Why Kenya-Uganda fallout over fuel may not last, as they’re joined at the hip
In the recent week, tensions escalated between Uganda and Kenya regarding petroleum imports. Kampala expressed its frustration by filing a case against Nairobi at the East African Court of Justice (EACJ). This action was prompted by Kenya’s obstruction of Uganda’s access to its pipeline for transporting fuel.
According to some opinions, the legal action aimed at pressuring Kenya to authorize Uganda’s use of the pipeline was seen as the definitive indication that the relationship between President Yoweri Museveni and Kenya’s William Ruto had irreversibly deteriorated.
In earlier times, the pair were close friends, supporting the idea of open borders and increased trade within Africa.
In earlier times, the pair were close friends, supporting the idea of open borders and increased trade within Africa.
Before assuming the presidency, Ruto used to attend political gatherings in Uganda. However, their interactions shifted, and currently, they no longer participate in each other’s national events. This change occurred as Uganda began expressing worries about new non-tariff barriers imposed by Kenya affecting their bilateral trade.
The oil deal seems like the last straw.
Nasong’o Muliro, a research fellow at the Global Centre for Policy and Strategy, expressed that there’s a deeper aspect beyond what is readily apparent.
“It’s a rarity for an African country to sue another in an African court. And for that matter, involving historically interdependent neighboring states such as Kenya and Uganda,” he told PoliticalPulseChat.
The two nations have previously engaged in disputes over trade and even land, yet the infrequency of legal action indicates their awareness that diplomatic avenues were typically satisfactory, he explained.
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The East African Court of Justice (EACJ) lacks robust authority, with its rulings frequently disregarded or diminished by governments on the losing side. Additionally, it faces irregular sessions and grapples with operational and financial difficulties.
Uganda lodged the lawsuit primarily due to frustration over Nairobi’s refusal to grant it an import pathway. Nevertheless, Kenya’s energy regulators currently possess a court order that halts the authorization process.
In November of last year, the Nairobi High Court prohibited the Energy and Petroleum Regulatory Authority (Epra) from processing a license request made by the Uganda National Oil Company (Unoc). Additionally, the Cabinet has delayed making a decision that would waive certain crucial criteria for Unoc, such as demonstrating ownership of a licensed petroleum depot and five retail stations, proving annual sales volumes of 6.6 million liters of petroleum products, and showing a turnover of $10 million over the last three years.
Epra rejected Kampala’s request in September based on those criteria. Presently, Uganda alleges that Kenya is violating the East African Community Treaty, which mandates member states to collaborate on utilizing current port and maritime amenities, along with the United Nations (UN) Convention on the Law of the Sea, granting landlocked nations access to maritime facilities and transit passages.
“Normal” dispute
Nelson Koech, a Kenyan Member of Parliament and leader of the National Assembly Committee overseeing Defense, Intelligence, and Foreign Relations, considers the disagreement with Uganda as routine and without any reason for concern.
“Such differences are a common occurrence between virtually all major trading partners across the world,” he told PoliticalPulseChat. “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 stated that it had not received the legal documents and had not yet provided a response to the lawsuit by the time of the press deadline.
However, Mr. Koech stated that Kenya is justified in requiring specific conditions before granting a license to Unoc.
“I hope the respective authorities agree 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.
Mr. Muliro suggested that aside from the oil pipeline, Museveni is seeking a way to reduce dependence on Kenya and other allies such as Tanzania.
“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.
What are the chances of Nairobi and Kampala restoring their usual relations considering the recent escalation in the regional court?
Analysts suggest that Uganda and Kenya are too interconnected to sever ties. Evidence indicates their significant trade partnership, and despite Uganda’s search for alternative markets, the fact remains that these nations are deeply intertwined economically.
Economics
For example, in 2022, Uganda chose to withdraw from the International Coffee Organization. However, this choice has had negative repercussions because despite enjoying success in its coffee production, earning up to $1 billion, its Australian buyers demand that the coffee must have certification from Kenya.
Additionally, according to trade data, revenue generated from exports in Uganda surged by 45% during the ten months leading up to October 2023, driven by the significant sale of agricultural goods and fuel. In the previous year, Kenya’s primary exports to Uganda included iron and steel products worth Ksh7.39 billion ($44.4 million) and petroleum products valued at Ksh5 billion ($31.7 million).
Although Uganda has redirected certain business activities to the port of Dar es Salaam, importers are aware that Dar is facing challenges with ship congestion, leading to Mombasa attracting more customers as a result.
In December, Dar halted cargo bagging to decrease the queue of ships at the facility, yet the load hasn’t lightened.
Uganda might anticipate that Kenya changes its decision or is legally obligated by the courts to permit Kampala to utilize its infrastructure for crucial cargo such as fuel.
Costly route
Uganda relies on Kenya for 90% of its petroleum imports and obtains the remaining 10% from Tanzania. Since there isn’t a pipeline connecting Dar es Salaam, transportation of fuel primarily occurs by road, partly utilizing the lake route via Mwanza. Covering approximately 1,500km from Dar to Mutukula border post, this journey comes with significant expenses, given the cost per cubic meter ranging between $120 and $130.
According to economists, Uganda requires over 200 trailers daily to sufficiently meet its fuel requirements. However, transporting each liter of fuel by road incurs a cost of $0.042, whereas water transport delivers the same amount at a lower cost of $0.016.
Mr. Muliro suggested that the situation at the East African Court of Justice might serve as a strategic step to resolve the legal restraint filed in Kenya. This restraint had prevented Epra from issuing a license 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 to achieve internal solidarity and nationalism?”.
At present, Kenya is advocating to Kampala for the continuation of its utilization of the Mombasa port. The Ministry of Energy and Mineral Development in Uganda verified that significant discussions between the two nations occurred in November. Concerns are growing that Kampala might opt for the Dar es Salaam port over Mombasa to manage its fuel imports.
Why Kenya-Uganda fallout over fuel may not last, as they’re joined at the hip