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Ethiopia is on the verge of halting petroleum
product imports from Sudan, and may be forced to pay
as much as 10 million dollars more every year to get
its fuel from Saudi Arabia and other Gulf nations.
Two factors may force Ethiopia to cease importing
millions of dollars in petreolum products from
neighbouring Sudan, an arrangement that has saved
Ethiopia millions over the last four years.
The state-owned Sudan Petroleum Corporation (SPC) –
which supplies Ethiopia with gasoline and liquid
petroleum, among other oil products – has stopped
allowing Ethiopia to purchase on credit.
Furthermore, the US Department of Treasury in May
2007 placed the SPC on its sanction list over
Sudanese government support for militia groups
terrorizing the Darfur region, putting diplomatic
pressure on Ethiopia to cease its business
relationship with the company.
A
senior government official told Fortune that
both factors will likely compel Ethiopia to look
elsewhere for its oil product imports. According to
data available from the Ethiopian Customs Authority,
in fiscal year 2005/06 alone, Ethiopia brought in
two billion litres of petroleum products, spending
about 860.5 million dollars in that year.
Fortune
learned that the senior members of Prime Minister
Meles Zenawi’s administration, led by Girma Birru,
minister of Trade and Industry, left for Saudi
Arabia last week. The delegation, which also
includes officials such as Yegezaw Mekonen, director
general of Ethiopian Petroleum Enterprise (EPE), and
Abi Sano, president of the Commercial Bank of
Ethiopia (CBE), stayed in Saudi for two days to
discuss with their counterparts about the
possibility of a credit facility to procure fuel
from that country.
One member of the delegation described the visit as
a success, but declined to give details on the
nature and result of the negotiation.
Up until May 2007, when the US imposed sanctions on
SPC, Ethiopia was importing petroleum products from
the Sudan through a Letter of Credit (L.C)
facilitated by CBE and Citibank. With Citibank now
restricted from dealing with SPC, the Sudanese oil
company strictly requires Cash Against Document
(CAD) for all procurement of the petroleum products
that Ethiopia purchases from the Sudan, an official
of the Ethiopian government confirmed.
The loss of Citibank as an intermediary in June 2007
even prevented Ethiopia from paying 2.5 million
dollars of debt owed to the SPC for petroleum
products. Ever since then, relations between the two
countries, which have never been easy, have been
further strained, the official told Fortune.
The Ethiopian government proposed to pay off its due
by means of agricultural products, but the Sudanese
government has refused to accept the offer.
Reliable data indicates that importing petroleum
products from the relative proximity of Sudan,
rather than from Middle Eastern countries, saves the
government as much as 10 million dollars each year.
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