OPEC member Iraq has agreed in principle to offer cash-strapped Egypt 4 million barrels of crude a month on a three-month credit term, in a move that could ease the fuel shortage that has recently hit the Egyptian economy, officials from the two countries said Monday.
OPEC member
Iraq
has
agreed in principle to offer cash-strapped
Egypt
4
million barrels of crude a month on a three-month credit term, in a move that
could ease the fuel shortage that has recently hit the Egyptian economy,
officials from the two countries said Monday.
The officials told Dow Jones Newswires that
Baghdad
would
supply
Cairo
with 2
shipments of
Basra
light
crude each month at international prices but the payment will be deferred for
three months with no interests incurred. The first cargo is expected in
Egypt
next
month once the deal is finalized, they said.
The value of the deal is close to $400 million a month, based on current market
prices.
"We were very keen to get the supplies on 9-month credit but the Iraqis
said they won't be able to do so," an Egyptian official who asked not to
be named said.
An Iraqi official familiar with the matter confirmed the agreement, saying:
"Iraq will sell the crude oil to Egypt at normal international
prices...Egypt has asked for preferential prices of oil similar, for example,
to the prices Iraq is offering to Jordan but so far Iraq has refused."
The Egyptian-Iraqi deal comes after
Libya
agreed in principle to offer
Egypt
crude
supplies worth around $1 billion on a one-year credit term. The two
neighbouring countries are still discussing the types of the grade and the
quantities of the crude that will be refined in
Egypt
, but
the first shipment is expected next month, an Egyptian oil official said
Sunday.
Egypt
has
been facing a slowdown in oil and gas exploration activities over the past
couple of years as a result of the continuing unrest since the ousting of
former President Hosni Mubarak. The country has been paying hefty premiums for
its crude supplies due to the weaker Egyptian pound and difficulties in
securing letters of credit for its transactions, while a shortage of
state-subsidized diesel has already paralyzed transportation in many parts of
the country.
The civil unrest has also led to a risky economic mix of dwindling
foreign-exchange reserves, declining tourism revenue and costly price
subsidies, economists say. To prop up the Egyptian currency, the central bank
has gone through nearly two-thirds of its foreign-currency reserves, pushing
the country to the brink of a liquidity crisis.
Egypt
is in
the throes of trying to secure a $4.8 billion loan from the International Monetary
Fund, a move viewed as critical to rescuing its economy and mending its
reputation as a place to do business.
People close to the talks say the IMF wants to see
Egypt
reduce its subsidy spending as part of a reform plan for the loan. But any
subsidy changes will probably only further enrage the legions of poor who rely
daily on cheap fuel, making the already uncomfortable summer months all that
more unbearable.
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