Kenya has officially announced the termination of its oil deal with Saudi Arabia and the United Arab Emirates, citing currency distortion issues.
The Kenyan government has terminated the oil deal with Saudi Arabia and the United Arab Emirates. The reasons given include problems of currency distortion, with the country’s desire to mitigate financial risks weighing on private players in the oil sector.
Kenya’s National Treasury highlighted the increased risks faced by private sector financiers under this deal and reaffirmed its commitment to private market solutions in the energy sector. This approach was applauded by the International Monetary Fund (IMF), which recognized distortions in the foreign exchange market and increased rollover risk for private sector financing.
During the first six months of the agreement, monthly import volumes did not reach the agreed levels, mainly due to lower demand in the domestic and regional market. The agreement, initially designed to secure fuel supplies and ease currency pressure, was therefore terminated.
Framework agreements with companies such as Aramco Trading Fujairah FZE and Emirates National Oil Company have led the Ministry of Energy to reconsider its approach. Receiving petroleum products with the assistance of designated local oil traders marks a step towards more flexible solutions.