The waiting game: How the US sabotages Lebanon’s energy security

Hasan Illaik, The Cradle, June 15, 2023 —

In an exclusive interview with The Cradle, Lebanon’s Energy Minister Walid Fayyad addresses the country’s energy shortage dilemma: Receive Iranian oil and risk US sanctions, or wait indefinitely for a purposely delayed US-backed initiative.

“For almost 30 years, Lebanese authorities have failed to properly manage the state-run electricity company, Électricité du Liban (EDL), resulting in widespread blackouts. The decades of unsustainable policies and fundamental neglect, the result of elite capture of state resources, alleged corruption, and vested interests caused the sector to completely collapse in 2021 amid the ongoing economic crisis, leaving the country without power through most of the day.” – Human Rights Watch, March 2023

Over 600 days have passed since US Ambassador to Beirut, Dorothy Shea, pledged to deliver a much-needed solution for Lebanon’s dire electricity crisis, which has forced most of the population to rely on costly private generators for their basic living needs.

The ambassador’s phone offer came on 19 August, 2021, mere hours after Hezbollah Secretary General Hassan Nasrallah broke the US-led siege on Lebanon by announcing the imminent arrival of Iranian diesel to the country.

Shea’s response to Nasrallah was to announce an ambitious, World Bank-funded initiative that called for the transport of Egyptian gas and Jordanian electricity – via Syrian territory – to Lebanon.

But as is all too often the case with US promises, the White House now refuses to provide the four Arab countries with sanctions waivers. Washington claims that helping Lebanon receive energy via Syrian territory will undermine US Caesar Act sanctions against Syria.

To understand the nuances of this endless waiting game, The Cradle sought out Lebanon’s Energy Minister Walid Fayyad for some insights. In an exclusive interview, Fayyad sheds light on the intricate web of circumstances preventing Lebanon from securing the much-needed energy resources from Egypt and Jordan, not least, the complicity of the US in undermining Lebanon’s energy security.

The Cradle: What is currently hindering the completion of the deal to transmit electricity from Jordan and pump Egyptian gas to Lebanese power stations, via Syria?

Walid Fayyad: Before my appointment as Energy Minister, I had a meeting with President Michel Aoun. He informed me that the power outage crisis in Lebanon would finally be resolved, and that the World Bank was ready to finance a project to bring electricity and gas from Jordan and Egypt to Lebanon.

The US ambassador in Beirut announced something similar earlier. I believed that such an Arab strategic project, with American support, was the logical solution to the crisis. It presented a golden opportunity for Lebanon, and I believed we should seize it, as it enjoyed the support of all parties involved.

The Cradle: Why do you perceive this solution as “logical”?

Walid Fayyad: It’s simple. Economically, geographically and politically, this is a very logical solution. The relationship with Syria is historical and deep. As for Egypt, it is a major Arab country that consistently seeks to strengthen Arab relations.

The Cradle: Is there any connection between the announcement made by the US ambassador in Beirut, expressing her country’s support for the project, and the statement made by Sayyed Nasrallah, on the same day regarding the arrival of Iranian diesel shipments to Lebanon?

Walid Fayyad: There may be a link. It’s possible that the ambassador’s announcement was a reaction to Sayyed Nasrallah’s speech.

The Cradle: What is currently preventing the completion of the project?

Walid Fayyad: The main obstacle is related to the passage of gas and electricity through Syria, which entitles it to a transit fee. We reached an agreement with Damascus, and informed the US and the World Bank that Syria will not impose fees, but instead will get 8 percent of the gas that will pass through its territory. The Americans did not object to this.

The Cradle: Was everyone in agreement with this proposal?

Walid Fayyad: Yes, the Americans, the World Bank, Jordan, Egypt, and Syria all welcomed the proposal.

The Cradle: Who confirmed that the Americans agreed to the 8 percent rate for Syria?

Walid Fayyad: I presented the proposal to accommodate all parties. The US ambassador in Beirut and the US presidential envoy for energy affairs, Amos Hochstein, agreed to it.

The Cradle: Did they both give you the green light to proceed?

Walid Fayyad: Yes, they gave initial approval, and said that it does not conflict with American sanctions as it does not include paying money to Syria. The final approval was pending until the remaining details regarding the companies involved in the contract were known, and making sure that there are no names listed on the US sanctions list.

The Cradle: Is the delay in the approval of the World Bank to finance the project due to the delay of the Lebanese Ministry of Energy in appointing members of the Electricity Regulatory Authority?

Walid Fayyad: No, there was no requirement to appoint members of the Electricity Regulatory Authority. Our agreement with the World Bank was to launch the recruitment process, with a period of 18 months for their appointment, and then another 18 months for activating the work of the Authority, and we’ve done that.

In the spring of 2022, a meeting of the Executive Board of the World Bank was held in Washington, and there were different opinions. Some demanded reforms not only in the energy sector, but in all sectors. The World Bank assured us that it wants to proceed with the project, but there are forces that are obstructing it, and we need to monitor certain developments in Lebanon.

The Cradle: Is the US preventing the World Bank from funding the project?

Walid Fayyad: At first, the US was supportive of the project, according to the ambassador. However, at some point, there was ambiguity, especially with regard to the issuance of US permissions to exempt Egypt and Jordan from sanctions.

This exemption should have been issued prior to the Lebanese agreement with the World Bank, or vice versa. By the summer of 2022, the ambassador began mentioning the need to fulfill the requirements of the World Bank, which were not previously discussed or agreed upon with the Ministry of Energy.

The Cradle: Is it not possible to discuss all these details and reach an agreement?

Walid Fayyad: When there is a genuine intention to reach a solution, we will see progress. Initially, the momentum was great, then it began to wane.

The Cradle: Are the Americans responsible for the halt in the project?

Walid Fayyad: They claim that the World Bank is the obstacle, but I know that they are major partners, and they have significant influence.

The Cradle: Why did the momentum from Washington decline?

Walid Fayyad: Because of a difference of opinion in Congress about whether Syria should be allowed to benefit from the gas that will pass through its territory.

The Cradle: If the US intends to impose sanctions on Damascus, why would they allow Syria to benefit from this project, even if it’s only by 8 percent? And concerning Lebanon, do you believe it is not in the interest of the Americans to see the country achieve its political goals?

Walid Fayyad: I cannot say for certain, but I don’t see delaying the project as being in the interest of either the Americans or the Lebanese parties that support a western orientation. On the contrary, I see a declining popularity in pursuing a western approach.

The Cradle: Are Syria, Jordan, and Egypt technically prepared for the project?

Walid Fayyad: The Syrian side is ready. Once the Egyptian gas reaches Syria, it will be used there to generate energy, and Syria will send the same amount of Syrian gas to Lebanon, after deducting 8 percent of the transit fees.

The Cradle: Do you have an estimate of the losses that Lebanon would have avoided if the project had followed its path to implementation?

Walid Fayyad: We pay almost $1 billion for 700 megawatts. Egyptian gas and Jordanian electricity will enable us to obtain 700 megawatts for $500 million. That is, the savings that will be achieved amount to $500 million annually.

In addition, increasing the hours of power supply reduces the cost of electricity in all sectors and reduces the use of generators, thus reducing the cost of production and commodity prices.

The Cradle: During last year’s negotiations to demarcate Lebanon’s southern maritime borders, was there a discussion about bringing in gas and electricity?

Walid Fayyad: Talk about bringing in Egyptian gas began before the negotiations. I asked Amos Hochstein about this, and while he denied that there was a link between the two, he did say that the demarcation might help implement the project.

The Cradle: What about the reports of an Iranian offer to give Lebanon free quantities of oil to produce electricity for at least 6 months?

Walid Fayyad: We sent a delegation to Tehran to study the specifications, and the Iranians confirmed that they are ready to provide us with everything we need. The Iranians were going to provide us with $350 million worth of diesel fuel, which would provide us with 4 hours of electric power daily. We would have been able to secure 10 hours of electricity per day, if we secured oil from Iraq and Iran and gas from Egypt.

The Cradle: Did the Americans pressure you to reject the Iranian offer?

Walid Fayyad: I asked the US ambassador if the sanctions applied to this offer, and she told me: “Leave the matter to Prime Minister Najib Mikati.” He later announced that Lebanon could not accept the Iranian offer because of the US sanctions.

The Cradle: Can we infer that the US is impeding Lebanon’s collaboration with its allies to acquire energy?

Walid Fayyad: Yes, in terms of the Iranian offer, that has been evident. As for Egypt, the US has been supportive since August 2021, but Cairo requires written guarantees from Washington. Unfortunately, these guarantees have not been finalized thus far.