Kenya-Uganda energy dispute: regional unrest

A contentious dispute has arisen between landlocked Uganda and Kenya regarding petroleum supplies; the leader of Uganda claims that his nation is being "cheated" by "parasites" and middlemen.

Kenya has imported and resold oil to its East African neighbours for decades; however, its position as the primary gateway for petroleum supplies to the region is currently jeopardised.

Ugandan President Yoweri Museveni accused Kenyan middlemen earlier this month of inflating oil prices by as much as 60%, resulting in a "huge loss" for his nation. This incident brought the situation to a climax.

In addition, he criticised "internal parasites" for "defrauding" Uganda by remaining silent since the escalation of prices earlier this year.

Since several years ago, almost 90% of Uganda's fuel imports have come from Kenyan oil marketing companies, which resell the fuel to their Ugandan subsidiaries; the remaining fuel is obtained via Tanzania.

A decision to cease this was authorised by the Ugandan parliament at the time of Mr. Museveni's attack.

It has been made abundantly plain that his administration desires greater independence in future oil transactions. Kenyan oil marketing companies have held the Kenyan government accountable for the recent surge in prices. Kenyan enterprises used to tender.

The winning company would import oil for other firms. US dollars were used for pay-as-you-go. However, bank limitation of dollars caused problems for all importers until the Kenyan government intervened in March due to a dollar shortage.

The government struck a credit price deal with foreign energy companies for domestic and export energy. This arrangement delays overseas supplier payments by six months.

According to the deal, Kenyan oil marketing companies' local customers pay in Kenyan shillings, while neighbours pay in US dollars. Withdrawing the dollar shortage load, the total cash is placed in a high-yielding account for six months before debt settlement.

John Njogu, CEO of the Petroleum Outlets Association of Kenya, says ulei buyers pay more. Njogu calls this "credit line." He told the sources that Uganda's refusal was justified because the country did not have a dollar shortage and should not pay a premium.

With Uganda's withdrawal, Kenya's dollar shortage will deteriorate, according to Mr. Njogu, who estimates that Uganda pays Kenyan firms $180 million (£143 million) per month for oil.

Kenyan opposition leader Raila Odinga has also criticised the agreement, calling it a "mega swindle" and implying that Kenyans are paying higher prices while others, including certain oil marketing firms, profit.

Kenya's Energy Minister Davis Chirchir told parliamentarians that the loan deal has protected Kenyans from foreign shocks and rising oil costs. He predicted greater prices without it, given the currency's decline against the dollar.

This verbal dispute coincided with an unexpected incident in Kenya over the entry of 100,000 tonnes of oil worth $110 million.

A court battle is underway over ownership. The Kenyan businesswoman's counsel claims she was kidnapped for days to "take" the goods. Her company is unlicensed and denied involvement by the Kenyan government.

Uganda and Vitol Bahrain agreed to finance the Uganda National oil Company's oil procurement and distribution transition. Additionally, it plans to keep fuel reserves in Tanzania. According to Mr. Njogu, Uganda's action serves as a necessary wake-up call for the oil import industry in Kenya.