Politics and policy
Kenya cancels oil deal with Iran over US sanctions
Posted Wednesday, July 4 2012 at 20:20
Kenya has cancelled its oil deal with Iran after the US warned of unspecified sanctions for dealing with Tehran.
Kenya had earlier this week said it would import four million tonnes of crude oil from Iranian National Oil Company, drawing the wrath of its long-time ally.
READ: Kenya turns to Iran for oil despite embargo
“We have terminated all negotiation with Iran on the possibility of importing their oil because the UN has declared a total trade embargo on the country,” said Patrick Nyoike, the permanent secretary in the Ministry of Energy.
The cancellation of the agreement is expected to avert economic sanctions that the US could have imposed on Kenya, a move that would have hurt the multi-billion shilling trade flows between the two countries.
Western powers are implementing sanctions against Iran for its controversial nuclear programme, with the US piling pressure on Kenya to follow suit or also face sanctions.
The European Union started implementing an oil embargo against Iran earlier this week, bringing to a halt crude import to 27 countries in the region. The US Congress is also expected to this month expand sanctions against Iran.
If Washington slapped Nairobi with economic sanctions, Kenya’s exports could take a major hit, with textile and cash crop sectors suffering the most. The US could also cut its aid and grants to Kenya.
According to the US Department of Commerce, the country last year exported goods worth $464.3 million (Sh39 billion) to Kenya.
In return, it imported goods valued at $382 million (Sh32 billion), leaving the US with an $83 million (Sh7 billion) surplus from the bilateral trade.
Kenya’s leading exports to the US were knit apparel (Sh12 billion); woven apparel (Sh9.8 billion); spices, tea, and coffee (Sh3.7 billion); edible fruits and macadamia nuts (Sh2.4 billion); and miscellaneous foods (Sh924 million).
Top imports from the US were aircraft (Sh5.5 billion); machinery (Sh5.3 billion); special relief donations (Sh3.6 billion); milling, malt and starch (Sh2.5 billion); and electrical machinery (Sh2.2 billion).
Kenya ranks at 98 among the largest export markets for US goods and is placed at 103 among the largest suppliers to the US.
The stock of US foreign direct investment in Kenya stood at $263 million (Sh22 billion) in 2010, growing 2.3 per cent from 2009, according to the latest data available.
General Electric, which supplies Kenya Airways with aircraft engines, is one of the major US corporations to expand their activities in Kenya in the past one year.
The pressure on Nairobi to sever ties with Tehran has also been fuelled by the recent arrest of two Iranian nationals in Mombasa who have been accused of planning multiple bombings in the country.