Prime
Museveni, Ruto leave investors mulling about oil spat
Kenyan President William Ruto meets with Ugandan leader Yoweri Museveni at State House in Entebbe, Uganda on January 19, 2024. PHOTO/HANDOUT
What you need to know:
- Uganda wants Unoc licensed unconditionally while Nairobi wants it to compete against Kenyan firms.
Tensions between Uganda and Kenya seemed to ease this week as the leaders of the two East African Community partner states met in Entebbe for an extraordinary summit of Igad on the Sudan crisis and the Non-Aligned Movement conference.
The meeting of President Museveni and William Ruto was expected to iron out the differences that have lately emerged over trade, and especially fuel imports.
Days before Ruto made the trip to Uganda, his EAC minister Peninah Malonza indicated last weekend that the trade spat would be resolved this week, and that the two leaders had scheduled a meeting to diplomatically mend fences.
But by press time, there was no deal in sight in spite of a meeting. Sources told The EastAfrican that Uganda demanded that Kenya allow the state-owned oil marketer, Uganda National Oil Company (Unoc) the licence it has been seeking without being subjected to local conditions.
Kenya, on the other hand, wants Uganda to withdraw the case it lodged at the East African Court of Justice to enable it sort out the local court issues that partly blocked Unoc in Kenya.
Kampala filed a case at the regional court in Arusha, accusing Kenya of going against the EAC Treaty, which obligates partner states to share existing port and maritime facilities, and the United Nations (UN) Convention on the Law of the Sea, which gives landlocked states the right of access to maritime facilities and transit routes.
But Kenya partly cited a case filed at the High Court in Nairobi last November barring the Energy and Petroleum Regulatory Authority (Epra) from handling the Unoc licence application.
The Cabinet has also dilly-dallied on a decision that would exempt Unoc from key requirements: Proof of owning a licensed petroleum depot and five retail stations, proof of annual sales volumes of 6.6 million litres of petroleum products and turnover of $10 million for the past three years.
Epra denied Kampala’s application in September on those requirements, and these are the conditions that Uganda wants to be dropped.
Our sources say that Kenya has proposed that Unoc be one oil marketers licensed to use the pipeline, rather than as an exclusive importer for Uganda. As such, it would only be among the users of the pipeline sending oil to Uganda alongside Kenyan competitors.
One of the reasons behind this is Kenya's desire to secure the interests of its investors who run fuel stations in Uganda, including senior government officials in Nairobi.
Kenya sees the pipeline as an equaliser on trade, seeing that Nairobi now imports more and its currency has continued to weaken against the Uganda shilling. This remained the bone of contention, according to our sources.
Uganda has threatened to limit the flow of goods from Kenya in retaliation, but Oil is not considered among those goods to be restricted.
Given the hardline stance adopted by both sides, there was no breakthrough by the time we went to press, but officials signalled that the door for talks was still open. In the meantime the status quo remains. Uganda continues to import oil via Kenya.
Recent data shows that Uganda is still relying on transit fuel imported by Kenyan oil marketing companies, even after announcing that it would start directly buying the commodity from Vitol Bahrain this month.
A schedule of importation shows that the volumes of transit fuel have largely remained unchanged between November last year and January, meaning Kampala was yet to pull out of the Kenyan deal.
Uganda National Oil Company, which is at the centre of the dispute, was expected to start importing petroleum products from Vitol Bahrain this month then use Kenyan pipeline infrastructure to ferry it.
Kenyan oil marketers have been rattled by the spat, as they stand to lose a lot of business if Uganda breaks away. According to the Business Daily, out of 81,733 metric tonnes of diesel that was to be shipped by Galana Oil this month, more than a quarter -- 22,401 metric tonnes -- was in transit.
Kenya’s Cabinet Secretary Malonza has downplayed the bad blood between Kampala and Nairobi, saying each was pursuing “its best trade interests.”
“There is a scheduled meeting between the two presidents to discuss the impasse and Kenya will also seek to explain her position during the next EAC Heads of States Summit,” the minister told journalists in Kitui town in eastern Kenya on January 12.
“There is no cause for alarm, because such trade disagreements are normal. Each country is established under different laws and principles and, therefore, we relate on the basis of the binding treaties and other diplomatic protocols,” she said.
“Uganda is not only Kenya’s biggest trading partner, it is also the biggest market for Kenyan oil. Nairobi and Kampala have co-existed very well since independence and both countries value each other’s economic potential.”
All indications have been that the two nations would resolve the oil import stalemate, but it seems to need time.
According to Malonza, Uganda is a Group A market for Kenya's oil, buying 90 percent of the commodity oil from Kenya, so it is natural that it take a keen interest in the affairs of its main trading partner.
