Kenya-Uganda fallout over fuel may not last, as they’re joined at the hip
Uganda is upset that it was kept in the dark about the negotiations around the government-to-government fuel deal between Kenya and two Gulf nations. PHOTO | NMG
The dispute between Uganda and Kenya over petroleum imports boiled over in the past week, with an angry Kampala lodging a case at the East African Court of Justice (EACJ) against Nairobi for blocking its use of its pipeline to transport fuel.
The case seeking to compel Kenya to grant Uganda permission to use the pipeline, some say, was the ultimate signal that relations between President Yoweri Museveni and Kenya’s William Ruto had broken for good.
In times past, the two were bosom buddies, advocating open borders and more trade in Africa.
Ruto had been appearing at political functions in Uganda before he became President. And then things changed and now they no longer attend each other’s national events, as Uganda started raising concerns about emerging non-tariff barriers erected by Kenya on bilateral trade.
The oil deal seems like the last straw.
There is more than meets the eye, said Nasong’o Muliro, research fellow at the Global Centre for Policy and Strategy.
“It’s a rarity for an African country to sue another in an African court. And for that matter, involving historically interdependent neighbouring states such as Kenya and Uganda,” he told The EastAfrican.
The two countries have bickered before on trade and even territory, but the fact that it rarely reaches the courts means the two sides always knew diplomatic channels were sufficient, he added.
The EACJ itself has not been strong and its decisions have often been ignored or downplayed by governments that lose. Besides, it does not sit regularly and suffers operational and financial challenges.
Uganda filed the case largely out of frustration that Nairobi was denying it an import route. Kenya’s energy regulators, however, have a court injunction in their hands, stopping the authorisation.
The High Court in Nairobi last November barred the Energy and Petroleum Regulatory Authority (Epra) from handling a licence application by the Uganda National Oil Company (Unoc). 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 now Uganda accuses Kenya of going against the East African Community Treaty, which requires partners 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.
“Normal” dispute
Nelson Koech, a Kenyan MP and chair of the National Assembly Committee on Defence, Intelligence and Foreign Relations, says the dispute with Uganda is “normal” and there is no cause for alarm.
“Such differences are a common occurrence between virtually all major trading partners across the world,” he told The EastAfrican. “It is well within the right of the Republic of Uganda to pursue recourse at the East African Court of Justice as this is one of the arbitration channels of such disputes within the EAC framework. However, I suggest that the two governments, through their respective ministries and, indeed, the EAC Council of Ministers, amicably iron out the differences to forestall any escalation. The EAC has great potential of enhancing intra-African trade as a safeguard against the external shocks facing of the Continent’s trade with the rest of the world.”
The Attorney-General’s Office in Nairobi indicated it had not been served with the court papers and was yet to respond on the suit by press time.
Yet Mr Koech said Kenya is right to insist on certain conditions before licensing Unoc.
“I hope the respective authorities come to agreement soonest, because Uganda is a strategic trading partner to Kenya and would largely benefit from the Kenya Pipeline Company’s infrastructure, which is the most superior in the region and which has been of great service to Uganda for decades,” Koech said.
Beyond the oil pipeline, however, Museveni is looking for an extrication from overreliance on Kenya and other partners like Tanzania, argued Mr Muliro.
“The dispute points to the long-drawn political economy of the oil business and logistics in East Africa. It is complex and points to the emerging geo-economics between Kenya and Tanzania on transport and logistics dominance in the region,” he said.
With the latest escalation into the regional court, what are the prospects of return to normal relations between Nairobi and Kampala?
Observers say that Uganda and Kenya cannot divorce. Data shows that the two countries are important trading partners and, although Kampala has been looking for markets elsewhere, the reality is that they are both joined at the hip.
Economics
For instance, in 2022, Uganda opted out of the International Coffee Organisation but that decision has come back to bite it because, as it savours good tidings from the crop, raking in up to $1 billion, its Australian customers insist that its coffee be certified by Kenya.
Also, trading data shows that export earnings from Uganda increased 45 percent in the 10 months to October 2023, propelled by sale of farm produce and fuel. Kenya’s main exports to Uganda are iron and steel products valued at Ksh7.39 billion ($44.4 million) and petroleum products valued at Ksh5 billion ($31.7 million) last year.
While Uganda has swung some business to the port of Dar es Salaam, it is not lost on importers that Dar is struggling with vessel traffic and Mombasa is gaining customers in the process.
Dar in December suspended bagging of cargo to reduce the number of ships waiting at the facility but the burden has not eased.
For important cargo like fuel, Uganda may hope that Kenya reverses its decision or is compelled by the courts to allow Kampala the use of its infrastructure.
Costly route
Uganda imports 90 percent of its petroleum products through Kenya and 10 percent through Tanzania. There is no pipeline from Dar, so fuel transportation is by road and partly through the lake via Mwanza. The distance from Dar to Mutukula border post is about 1,500km, a costly route considering that the cost per cubic metre is $120-$130.
Uganda would need more than 200 trailers per day to feed its fuel demand adequately, but each litre carried by road comes with a cost of $0.042 compared with $0.016 on fuel delivered by water transport, economists say.
Mr Muliro said the case at the EACJ could be a strategic move to unlock the court injunction filed in Kenya, which restrained Epra from granting licence to Unoc.
“The debate will be moved to which supersedes the other: Municipal court or regional court? Or could it be another diversionary tactic common in statecraft where governments foment external disputes so as to achieve internal solidarity and nationalism?”.
Meanwhile Kenya is lobbying Kampala to continue using the port of Mombasa. Uganda’s Ministry of Energy and Mineral Development confirmed that high-level talks between the two countries took place in November amid mounting fears that Kampala will drop the port of Mombasa in favour of the port of Dar es Salaam to handle fuel imports.
