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.
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Uganda-Kenya row over oil supply unveils peppered, rising tensions
The Kenyan High Court will in the next few weeks determine if Kenya should go ahead and grant user rights to Uganda for the Kenyan oil pipeline, potentially solving or worsening the ongoing tiff between Nairobi and Kampala over fuel imports.
Trade and diplomatic relations between the two capitals have chilled over the past year, putting into question the state of the initial “bromance” between Ugandan veteran leader Yoweri Museveni and Kenya’s William Ruto.
When he came into office in September last year, Dr Ruto left no doubt who his political mentor was. They had been appearing at public functions, launching projects and Ugandans even named an institute after Ruto.
The new dispute over oil is one of a series of trade spats that have seen Uganda look south to Tanzania for business and logistics. Sources told The EastAfrican that the falling-out over oil was a culmination of differences peppered over by public officials but involving deals that either party felt cheated out of.
Petition
This week, three petitioners, Royani Energy Ltd, Acacia Ridge Construction, and Charles Kombo, jointly with John Kinuthia Mwangi, filed a petition at the High Court to stop the Kenyan energy regulator, the Energy and Petroleum Regulatory Authority (Epra), from giving Uganda National Oil Company (Unoc) a licence to import oil through Kenya.
According to the suit, Unoc intends to take up space from Kenya Pipeline Company’s western loading terminals – space that currently belongs to Kenyan oil marketers (OMCs) – of close to 200,000 cubic metres of petrol, diesel, and kerosene.
Meanwhile, Uganda is in talks with Tanzania seeking import lines in what President Museveni said was disappointment with oil cartels in Kenya who manipulate the pricing.
By press time, Kenyan officials were insisting that there was no formal communication from Kampala that existing arrangements – where Kenyan OMCs supplied oil to Uganda – had been terminated.
Rebecca Miano, Kenya’s new Trade Cabinet Secretary, said there had been no formal termination of the agreement and Kenyan officials were expected to meet their Ugandan counterparts in the coming days to iron out the issues.
“Our economy is firmly interconnected with regional, continental and global economic systems. A lot of what we are hearing is based on social media but, as a ministry, we are yet to receive any official information from the government of Uganda. When we do, we will surely engage with our counterparts in Uganda,” Ms Miano told The EastAfrican.
The EastAfrican understands that Uganda’s protestations against the Kenyan oil marketers didn’t start recently. In September, Kampala had applied for a licence to import fuel directly using Kenya Pipeline. Epra declined, citing a failure by Unoc to meet criteria, which included sufficient proof of funds, proof of owning retail stations in Kenya as well as past dealing in stock of at least 6.6 million litres of petrol, diesel and kerosene.
“Without my knowledge, our wonderful people were buying this huge quantity of petroleum products from middlemen in Kenya. A whole country buying from middlemen in Kenya or anywhere else! Amazing but true,” President Museveni said this week, adding that Uganda was losing a lot of money and depending on the whims of Kenyans.
However, sources indicated that oil marketers pressured Epra, too, given that they own the fuel supply system used by the KPC. One source said that the marketers view Unoc as an entity that could displace them and subsequently nationalise a private asset.
Uganda got squeezed out in March after Kenya signed deals with UAE’s Adnoc and Saudi Aramco for the supply of petroleum products to Mombasa.
These government–to–government deals angered Museveni, who this week expressed his frustrations and ordered the Unoc, despite its weak financial muscle, to handle the country’s 130-140 million litres of fuel per month.
The Ugandan leader feels President Ruto should have consulted him before the deal was signed with the Gulf firms, since his country Uganda would be the biggest beneficiary or loser from the deal.
Uganda imports 90 percent of its petroleum products through the port of Mombasa, with the remaining 10 percent arriving through the port of Dar es Salaam.
It is estimated that 40 percent or more of Kenya’s petroleum imports are exported, primarily via Uganda.
Also read: Mombasa or Dar es Salaam? Uganda decides
Thus, Uganda’s angry move will impact the two neighbours’ trade relations – which have been deteriorating – and reduce the money Kenya would have made by selling petroleum products to South Sudan and the Democratic Republic of the Congo. This, The EastAfrican has learnt, also informed Kenya’s stance on Unoc.
Negotiating with Tanzania to have Unoc and Vitol establish buffer stocks in Uganda and Tanzania, cuts into the need for the Kisumu jetty which Ruto hoped would position his country as an entry point for fuel in the Great Lakes region, beating off competition from Tanzania.
Yet, the hostilities between the two EAC partners aren’t new. As far back as December 2019, they have tussled over trade in poultry and milk products.
Kenya started it when it stopped importing Ugandan milk, particularly the Lato brand.
Flurry of bans
In July 2020, Kenya followed up with a ban on Ugandan sugar, against an earlier agreement to increase Uganda’s sugar exports to Kenya.
Nairobi accused Uganda of introducing discriminative excise duty.
Now, Ms Miano says her ministry is seeking dialogue to resolve the simmering trade disputes that have been in existence for more than four years now.
The newest dispute is likely to strain the relations between the two leaders, who a year ago seemed like best friends forever.
In the past year, President Ruto has increasingly moved away from the man he called mentor and political father of the region. He has acquired new friends.
At the height of the contest between Dr Ruto and Raila Odinga for Kenya’s presidency, Ruto found support in Uganda’s Museveni and his National Resistance Movement (NRM) party establishment.
Fading friendship?
NRM’s director of communications Emmanuel Dombo told The EastAfrican then that Ruto and Museveni had cultivated a tight friendship.
“Ruto is a very good friend of President Museveni, Uganda, and the NRM as a party. That is why he came and campaigned for our presidential candidate one time. This is the brotherhood of the African people,” Mr Dombo said.
Museveni liked Ruto because he represented a new working relationship to promote business and trade for both countries. The two were close to a point that some Kenyan politicians feared Museveni could interfere in the elections at the time.
The Ugandan leader has, however always denied having any interest in Kenya’s political affairs.
President Museveni seemed to cement their friendship by donating $100,000 towards the construction of the William Ruto Institute of African Studies at Makerere University. The land on which that institute was to stand, however, became a subject of an ownership dispute.
Ruto’s electoral victory in August last year came at a time when Museveni seemed disappointed with the Uhuru Kenyatta regime’s ban on Ugandan milk products, maize, chicken and eggs from the Kenyan market. He seemed to see better business prospects with the new leader, himself a businessman with interests in a wide range of sectors.
In January 2023, President Ruto sent a special message to President Museveni through then-Trade Cabinet Secretary Moses Kuria, granting access to milk and chicken from Uganda.
President Museveni was very happy.
“I thank President Ruto for opening up the market for milk and chicken,” he said at the time. But two months later, the Ruto administration banned Ugandan milk, then lifted it a week later. It imposed it again two months later.
Kenya is the leading buyer of Uganda’s milk, with imports valued at $138.2 million.
The ban seemed to hurt the Kenyatta family-owned Brookside Dairy Uganda, which on June 23, sent home at least 200 workers, after it had been forced to cut production by 75 percent as it has been unable to export to Kenya the milk produced since March.
The move made President Museveni realise that there was little hope in Kenya market and looked to West Africa and the Maghreb for a market. Algeria and Senegal were the first targets, although nothing has materialised.
The fault lines have been visible in Ruto’s relationship with Kampala.
His last visit to Museveni was mid-August this year, with the discussions vaguely described as bilateral and of mutual interest. The visit was short and not much publicised.
It seems some hardlines are emerging.
Uganda’s Energy Minister Ruth Nankabirwa has tabled the Petroleum Supply (Amendment) Bill 2023 to empower the Unoc to take over the supply of oil to Uganda at the orders of Museveni.
The president said this week Uganda imports 2.5 billion litres of fuel per year worth $2 billion, but it was all being bought through middlemen in Kenya.
In March 2019, Ruto, then deputy president, waded into the frosty relations between Uganda and Rwanda, showing solidarity with Museveni.
Debt of regional leadership
At one of the functions he attended in Uganda, Ruto told Museveni: “You owe us a debt. Before you retire and if possible in the next two or three years, you owe us the fruition of the East African Federation.” This was good music to Museveni’s ears.
Now, President Ruto has taken to the world, visiting and courting different world leaders for commercial and diplomatic alliances.
His relations with Congo Brazaville’s long-serving leader Denis Sassou Nguesso seem to have grown.
And now, Ruto, who has on many occasions portrayed himself a pan-Africanist – an image Museveni has cut – has ironically been to Western capitals, visiting European countries eight times, and America twice in the past year. He has been praised by US President Joe Biden for promptly offering 1,000 Kenyan police officers to restore order in troubled Haiti.
He has met with Ukrainian President Volodymyr Zelenskyy and assured him of support; as he has Luis Abinader (Dominican Republic), Alain Berset (Switzerland), Miguel Diaz-Canel (Cuba), Kassym-Jomart Tokayev (Kazakhstan), Marcelo Rebelo de Sousa (Portugal), Joao Lourenco (Angola), and Italy’s Prime Minister Giorgia Meloni.
If nothing comes out of Miano’s efforts, the oil deal could see the two EAC leaders drift apart, and with it a large chunk of business to Tanzania, which has been slowly but surely clawing at Kenya’s incomes.
Figures show a steady decline of cargo to Uganda through the Northern Corridor, and the much-awaited launch of its standard gauge railway to Burundi and DR Congo will surely clinch the Great Lakes market, with its rich mineral resources and huge consumer population.
Reporting by Nelson Naturinda, Aggrey Mutambo, Luke Anami and Brian Ambani
