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Uganda sues Kenya in fuel dispute.

Uganda sues Kenya in fuel dispute.

(Courtesy photo)

In a move signaling strained diplomatic relations and trade tensions, Uganda has officially filed a case against Kenya in the East African Court of Justice. This legal action comes after Nairobi refused to grant a license to Uganda’s government-owned oil marketer, the Uganda National Oil Corporation (Unoc), to operate locally and handle fuel imports destined for Kampala.

The dispute traces back to Kenya’s denial of a license to Unoc in November, prompting Uganda to take the matter to the regional court last month, seeking a directive for Kenya to issue the necessary approvals. Uganda contends that Kenya has reneged on a commitment made in April of the previous year, which pledged support for Kampala’s initiative to directly import fuel starting this month.

The Ugandan Attorney-General argues that Kenya’s Ministry of Energy and the Energy and Petroleum Regulatory Authority (Epra) imposed unnecessary obstacles, including requirements such as proof of annual sales, ownership of a licensed petroleum depot, and at least five retail stations locally. Unoc claims compliance with some of these conditions under protest, as it sought to ensure the smooth execution of Uganda’s plan to directly purchase fuel.

The impasse raises concerns about the diplomatic relations between the two neighboring nations, as this marks the first instance of such legal action between East African Community members. Experts question the communication between the presidents and the potential ramifications for regional integration.

Starting this month, Uganda plans to procure fuel directly from Vitol Bahrain after fallout from Kenya’s decision to engage in a government-backed deal with three Gulf oil majors. In the absence of a local license from Kenya, Uganda has also explored alternatives, including discussions with Tanzania to use the Port of Dar es Salaam for fuel imports. However, given the Kenya Pipeline Company’s (KPC) extensive network, Uganda is keen on securing Unoc’s license to facilitate the transportation of petroleum products through Kenya.

Uganda’s annual fuel imports, valued at $2 billion, heavily rely on KPC, handling around 90 percent of the cargoes. Shifting to the Port of Dar es Salaam would not only impact KPC’s revenues significantly but also affect taxes collected by the Kenya Revenue Authority from management fees charged by local oil firms for handling transit fuel.

The dispute intensifies the ongoing disagreement between Uganda and Kenya, with President Museveni previously accusing Kenyan middlemen of contributing to high pump prices in Kampala, despite falling global fuel prices. The situation was exacerbated by Kenya’s deal with Gulf oil majors, which President Museveni claimed inflated pump prices in Uganda.

As tensions persist, observers closely watch the developments and ponder the implications for both nations and the broader East African Community.

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