Jul 2

Lebanon Fuel Crisis Deepens as Authorities Cut Subsidies

Dimitri Frolowsckii
Aug 17, 2021
Image: rashid khreiss via Unsplash

Lebanon has been struggling with fuel cuts that have triggered a full-blown energy crisis.

Last week, collapsing fuel supplies plunged Lebanon into blackouts and long lines for petrol, with many hospitals and other public services almost forced to close.

On Saturday, the American University of Beirut Medical Center, the nation’s top hospital, announced that it would be forced to shut off ventilators and other lifesaving equipment if the fuel shortage continues. As a result, 40 adult patients and 15 children living on respirators could die “immediately.”

Last week, local media reported the hijacking of a fuel tanker and a shooting at a station. Adding to the already grim situation, a fuel tank explosion in the northern region of Akkar killed 28 people on Sunday. Shortly after that, Hezbollah’s leader Hassan Nasrallah pledged to import gasoline and diesel from Iran.

The nation’s economic paralysis also created dramatic disruption to food supplies, with many people forced to wait for hours to purchase bread. The lebanese currency has lost more than 90% of its value during the past two years, and more than half of the population is now in poverty, according to France 24.

Previously, Lebanon’s central bank announced that it would end subsidies for fuel amid a nationwide energy crisis. Instead, the authorities decided to extend lines of credit for fuel importers at the current market price as much as four-fold. The decision will likely increase fuel prices and effectively end the existing fuel subsidy system while energy shortages are already rampant.

As Lebanon is almost entirely dependent on imported fuel, its electricity company has introduced rolling blackouts that restrict power to about an hour a day to both homes and businesses.

The central bank provided dollars for fuel imports at 3,900 Lebanese pounds per dollar, which is significantly less than the market rate of more than 20,000.

The Lebanese government opposed the move and criticized the central bank’s decision. But it could not do much to reverse it.

On Friday, Lebanese President Michel Aoun called an emergency meeting to discuss the deepening crisis. But he was rebuffed by Prime Minister Hassan Diab as public demonstrations and political paralysis obstructed efforts to find a solution.

However, Central Bank Governor Riad Salameh said that the government had been aware of the announced decision to start extending credit lines for fuel imports at the market rather than heavily subsidized exchange rates. This raised speculations as to whether the government was the one who initiated the move.

It is unclear how the cash-strapped and politically divided government will resolve the issue.

Fuel importers announced that they would not extend supplies until an agreement is reached. Previously, they warned of a massive shortage of already scarce fuel and demanded that the exact exchange rate must be used for buying and selling energy. Currently, it is considered the only possible solution to the current deadlock.

Dimitri Frolowsckii

Dimitri Frolowsckii is a political and energy analyst with over 15 years of experience in journalism.

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