Egypt is inching closer to getting a letter of credit to back a $1 billion much-needed oil supply contract with Libya, but the deal still faces a stumbling block in Tripoli, which fears being dragged into Cairo's economic woes, officials said.
Egypt
is
inching closer to getting a letter of credit to back a $1 billion much-needed
oil supply contract with
Libya
, but
the deal still faces a stumbling block in
Tripoli
,
which fears being dragged into
Cairo
's
economic woes, officials said.
State-owned Egyptian General Petroleum Corp., known as EGPC, has asked the
National Bank of
Egypt
for a
$1 billion guarantee that will allow it to complete its side of the oil deal
with
Libya
, a
bank official said. However, the Libyan government has yet to decide that a
letter of credit from that bank is strong enough to overcome the risk of any
losses if EGPC is unable to pay for the oil, said a government official.
Failure to agree the deal would be a significant blow for Eqypt because it is
seen as vital for easing the country's fuel shortage. An even bigger oil supply
deal with
Iraq
has
faltered due to similar concerns over financial guarantees.
"We have asked EGPC to give us first a guarantee from the finance ministry
before we study its request since its loans have exceeded 20% of our capital
base, or about 22 billion Egyptian pounds ($3.13 billion)," Mahmoud
Montaser, NBE's corporate banking and syndicated loans senior group head told
The Wall Street Journal.
"We got the guarantee from the finance ministry and hopefully the letter
of credit will be issued soon," Mr. Montaser, who is also a board member
of the state bank, said.
Egypt
has
been facing a diesel shortage since last year, leading to rising food costs,
long queues at filling stations and electricity blackouts. Egyptians have also
taken to the Internet and streets to protest daily power cuts that they say are
getting more frequent and lasting longer.
Neighboring
Libya
, a
member of the Organization of the Petroleum Exporting Countries, had agreed in
March to supply
Egypt
with
up to 1 million barrels a month of crude oil, with a generous credit term of up
to a year, which would help
Egypt
with
both its fuel shortage and its cash flow problems.
Egypt
has
so far been unable to provide a guarantee for the payments to
Libya
,
which is concerned about the political and economic turmoil in the country. Even
with a letter of credit from the NBE,
Libya
is
still reluctant to give a stamp of approval.
"The National Bank of
Egypt
. It's
not a triple A bank," said a Libyan official familiar with the deal. This
means that going through with the deal on that basis, "will
require...guarantees from the central bank of
Libya
,"
the official said.
The official said the Libyan Foreign Bank--in charge of providing a $1 billion
credit line for the country's National Oil Co.--was concerned that exposure to
such large risks in the EGPC deal would impede its own financial flexibility,
especially when it comes to issuing letters of credit to other commercial
partners.
The Egyptian fuel crisis has compounded broader economic problems in the
country, which in 2011 overthrew the government of President Hosni Mubarak in a
popular uprising.
Egypt
's
current government, which is dominated by Islamist party the Muslim Brotherhood,
is short of funds and has been negotiating a $4.8 billion loan with the
International Monetary Fund, which analysts and investors say is critical for
the country. IMF officials left
Cairo
in
April without agreeing on the terms of the loan.
Iraq
has
also offered 4 million barrels of oil a month to
Egypt
, with
payment deferred for three months with no interest incurred. However, the
country's oil minister, Abdul Kareem Luaiby, said last month the deal will be
completed only if the North African country provided a letter of credit
"opened in internationally recognized banks prior to the supply, but Egypt
has so far [been] unable to open such letter of credit."
Egypt
's
energy import needs are rising because of a drop in its own hydrocarbon
production, stemming from a slowdown in exploration over several years of civil
unrest. EGPC has also been paying hefty premiums to import fuel because of the
weaker Egyptian pound. It is struggling to pay debts of about $5 billion to
foreign energy companies, according to officials familiar with the situation.
Διαβάστε ακόμα
Τρι, 24 Σεπτεμβρίου 2024 - 19:58
Τρι, 24 Σεπτεμβρίου 2024 - 19:54
Τετ, 18 Σεπτεμβρίου 2024 - 18:32
Τετ, 18 Σεπτεμβρίου 2024 - 18:27
Τρι, 17 Σεπτεμβρίου 2024 - 20:01