Lebanon-Iraq oil deal: Cash payments replace barter amid debt woes

Shafaq News/ Lebanon has reached an agreement with Iraq to renew its oil import contract, switching from fuel oil to crude oil, as the country grapples with a prolonged financial crisis and struggles to sustain power generation.

A Lebanese government source told local media that a delegation, including the Chairman of the Investment Promotion Authority in Lebanon (IDAL), Mazen Souaid, and Brigadier General Hassan Choqair, traveled to Baghdad and secured a deal to import about two million tons of crude oil. The new agreement modifies Lebanon’s payment terms, a key sticking point in negotiations.

“The talks were tough because Iraq needed assurances that Lebanon would meet its payment obligations after repeated delays despite previous lenient terms,” the source said. Under the revised agreement, Lebanon will make immediate cash payments in US dollars via direct transfers from the central bank, a departure from earlier contracts where payments were made through services offered to Iraqis in Lebanon. The two sides also discussed clearing Lebanon’s outstanding debt of $2 billion through a bilateral payment platform.

Despite previous arrangements allowing Lebanon to pay for fuel in local currency—deposited into an account for the Iraqi government at Lebanon’s central bank—the country has accumulated significant arrears. By the end of 2024, Lebanon had paid just $118 million of its $2 billion debt.