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Kuwait’s Oil Minister Stands Firm Against MPs, Appoints Senior Management

Kuwait’s Oil Minister Stands Firm Against MPs, Appoints Senior Management

Kuwait’s parliament is launching a probe into an international court ruling that ordered it to pay $2.16bn in damages to Dow Chemical for ending a $17.4bn petrochemicals joint venture, K-Dow. Members of parliament have also said they will call Minister of Oil Hani Husain and the prime minister for a grilling over the issue. Mr Husain, however, despite media attacks and speculation about his resignation, has got on with quietly and firmly doing his job – appointing Badr al-Khashti, an experienced oil executive, as head of shipping arm Kuwait Oil Tankers Company (KOTC), and filling other key positions – as he continues building his managerial team of technocrats. The head of the parliament’s budgets committee has warned that Kuwait could face a budget deficit if oil prices drop below $101/B, and parliament has called on the government to halt al-Zour North power plant project and to investigate the tender award. Nick Wilson writes.

Parliament’s probe will run in parallel with the ministerial investigation launched last week (MEES, 4 June) into an international court ruling that state-owned Petrochemical Industries Company (PIC) – a subsidiary of Kuwait Petroleum Corporation ( KPC ) – canceled a contract to form a 50:50 venture with Dow Chemical in 2008. Theministerial committee will investigate how it happened and try to reduce the loss. The probe of parliament – whose opposition blocs demanded the cancellation in 2008 – is expected to focus on who was responsible. Many opposition members in today’s parliament blame the government for the debacle, and two have said they will call Mr Husain and Prime Minister Shaikh Jabir al-Mubarak al-Sabah before parliament for questioning, although they have not officially submitted their applications to the Speaker of Parliament. Opponents of Mr Husain allege that as a consultant he advised on inserting a penalty clause that punished any party that ended the agreement. He argues that he was responsible for a ceiling that limited damages – Dow Chemical had claimed $5.5bn.

The signatures of 10 MPs are needed to force a vote of no confidence in ministers, which in Kuwait sometimes follows a parliamentary grilling. Since elections in February, parliament has forced the resignation of the Finance Minister Mustafa al-Shimali, after a grilling, and the Minister of Social Affairs and Labor Ahmad al-Rujaib faces questioning on 20 June. The prime minister will also be questioned over the government’s rejection of a law voted for by the Islamist-dominated parliament to introduce the death penalty for blasphemy. The law specifically defines insulting Aisha – one of the Prophet Muhammad’s wives – as blasphemy, which could be seen as targeting Kuwait’s Shi'a minority following a recent court case. The justice minister had offered his resignation, which was refused by the Amir, who is supporting his government over the issue. A high-ranking oil official tells MEES “the opposition is the majority, which makes the government weak.”

Despite the political turmoil, Mr Husain is building up an experienced management team of technocrats, in order to move ahead with the ‘mega-projects’, appointing Mr Khashti as head of KOTC, to replace Nabil Bourisly as chairman and managing director. KOTC plans to build nine tankers by 2014 – taking the total to 33 (MEES 30 January). Mr Khashti is a veteran KPC executive whose positions have included heading Kuwait Gulf Oil Company (KGOC) and Kuwait Foreign Petroleum Exploration Company (Kufpec). Mr Bourisly becomes KPC’s Managing Director of Administrative Affairs, Research and Development. Other appointments include: Ahmad Bahbahani, Deputy Managing Director of Internal Audit; Ali al-Hajiri, Managing Director of Financial Affairs and Development; 'Abd al-Latif al-Huti, Managing Director of Planning and HSE; and Shaikh Talal al-Khalid al-Sabah, whose role as Managing Director of Government and Parliamentary Relations and Media Relations, will be key in the political battles. In May Mr Husain replaced three members on the board of directors of KPC and was expected to start a major reshuffle (MEES 14 May).

With Mr Husain’s team in place, KPC chief Faruq al-Zanki – who announced the new appointments on 7 June, through state-owned news agency KUNA – will be able to appoint his own team of managers. Deputy managing directors – key operational management – had been on temporary contracts despite Mr Zanki being appointed nearly two years ago, with appointments held up by political fighting and changing oil ministers. Mr Husain – a former KPC chief, who is highly respected by many in the industry for his integrity and technical knowledge – was appointed in February and aims to kick start Kuwait’s struggling oil sector. An industry insider who is close to Mr Husain says of his management style: “He believes in consensus. His leadership is to get the train moving and get everyone to jump on board, but if someone’s blocking the tracks he will be firm. But he won’t be firm with that person in public, it will be in private.”

‘Propaganda’

Mr Khashti tells MEES that the political and media attacks on Mr Husain are “propaganda” and are not stopping him from moving ahead with his plans for the oil industry, which is key to government finance. The government faces revenue problems. Head of the parliament’s budgets committee Adnan 'Abd al-Samad said: “We can see a true deficit in the state’s budget should oil prices drop below the average of $101-103/B. We have reached a critical point with regard to the state’s general budget.” The International Monetary Fund (IMF) said in a report in May that Kuwait’s foreign currency reserves will run out by 2017 if it doesn’t fix its finances.

Minister of Electricity and Water 'Abd al-'Aziz al-Ibrahim has warned that the delay of al-Zour power plant will cause power generation shortages. Parliament had earlier demanded a halt to the project to allow an investigation into the contracts’ award process, and called on the government to launch a probe into the investments of the Public Institution for Social Security. During the grilling of the former finance minister allegations were made about the investments. Having forced him from office, parliament is calling for his prosecution.

© Copyright MEES 2012.

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