi media reported.

   The deal allows Beirut to resell 1 million tons of heavy fuel oil from Iraq 
-- fuel that Lebanon cannot use in its own power plants -- to companies who 
would then provide useable fuel to Lebanon over the next year.

   Lebanon would offer Iraq services in exchange, Energy Minister Raymond 
Ghajjar said, without offering details. Local media said Iraq would benefit 
from Lebanese health services and agriculture consultancy.

   The swap, which Ghajjar estimates is valued at between $300-400 million, 
could offer a brief respite to Lebanon's worsening power cuts and bring funds 
to its cash-strapped government. But a structural power solution, in a sector 
steeped in corruption and political interference, is far from sight.

   Blackouts have been a fixture in Lebanon since the end of its 15-year civil 
war in 1990, and the small country relies on imported fuel. But the problem has 
intensified as the government grapples with unprecedented financial problems, 
and considers lifting fuel subsidies.

   "The Iraqi state agreed to open an account in Lebanon's Central Bank in 
exchange for this fuel. This account is managed by the Iraqi Finance Ministry 
through which it buys services inside Lebanon... in Lebanese pounds," Ghajjar 
said. Then Lebanon resells the fuel in exchange for fuel it can use in its 

   "We hope other Arab countries follow suit and give us this opportunity 
because it is really a golden opportunity for us," Ghajjar said at Beirut 
International Airport upon his return from Baghdad.

   A statement from Iraq's Prime Minister's office said the 1 million barrels 
of fuel oil would be offered to Lebanon in exchange for services and products, 
although neither side immediately mentioned what these were.

   Lebanon's state electricity company has most recently been providing no more 
than four hours of power a day, leaving private generator operators as the main 
providers. Diesel supplies have dwindled, and long queues stretch outside gas 
stations each day.

   Government officials have also complained of widespread smuggling to 
neighboring Syria, which is also facing an economic crisis following a decade 
of war.

   Lebanon defaulted on its foreign debt last year and struggled to pay 
suppliers. The Central Bank has been limiting credit to purchases of basic 
supplies, including fuel and medicine.

   The energy crisis has reached unprecedented levels in Lebanon. Generator 
operators warned Friday they would have to turn off their engines as diesel 
shortages have worsened and prices on the black market have reached exorbitant 

   Hospitals are rationing their consumption, shutting off air conditioning in 
waiting areas, while bakeries in some parts of Lebanon have stopped their ovens 
altogether. Supermarkets have warned that the power shortages threaten their 
merchandise and endanger food safety.

   The U.N. children's agency, UNICEF, has warned that most water pumping will 
gradually cease across the country in the next four to six weeks, putting more 
than four million people, including one million refugees, in immediate risk of 
losing access to safe water.

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