The Ministry of Energy and Water announced that Iraq will supply Lebanon with fuel oil for electricity generation. The agreement between the Lebanese authorities and their Iraqi counterparts stipulates that Iraq will export 500,000 tons of heavy fuel oil to Lebanon in 2021. 

The agreement between Lebanon and Iraq came after the contract between the Lebanese State and the Algerian energy conglomerate Sonatrach to supply fuel oil to Lebanon expired on December 31, 2020, which raised concerns about sourcing fuel oil for electricity production in Lebanon.

The ministry did not provide details about the quality of the imported fuel from Iraq. But it said that Iraq's heavy fuel oil does not match Lebanon's specific needs, and noted that an Iraqi company could arrange a swap for refined fuel that is more compatible with the needs of the market. In addition, payments to Iraq will reportedly consist of opening a special account at Banque du Liban that can be used by the Iraqi authorities to pay for local services, such as covering the cost of healthcare for Iraqi nationals at Lebanese hospitals.

Electricité du Liban (EdL) imported 1.8 million tons of fuel oil in the first nine months of 2020, down from 5.4 million in the same period of 2019. However, the substantial decline in EdL fuel imports masks discrepancies related to the accounting of such imports in 2019. At the time, the Ministry of Energy & Water claimed that the elevated imports of mineral fuel and oil in 2019 were due to a surge in fuel imported on behalf of EdL, which reflected quantities that were imported in the past few years but that were officially registered as imports in 2019. The ministry claimed that actual fuel imports in the first 10 months of 2019 totaled 2.25 million tons, while 3.63 million tons that were additionally registered to EdL during the same period constituted fuel imports from previous years.

In parallel, losses at EdL have constituted a burden on public finances for more than 20 years, requiring regular transfers from the Treasury and leading to wide fiscal deficits. The latest available figures show that Treasury transfers to EdL accounted for 8.7% of budgetary primary expenditures in the first eight months of 2020 relative to 13.7% in the same period of 2019, due to the drop in global energy prices. They constituted the third largest expenditures item, or 7.3% of overall fiscal spending after wages, salaries and benefits of public sector workers and debt servicing. Treasury transfers to EdL were equivalent to 5.1% of GDP in 2012, 4.3% of GDP in 2013, 4.4% of GDP in 2014, 2.3% of GDP in 2015, 1.8% of GDP in 2016, 2.5% of GDP in 2017, 3.2% of GDP in 2018, and 2.8% of GDP in 2019. Overall, transfers from the Treasury to cover EdL's losses totaled $23.1bn from 2001 to the end of August 2020.