Lebanese businesses suffer as fuel crisis bites

Shortages of fuel have hit factories and businesses across Lebanon, threatening to halt manufacturing, deliveries and transport in a country already struggling with its worst peacetime economic crisis.

The fuel emergency, blamed on smuggling, hoarding and delayed deliveries, has been exacerbated by the cash-strapped authorities’ decision to reduce fuel subsidies and the collapse of the Lebanese pound. In recent days, it has fallen as low as L£18,000 to the dollar on the black market against an official rate of L£1,500.

“If we don’t receive diesel . . . we will close down,” said Fady Abboud, an industrialist and former minister whose factory produces takeaway cartons and wrappers. “I’m going crazy.” He had just six hours of diesel left for his generators when he spoke to the Financial Times this week.

The country’s problems — a result of decades of mismanagement and corruption and worsened by coronavirus and last August’s explosion at Beirut port — have pushed the fragile nation close to collapse. The World Bank estimates Lebanon’s gross domestic product fell by a fifth last year.

Firms have been badly hit by hyperinflation, a shrinking local market and the inability to access funds stranded in the banking system. The fuel crisis alone has in recent days prompted miles of queues at gas stations, violence at pumps and protests.

Paul Abi Nasr, chief executive of Lebanese apparel maker Polytextile, said “5 to 6 per cent” of his staff had been unable to get to work on Monday because they could not find petrol, while many employees had arrived with practically empty tanks. In the absence of reliable public transport, most people depend on cars. “They don’t know how to go back home,” Abi Nasr said. “It’s that bad.” He provided them with petrol from the company’s own supplies.

Abi Nasr described Lebanon as being “in complete turmoil,” citing currency swings, runaway inflation and the inability of businesses to set wages that reflected rocketing living costs.

He and other industrialists expressed frustration at the absence of effective government intervention. The administration, which defaulted last March, stepped down in August after the Beirut port explosion. But a new cabinet has yet to be formed.

Lebanon’s manufacturing sector had been seen as the best way to reduce the country’s reliance on imports it could no longer afford. Although some local producers, such as poultry, are benefiting from the increase in import prices, Fady Gemayel, president of the Association of Lebanese Industrialists, said that “we are all in the same ship, so if it’s going under, we are all going to go under”. The lack of fuel was threatening production at his paper products factory, he added.

The irony, claims Maroun Chammas, chief executive of Medco, a fuel importer, is there is no genuine shortage of fuel. “We are low on stock but there are ships waiting to discharge [fuel],” he added. Chammas blames long delays at the central bank, which provides cheaper financing for fuel purchases and other essential items in the wake of the country’s banking crisis. He says he has had to wait as long as 20 days to unload vessels because of what he believes is the central bank’s tardiness.

Meanwhile, Lebanon’s cheap, subsidised fuel was often smuggled to neighbouring Syria, said Chammas. Even this week, the Lebanese army said they had caught fuel smugglers.

These subsidies have eaten into remaining hard currency reserves, costing the central bank as much as $500m a month to sustain. On Friday, caretaker prime minister Hassan Diab announced a new financing rate for fuel. The energy ministry increased prices again on Thursday, leaving prices more than 50 per cent higher than they were a week earlier, but still nowhere near as much as it would cost if subsidies were fully lifted.

The prospect of higher prices encouraged some sellers to start hoarding. “Some stations, aware of the fact that the price is going to increase, have decided to keep on the side a few thousand litres of gasoline so they can benefit,” said Chammas, adding that Medco’s stations had not done this.

On Tuesday afternoon, hours after the fuel price had risen for the first time, Abboud’s long-delayed diesel finally arrived and he was able to avert shutdown by a whisker. But Chammas, who said he was encouraging carpooling and remote working in future, warned that Lebanon’s fuel crisis could continue: “I don’t think it will be resolved until the price is the real price of the product.”