Uganda has escalated a dispute with Kenya to the East African Court of Justice after Kenya refused to grant a local operating license to Uganda’s state-owned oil marketer, a move that has strained diplomatic relations and trade between the neighboring countries.
The Yoweri Museveni administration lodged a case against Kenya on December 28, highlighting the rift between the nations over the denial of a license that would enable Uganda to handle fuel imports destined for Kampala.
This legal action comes following Kenya’s rejection in November of authorizing the Uganda National Oil Corporation (UNOC) as a local oil marketer. Uganda’s decision to seek redress in the regional court aims to compel Kenya to fulfill its earlier commitment made in April of the preceding year to support Uganda’s direct fuel import initiative.
According to court documents presented by the Ugandan Attorney-General, Kenya imposed various prerequisites for UNOC to acquire the license, including demonstrating annual sales of 6.6 million liters of petroleum products, owning a licensed depot, and operating a minimum of five local retail stations.
UNOC deemed these requirements unnecessary hindrances, particularly as the petroleum products in question were solely meant for transit and not intended for local distribution within Kenya.
Although UNOC complied with some of the conditions, such as registering a branch in Kenya, it was done under protest as Uganda aimed to ensure a seamless implementation of its fuel procurement plans.
The legal standoff between the two East African nations raises concerns about the broader implications for diplomatic relations and the East African Community integration process, marking the first instance of such a legal dispute reaching the regional court between the countries.
Starting this month, Uganda will pivot to purchasing fuel directly from Vitol Bahrain due to the fallout from Kenya’s engagement in a government-backed deal with three Gulf oil majors.
Despite exploring options with Tanzania to use the Port of Dar es Salaam for fuel imports, Uganda remains adamant about the importance of Kenya’s approval for UNOC’s license due to the superior infrastructure of Kenya Pipeline Company (KPC) compared to facilities in Tanzania.
Uganda’s Attorney-General stressed the necessity of utilizing KPC’s infrastructure to transport petroleum products through Kenya to implement Uganda’s decision to procure fuel from the global market.
Annually importing around 2.5 billion liters of petroleum valued at $2 billion, Uganda heavily relies on KPC for handling at least 90 percent of its fuel cargoes, making a significant impact on Kenya’s transit fuel market.
This dispute highlights tensions between the two nations, emerging shortly after President Museveni accused Kenyan middlemen of inflating pump prices in Kampala despite global decreases in commodity prices.
Uganda, facing the highest fuel prices in the region, anticipates that direct procurement could potentially alleviate costs, making the resolution of this licensing issue crucial for both countries’ economic interests.
