The Saudi grant to Yemen … oil derivatives and a work program that sustains electricity


«Hey! Did the Yemeni government pay Saudi Arabia an amount to buy oil for power stations? Or is it not the grant from Saudi Arabia to Yemen and not the other way around? ”With this disapproving question, Ahmed Yahya Ahmed, a Yemeni who runs a juice shop in Aden, responded to a question that elicited his opinion and others in the interim Yemeni capital, after it learned to Asharq Al-Awsat that the Yemeni government had paid the first requests for the batch. The first is of $ 10 million in addition to the added value, and this is a quarter of what the government used to pay, as the grant represents 75 percent of the total purchases Yemen buys.

Ahmed and millions of Yemenis followed the announcement of the Saudi grant to Yemen, during a call between Saudi Crown Prince Mohammed bin Salman and Yemeni President Abd Rabbu Mansour Hadi, in which Prince Muhammad bin Salman confirmed Saudi Arabia’s provision of a new oil derivative grant in the amount of $ 422 million through the Saudi Program for the Development and Reconstruction of Yemen In support of the Yemeni government, which is not the first time, Yemen has received continuous Saudi support for decades, and even before the coup, there was support with $ 3.2 billion in oil derivatives in 2012, and about $ 835 million in oil derivatives in 2014, after it received it. The government raised prices, and the Houthis’ arguments preceded their coup and their control of Sanaa by force that year.

It seems that the grant will not stop at lighting homes and stores, but it seems that it establishes a broader concept that guarantees the development of the electrical sector and that this grant is not sufficiently temporary, as a work program that is monitored, developed and qualified and ends with sustainability.

The Yemeni government faces challenges and criticisms, the most prominent of which are questions about corruption charges, the lack of governance to ensure the benefit from programs and grants, as well as the absence of an announced strategy to build the capacities of the government and state institutions.

How can this grant be used, and what has the Yemeni government responded to the criticism, and how will the grant develop the electricity sector?

Governance and transparency

Anwar Kalashat, the Yemeni Minister of Electricity, told Asharq Al-Awsat that the estimated fuel grant would be “like the difference in the price of electricity fuel that will be guaranteed by the Saudi government, so that we buy fuel from Saudi Arabia at the local market price plus 15 percent added tax and the costs of shipping it to the port of Aden. That the Saudi government pay the price difference. ”

An observer of the Saudi Program for the Development and Reconstruction of Yemen discovers that its main objective is to build capacity for the Yemeni government and for Yemen to rely on itself. An informed source says: “This requires that Yemenis participate, starting with the government, state institutions, the private sector and civil society organizations.”

The Saudi Program for the Development and Reconstruction of Yemen has set up governance to raise the capabilities of the government and electricity institutions and to combat corruption, and to ensure transparency and the participation of the various sectors through the following mechanism: The Yemeni government pays the value of oil derivatives at local prices, which represent 25 percent of the global market value, and the Kingdom pays Aramco the price difference That exceeds 75 percent.

In addition, an electronic platform has been developed that clarifies what is happening in terms of governance, operation, and revenue collection with the aim of disclosure and transparency, and the government and the Electricity Corporation will gradually raise the ability to collect, as well as gradually raise prices, especially for the commercial sector and high energy use, in order to allow the strengthening of its capabilities in the medium and long term. Revenues for the sold energy after deducting salaries and operating in a joint account between the program and the Ministry of Electricity in the Central Bank of Aden, and it is spent on developing and rehabilitating public stations in Yemen.

The Saudi program will also work with the Yemeni side to develop plans to raise the production capacity of power stations by relying on gas or solar energy.

Returning to Kalachat, he preferred to repeat the explanation in his own way, saying: “We, as a government, will buy derivatives from the Kingdom at the local market price. For the port of Aden ».

– Down payment

The Yemeni Minister of Electricity confirms that Yemen requested the first batch: 54 thousand tons of “diesel” and 25 thousand tons of “diesel”, with an estimated value of about 10 million dollars, which was paid in advance with value-added tax by the Yemeni government.

“This amount was paid to the Saudi Program for the Development and Reconstruction of Yemen,” the minister said. “They will transfer the amount to Aramco, and the freight and its costs will be borne by the Yemeni government, and the difference in the global price will be paid by Saudi Arabia … This will save us a lot.”

And because the last government that took the oath before Yemeni President Abd Rabbu Mansour Hadi last December was newly formed, hopes are returning after the “Riyadh Agreement” between the parties was agreed and resulted in the formation of a government. Many officials in that government are calling for more time and empowerment so that we can perform our duties.

“We, as a government, are keen to ensure that the fuel reaches the stations in a transparent manner and is utilized properly, because in the end we will buy and lose and we want it to reach the beneficiaries in a clear and transparent manner,” Kalashat says. We also want to be honest with our people and our brothers in Saudi Arabia that the scholarship has reached its beneficiaries. ”

When asked about the criticisms directed at the government, the Yemeni Minister of Electricity replied, saying: “What is happening in the media is exaggerated, and whoever wants to see our offices are open and the supervisory committee will be present and operate clearly instead of exaggeration and incorrect rhetoric. “Anyone can be sure that the fuel will reach its rightful place, and there will be clear and transparent governance for everyone who wants to ensure that the fuel reaches the power stations and that it has been used by the beneficiaries.”

– “The scholarship is not forever.”

The Yemeni minister affirms that the Saudi grant will not last forever, but among the terms of the signed agreement, “We, as the Ministry of Electricity, are obligated to make reforms within the ministry by raising the collection, and people must pay the value of electricity use. Otherwise, the Saudi side, if it does not see an improvement in revenue collection, may stop the grant. Because in areas such as Aden, Lahj, Abyan and other areas, there are consumers, unfortunately, who do not pay bills, and this matter should not continue, and everyone should realize that if he wants electricity, he must pay the value of the electricity, and if they want to continue in this direction, he will not get it for free.

Kalachat adds, “It is also required to improve service in the future and to work out strategic solutions to get rid of costly fuel (diesel)” according to the government’s capabilities, and these measures are required of us in the General Electricity Corporation to implement them to continue with the grant, and a plan is required that will be prepared within a few days to deal with the grant and benefit from it to achieve Clear and clear reforms in the electricity sector during the next few days, and the support cannot last forever, as it is provided for a year, and a financial ceiling of $ 422 million if the year or the amount ends … We should then be our steps forward to be able to rely on ourselves and be the institution Able to rely on themselves in the future ».


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